Piggy Banks vs. Savings Accounts for Kids

At Motherlode, Ron Lieber wonders when the right time is for his kids to switch from saving money in a jar or piggy bank to a savings account at the bank. Lieber says there is value for kids to see their pile of money growing in a bank at home—money that they can actually hold in their hands if they wanted to. He points to David Owen’s book, The First National Bank of Dad which had a chapter on this argument:

Under a heading that reads “Grown-Ups Are Dumb” he describes savings accounts from his daughter’s perspective. She saw them as a “black hole that swallows birthday checks.”

Sure, we’re trying to teach children good habits. But when the $100 check goes away into an account that earns little interest and is inaccessible in any event, kids under 12 or so come to see a $5 bill as more valuable, according to Mr. Owen. As a result, he writes, savings accounts are “actually punitive in intent: their true purpose is not to promote saving but to prevent consumption.”

I saved my money in a tin can until I finally opened a savings account at Wells Fargo in high school. Did it make me appreciate my savings more? I’m not sure—though I also wasn’t earning any interest on it unlike David Owen’s children: “Mr. Owen reinforced the instinct to let the pile grow by paying well-above market rates in interest on money that his two kids kept in the ‘Bank of Dad’ that he ran using the personal finance software Quicken.”

Photo: andrewmjiang

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