Wednesday, June 8, 2016

Teach Kids The Self Billing Trick For Annual Expenses

Today’s fantastic family finance article is:

Bill To Self


“Happy Birthday, Dad!”
“Thank you, son.”
“Can I borrow some money?”
“What for?”
“To buy you a present...”

Lame.

Time to teach your kid the self-billing trick for annual or infrequent expenses. It’s simple:

  1. Open a separate savings sub-account, prepaid card, envelope, or jar. Name it after the expense. Like “Dad’s Birthday”, or “Holiday Gifts”, or “Spring Break.”
  2. Calculate the total expected annual expense and divide by 12. That’s the monthly bill.
  3. “Pay” the bill each month by moving money to the dedicated account — ideally with an automated transfer. Want to make the payments smaller? Ratchet up the billing cycle to weekly, and adjust the math accordingly.

Viola! No last minute panic loan. The money is right there ready to go each year.

Happy Birthday Dad.


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