Learning to Save Smartly A Parent’s Lesson on Savings Accounts
Every year, seemingly without fail, my son expresses an intense desire to own the latest, hottest, most important gadget ever. And every year, also without fail, the same bargain is struck – when my son can save up enough money, he can purchase that device. If he wants to perform extra chores around the house to supplement his relatively meager income, then he is more than welcome. He’s wanted enough things in the past that he knows the onus of savings rests with him.
So, my son saves up for months, puts in the teenage version of overtime around the house, and eventually he has a new toy with little else to show for it. My son, for better or for worse, is living paycheck to paycheck. As a responsible parent, I felt it only prudent to not let him fall down that path, at least not while he still lives under my roof.
So, when my son absolutely had to have a new video game console, we sat down to talk about money and saving. He laid out all of the reasons he needed to have this new video game, and I, as the parent, explained that he was talking about hundreds of dollars. I laid out the rate it would take him to save up that much money at five dollars a week, and he bartered for rates on extra chores. I addressed the hidden costs – games and extra controllers – and he said he’d just save up for those when the time came.
Our negotiations typically ended at that point. This year, however, I laid out one new stipulation – my son would have to put aside an extra ten percent of the price of his console. He did the math and balked. I assured him that it wasn’t all bad, just a few extra weeks of allowance or a few extra chores would easily make up the difference. I explained to my son that he had to consider his allowance like a paycheck, and while the video game system is a nice way to spend that paycheck, he needs to pay himself first.
I asked him to think of this as having a savings account to go with his checking account. To add to the realism of the experiment, I even offered an interest rate of a few percent, explaining that while his money was sitting in savings, that he was actually going to earn more of it.
I brought up the last few purchases he’s made, each more expensive than the last. Each purchase had him starting from zero, which meant that expensive gadgets took longer to get, and by the time he got there, who knew what else might come out? Having money in savings would mean that he wasn’t starting from zero.
He was initially opposed to the idea of saving money. But I explained to him the rather grown up concept of finding his own cushion. Right now, my son does not have to worry about unexpected expenses; those are taken care of by his parents. But as he grows up, he’s going to want a measure of money in the bank, a reserve cushion, a rainy day fund that can take care of the unexpected. The ten percent that I asked him to save, that was just his first cushion.
We went to our local Richmond Virginia Bank and opened an account. The friendly service along with the Lolly-pop was a tremendous hit. We check his balance online and he knows exactly how much he has and what he is allowed to spend. It was a worthwhile experience to teach him some fundamental principles of savings even though he knew all about spending already.