hab's comments

Kids and Money: Early Earners - Blog Entry

13 Jul 2006 08:57 PM

Hi Sherry

While I agree there's a lot to like about the early earners site, I think a few important fundamentals are missing when it comes to the message for kids.

1) There's almost a single-minded focus on saving, without addressing the benefit of saving other than "having more money". I know with my four kids, I would quickly lose their interest when talking only about "fun stuff to give up" (eg pizza) with the only payoff being conceptual (savings over time) and perhaps fear reduction ("if you're not scared yet"). I have to admit - I'm quite skeptical that many kids have read the site. And if they did, I doubt they encouraged Mom and Dad to rush out and get them a savings account.

2) I really try to teach my kids that earning/spending/saving is all about making choices - sometimes between two products today - sometimes between something today and something in the future. And it's ok to sometimes make the choice to spend today! Llife's about balance. And it's best they start to learn these lessons as kids when the price of a mistake is pretty low.

3) I found that using real bank accounts just didn't help teach the kids much. It was pretty sterile, not interactive enough and interest payments were too small and infrequent to matter to them. I suspect that's what many kids find when they open an account, so it doesn't really teach them much.

To help our kids learn about responsible earning/spending/saving, my wife and I developed a more elaborate system with several "virtual" bank accounts (recreation, gifts, sharing, clothing, long term savings, etc), "virtual" checks they could print and sign when they wanted to withdraw money, really simple tracking of expenses and income (eg allowance, gifts) so they could see where they got their money and where they spent it. We also created Responsibilities Checklists that enabled them to not only feel proud about earning their allowance by sharing the family tasks but also earn bonuses for special achievements (eg finishing a school project early).

The system has been outstanding, but involved a lot of effort when we did it manually. So we created a website to dramatically simplify as well as significantly improve the process. In case you're interested, it's in public beta right now, at www.activeallowance.com