This Amish Way Of Saving Will Enable Your Kids To Buy Their House By Age 18

The Amish people

The Amish are generally very practical and wise about things—especially when it comes to money.

People in general have very little knowledge about the Amish people, most of it just glimpses into their lives from television shows like 2 Broke Girls or Friends. But a quick run-through of Amish history would reveal that they have actually been in America since the 18th century, taking refuge in the country to escape religious persecution in Europe.

Some fast facts about the Amish: they are a group of traditionalist Christian church fellowships with Swiss Anabaptist origins, known for their simple living and reluctance to adapt to modern technology. While the rules vary depending on the community, most Amish groups are prohibited from owning cars, tapping electricity from public utility lines, owning gadgets like radios and computers, and even taking photographs because these cultivate personal vanity.

This simple kind of living has trained the Amish to become very sensible and prudent when it comes to their money—and their way of handling their children’s paychecks can teach the Englishmen (what they call non-Amish folk) a thing or two about money management.

Amanda Grossman, on Money Prodigy, talked about how the Amish start learning about money responsibility early in their lives. In Amish communities, children don’t get regular allowances. Everything is provided for at home and they will only receive a small amount during special occasions.

Children also start working as soon as they finish 8th grade. After they graduate, they find someone they can apprentice for or find employment, preferably under another Amish man or an Englishman that the family knows and trusts. But just like allowances, none of the paychecks go straight to the children. Instead, their paychecks are divided into a 10:10:80 system.

10:10:80 system

This Amish system funnels the child’s paycheck into three: 10 percent goes to the child for spending money, 10 percent is invested on Amish Helping Hands (a form of low-interest loan to Amish farmers and first-time homeowners), and 80 percent goes to the household.

That 80 percent then is again divided into paying for the utilities and basic necessities around the house, a savings fund, and the community-based health insurance plan.

In Amish culture, they are expected to purchase their own home at the age of 21. Amish are required to live with their parents until they’re married so even if they already constructed a house by an early age, this house is only put up for rental. Typically, if an Amish kid starts work after 8th grade and his parents wisely puts his income in the right places, he’ll have enough money for a dowpayment for his very first home by age 21. At a 10-year mortgage, that would essentially make him debt-free by age 31.

In theory, it sounds all too good. But it’s actually achievable.

Grossman talked to an Amish man named Leroy, who said that following this 10:10:80 system, his son was able to buy his first house at age 18.

The 10:10:80 system is not set in stone. According to Leroy, he adjusted the system every year his son earned more, bumping up the 10 percent spending money he gives to his son as he grew older, and increasing the amount he funnels into the investment fund.

By age 21, Leroy’s son will reach the maturity age and he will no long hand his paycheck to his parents. By this age, he will keep his whole paycheck, still live at home rent-free, and even earn rental income from the house he was able to put up. Sounds like he’s set up for a good life, eh?

Do you think you can encourage your child to save up for his/her future using this system?