Kids & Money: Developing a Taste for Saving

Posted on | January 9, 2008 |

Long, long ago when our children were mere preschoolers, The Husband and I had a series of conversations relating to children and money.  We discussed the ins and outs of allowances as well as what types of skills and attitudes regarding finances we wanted them to acquire while still in our care.

When imaging The Husband and me at work on parenting decisions, it’s important to keep a few facts in mind:

1. My significant other is significantly older than I am (29 years, 2 months, and 28 days, to be exact, but I usually just round up to 30 years 
2. We each spent our formative years in completely different eras:  he in the late 30’s and 40’s, me in the late 60’s and 70’s
3. We come from drastically different social and economic backgrounds: he from humble southern folk who made good, me from wealthy cultured southern and european folk who didn’t
4. The Husband had a lifetime of experience prior to our relationship in which he raised and supported three children from birth through under-graduate degrees and also raised and provided for a special-needs child

I came to our discussions with one initial goal — to teach our children to enjoy saving money before they ever experienced the allure of spending money.

I was quite familiar with what was then, and remains to this day, a typical parental decision to require children to save a set percentage of their allowance and income.  Additonally, many parents require their children to tithe (I don’t and have written about my reasons here).   I didn’t agree with the typical save/tithe/spend scenario back then and, after nearly 10 years of experience with my own children, feel that I made the right decision to follow my own path.

The argument for the typical save/tithe/spend arrangement is that it helps children develop good money habits.  But habits only get you so far.  Plus, it seems, good habits are difficult to develop and easy to break.  I wanted saving to be more than a habit for my children.  And I definitely wanted the act of saving to last way beyond the parental-restriction years.

I wanted my children to develop a strong taste for saving and watching their money grow.  To truly derive pleasure and a sense of accomplishment from watching their bank balances get larger with each new deposit and each new bank statement of interest earned.

My resulting plan was simple — for the first year of receiving an allowance, no spending was allowed.  In all honesty, I can’t remember if we started each child on an allowance when they reached 6 or if we waited until they were 7.  But the point is, that for that entire first year, all allowance went straight into their savings accounts.

Within a week of my daughter’s birthday, she and I went to the bank and opened a custodial 2-year CD.  Even though the account, because she was a minor, had no opening minimum and no monthly minimums, her dad and I kicked in an initial deposit of $100.00.  From that point on, at somewhat irregular intervals, we’d make visits to the bank so she could make her deposits.  I taught her how to fill out deposit slips and make the proper entries into her bank book — activities that dovetailed nicely with our homeschooling efforts.  Every quarter she’d get an envelope from the bank with a paper statement and we’d sit down with the statement and enter her quarterly interest earnings into her bank book.

Just as I’d hoped, she loved seeing that number grow.  By the time her 1-year “probation” period had ended, she had both developed a savings habit and acquired a taste for watching her bank balance grow.

When The Son turned 6 (or 7 — whichever it was), I did the same thing all over again.  We went to the same bank and opened another custodial account, again kicking in the first $100.00.  Now they were both filling out deposit slips and recording their deposits and interest earnings into their bank books.

The Daughter, to this day, is a terrific saver and a very wise spender.  I’m particularly in awe of how well she has balanced her very generous spirit with her very strong taste for saving and desire to watch her money grow.

The Son, too, is a strong saver.  Stronger even than his sister because he has expressed absolutely no interest in spending.  But he’s really only now, at 13, fully awakening to the benefits of keeping his money in the bank instead of under his mattress or hidden in his little metal safe in his closet.  I think this probably has much to do with his clear preference for staying home over going just about anywhere — especially anywhere as boring and mundane as the bank.

Helping my children develop a taste for saving before giving them a taste for spending was just one of many policies The Husband and I developed regarding our children and money.  Only time will tell how truly effective this strategy was but I feel it has provided them both with an excellent financial foundation.

I’ll be sharing more the details and the evolution of our allowance policies over the next several weeks but you can read more about my general thoughts and philosophy on allowances in my post, Allowance — Yes? No? and Why?

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