children-and-money

PARENTSwhodecidethatthetimehascometoteachtheirchildrenaboutmoneyusuallybeginbyopeningsavingsaccounts.Thekidsareintriguedatfirstbythenotionthatabankwillpaythemfordoingnothing,buttheirenthusiasmdisappearswhentheyrealizethattheinterestrateisminusculeand,furthermore,theirparentsdon'tintendtogivethemaccesstotheirprincipal.Toakid,asavingsaccountisjustablackholethatswallowsbirthdaychecks.Kid:Grandmagavemetwenty-fivedollars!Parent:Hownice.We'llputthatcheckstraightintoyoursavingsaccount.Kid:Butshegaveittome!Iwantit!Parent:Oh,itwillstillbeyours.Youjusthavetokeepitinthebanksothatitcangrow.Kid(suspicious):Whatdoyoumean'grow'?Parent:Well,ifyouleaveyourtwenty-fivedollarsinthebankforjustoneyear,thebankwillpayyouseventy-fivecents.Andifyouleaveallofthatinthebankforjustonemoreyear,thebankwillgiveyouanotherseventy-fivecentsplustwoandahalfmorecentsbesides.That'scalledcompoundinterest.Itwillhelpyougotocollege.Themainflawinsuchsavingschemesisthatthere'snothinginthemforthekids.Collegeisathousandyearsaway,andtheyprobablythinkthey'djustassoonstayhomeanyway.Indeed,thetruepurposeofsuchplansisusuallynottopromotesavingbuttopreventconsumption.Appalledbywhattheirchildrenspendoncandyandvideogames(or,rather,appalledbythedegreetowhichtheirchildren'sprofligacyseemstomimictheirown),parentsdevisestratagemsforimpoundingtheirchildren'sresources.Notsurprisingly,kidsquicklydecidethatlargesumsaren'trealmoneyandthatallcashshouldeitherbespentimmediatelyorhiddeninadrawer.Toavoidthisproblemwithmytwochildren,Istartedmyownbank.It'scalledtheFirstNationalBankofDave.Isetupanaccountforeachchild,usingthesamecomputerprogramIusetokeeptrackofmycheckbook.BecauseIwantedmykids'depositstogrowatapacethatwouldholdtheirattention,Iofferedanattractiveinterestrate--fivepercentamonth.Compounded,thatworksouttoanannualrateofmorethan70percent.(No,Idon'tacceptdepositsfromstrangers.)Allowancesaredepositedautomaticallyonthefirstdayofeachmonth.Thekidscanmakeotherdeposits,orwithdrawals,whenevertheylike.TheBankofDave,whichhasbeeninoperationfouryears,instantlyturnedbothmychildrenintoardentsavers.Mysonstillcomestomewithchangehehasfoundonthefloorofthecar,saying,Andcreditthistoday.Bothkids'accountsgrewsofastthataftertwoyearsIhadtorollbackmymonthlyinterestratetothreepercent.ThekidssquawkedwhenIannouncedthechange,buttheynoddedsolemnlywhenIexplainedthatthelawofsupplyanddemandapplieseventothesupplyofmoney.Thekidshelpmecalculatetheirinterest--ausefullessoninaveragingandpercentages.Igivethemunlimitedaccesstotheirfunds,noquestionsasked,andIprovideprintedstatementsondemand.ThehighrateofinterestisnottheonlyattractivefeatureoftheBankofDave.Equallyimportantfromthekids'pointofviewisthattheiraccountsbelongtothem.Whentheysave,theyreapthebenefit;whentheywanttospend,theydon'tneedpermission.Childrenwhohavenocontrolovertheirownfundshavenoincentivenottobegformoneyandthensquandereverydollarthatcomesintotheirhands.Ifyourownincomeconsistedsolelyofwhatyouwereabletobegfromafickleandinscrutableboss,youwouldwheedletoo.Thewaytohelpchildrenbecomerationalconsumersistogivethemmorecontrol,notless.Beforewegoonvacation,I'llusuallygivemykidsanextratwentybucksorso,whichIdepositintheiraccounts.ItellthemthattheycanspendtheextramoneyonaT-shirt,saveit,spenditbeforeweleave,ordoanythingelsetheywantwithit--butthatwhileweareonvacation,theywon'treceiveanyadditionalpocketmoneyfromme(exceptintheformofcommunalpurchasesconsideredbycustomtobevacationentitlements,suchascandy,icecream,movietickets,andsoon).Becauseanymoneytheyspendstartsoutastheirs,notmine,theythinktwicebeforethrowingitaway.InasouvenirstoreonMartha'sVineyardacoupleofsummersagomysonquietlystudiedtheunpromisingmerchandisewhileafriendofhisloudlycajoledhisparentsintopayingfivedollarsforatoytomahawk,whichfellapartalmostbeforewegotbacktothecar.Mysonendedupspendingthirty-threecentsforanunopenedgeode,whichhelateropenedbywhackingitwithahammer--agoodvalue,evenfrommyjadedperspective.Ifhehadbeenspendingmymoneyinsteadofhis,heundoubtedlywouldhavewantedatoytomahawkinstead.Childrenareinstinctivecapitalists.Ifgivenenoughleeway,theyquicklybecomeshrewdmanagersoftheirownfinances.Whenparentsfailintheireffortsatfiscaleducation,it'susuallybecauseforreasonsoftheirowntheyhavemanagedtomakesavingseempunitiveanddull.Moneyisfun,andit'salmostentirelyself-explanatory.Theonlywaytoteachkidstoadoptalong-termperspectiveistogivethemashort-termincentivefordoingso.孩子和钱父母考虑到把时间用来教他们的孩子关于金钱经常开始于开设储存账户。孩子刚开始会被银行付钱给他们却不需要为他们做什么的观念吸引，但是他们的热情逐渐消失当他们意识到那个有趣的利率十分微小并且此外，他们的父母并不打算给与他们本金进行存储。对于一个孩子，一个存储账户就像一个黑洞可以吞下生日获得的现金。孩子：“奶奶给了我25美元！”父母：“太好了。我们会直接把这些先进放入你的存储账户。”孩子：“但是她给了我！我想要它！”父母：“噢，它仍然是你的。你仅仅只是把它保存在银行里以至于它能增长。”孩子（怀疑的）：“你说的‘增长’是什么意思？”父母：“嗯，如果你把25美元留在银行里一年，银行就会付给你25美分。而且如果你把他们全留在银行里只要一年，银行就会给你另外25美分再加上另外2.5美分，这就叫做复利。它会帮助你进入大学。”这种储存方案的主要缺陷是他们没有什么给他们的孩子。大学离他们太远了，而且他们可能想的是他们只希望尽快无论如何留在家里。的确，这类计划的真实原因通常不是促进节约而是保护消费量。被他们孩子在糖果和电子游戏上花的钱所震惊（或者被他们孩子过度花钱的程度好像在模仿他们自己所震惊），父母设计方式去锁住孩子的财力。不是令人惊讶的，孩子们很快意识到庞大的总和不是真正的钱而且所有的现金竟然既不是立刻花掉也不是藏在抽屉里。为了让我的两个孩子避免这个问题，我开了我自己的银行。它被称作戴维第一国家银行。我设置了一个账户给我的每一个孩子，使用了和我用来跟踪我的支票簿一样的电脑程序。因为我想要我孩子的存款以