Up until this week our two children have squirreled away their money happy to have it deposit into the bank for a day when there was something their hearts truly desired. This week each approached me with requests. Our four-and-a-half-year-old son pleaded for a Pillow Pet while our daughter, age seven, dreamily looked at the American Girl Doll catalog wishing for another friend for her beloved Felicity.
While the task of teaching children to save money can be daunting, it doesn't have to be. Bill Dwight, founder of FamZoo, a virtual family bank that teaches practical money basics to kids of all ages, urges parents to start simple. He believes in starting your family banking system when your child first asks to buy something.
"It's the perfect teachable moment to start discussing wants vs. needs, what a bank is, how to save, and how to make purchasing decisions," says Dwight. "The longer you wait, the more you encourage the "gimmies" and a growing sense of entitlement. Do yourself and your child a favor: nip that in the bud."
Nip it in the bud by starting a Bank of Mom and/or Dad. Dwight did this when his now-college-age children were younger, and it's something that we've started in our house too.
Here are some helpful tips to help you open a branch of The Bank of Mom and/or Dad in your home:
Banking can become increasingly complex as your children grow up. Consider teaching your kids about interest and encourage them to save. If there's a big ticket item that they want, give them a loan if they have insufficient funds in their account. Dwight also encourages to teach children about charitable giving by designating a certain amount of funds for spending, saving, and giving.
In his experience as a father of 5 children, Dwight believes that there isn't just one way to teach kids about money but believes, "the most important thing is to have a clear, explicit system that is consistent with your family's values and your family's situation. Then, let your kids practice and make mistakes while under your guidance. Better now than when they hit the unforgiving real world."
Originally published in 2011.
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