Putting Banking into Kid Terms

Leticia Barr
May 30, 2014

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:

  • Talk about why it is a good idea to put money in a bank rather than stuffing it in a piggy bank or in a wallet in a pretend purse. Dwight recalls his own kids' experiences with a piggy bank saying, "When you have four older siblings, an unsecured piggy bank is a very risky repository!"
  • Teach your kids about the basic terminology associated with banking. Start with words like bank account, deposit, withdrawal, and balances and put them in kid-terms. A bank account is a place where money is held for safe keeping. Deposits can be made when kids have money they want to save such as birthday money, babysitting earnings, or an allowance. When you take money out of the bank, that's called a withdrawal. A withdrawal might be made when a child wants to use their savings to make a purchase. Making a withdrawal can make the balance, total amount in the account, decrease.
  • Help your children understand banking with concrete examples. Inspired by the passport-size books I used to hand to the tellers at my childhood bank used for a printed record of withdrawals and deposits, we've set up a spiral bound notebook so our children can watch the dollar amount in their accounts increase or decrease. If you are looking for an online site, I highly recommend FamZoo!

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. 

From the Parents

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