by charlie reese
Most adults are used to making, and sticking to, their household budget. Your income is so much, your expenses are so much and in order to make it all work, you’ve got to toe the line to make ends meet and achieve other longer term goals as possible. If you’re paid twice a month, you need to coordinate bill payments, food and whatever else to that schedule. We all know that we should set aside a little of our earnings in a savings account, but in reality, few of us do. Even if you do make regular deposits to your savings, an emergency can put a big dent in that account overnight. In the current economy, this money management can be difficult for adults, so it’s no wonder that kids have very little understanding of the value of money.
This is why, when you go shopping with young children, they can’t understand why you might refuse to buy a toy or other fun item that catches their eye. Hey, Mom, it’s only $10! They see a flat screen TV with a $600 price tag, so $10 sounds like a minuscule sum. One way to teach your child about money is with that child’s bank account, opened with their name and you as the trustee. This means you must approve their purchases and keep track of statements. When you open a child’s bank account, they see their name printed on the account, along with yours. This strategy gives your child a sense of power and control over their own money, making it much more likely that they’ll see exactly how far their money goes.
Without such a child’s bank account, you may buy a number of toys, games, craft items and the like, several times throughout the month, easily totaling $50 or more. Now, if you open a bank account for your child with an initial deposit of $50, that child will feel like Bill Gates ” until they start spending it. Let’s say you give your child an allowance of $20 per week, which must be deposited in the account every week.
At the same time as you open the child’s bank account, open a savings account as well. Let your child know that he must deposit at least $3 of his weekly allowance into the savings account and that the money must be saved, not withdrawn. Explain that the bank will pay him a small sum for every dollar that remains in that savings account. Following this plan, at the end of one year, that savings account will hold more than $150. Meanwhile, your child’s bank account affords close to $70 of spending money each month. Any kid can get behind such a program.
You might expect that most kids will want to spend it all at once, as soon as it’s in the bank. The first week will surely turn up a $15 game or toy they’ll want. Just let them know that, once spent, it’s gone and you won’t be refreshing their money supply until it’s due. Point out that the desired item will likely be there next week, and keeping their money this week means double the spending power next week. Sooner or later, they’ll catch on and begin being more thoughtful and less frivolous in their spending habits. The child’s savings account also looks better and better, over time.
Teach them to record their purchases, writing out how much and for what. Go over their register with them each month, teaching them how to balance their account and reviewing expenditures, for value received in each choice.
One great advantage to a child’s bank account lies in the child’s perception of ownership and control. If they spend all their money, it was they who did it. They’ll also learn the value of saving a portion of their income. Your child will leave the nest with a far better understanding of money management than most.
About the Author:
Charlie Reese enjoys giving banking and
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