All three of my kids have recently celebrated birthdays and received a bunch of little gifts. In the mix of these gifts were some gift cards and a little bit of cash. I decided to take advantage of these newfound gifts to provide a money management lesson to our 8 year old and 10 year old daughters. My 4 year old is still too busy with Paw Patrol to care and he thinks that when mom and dad need cash they withdraw it from the Dollar Store. It's far from the first time we have discussed money with the kids. My wife and I have spent a fair bit of time teaching the importance of saving money and giving charity. Our morning commute to school has been a great time to discuss topics like this, and we have covered everything from car insurance to bank accounts to basic investing. I'm always fascinated by some of their questions - they are full of insight and naiveté all at the same time. All in all, it makes for wonderful conversation and a solid opportunity for us to educate our children.
I recently came across a book by Ron Lieber,
Lauren, my 8 year old, was extremely excited to do the exercise. She did however feel some competitive pressure from her sister who swiftly and confidently completed the exercise. She had a question before dividing her money. "Dad, can we please go to the bank so that I can take another $40 out of my bank account to put in the jars?" At that moment I realized that some additional clarification was required. My daughters have no interest or use for the bank at this stage of their life. As far as they are concerned the bank swallowed up their money the last time they went there. To be fair, they had a horrible experience when we took them to open their first bank account. Lauren's request presented an opportunity to more tangibly explain the role and purpose of a savings account. As much as I would have liked to explain on the spot, the competitive pressure was too much for Lauren too handle. Once she calmed down she listened to my explanation and immediately understood. The money from a full jar will go to her savings account. Lauren placed $20 in give, $20 in save and $10 in spend. Lauren also had a small gift card from Toys R Us that she tried to force into her spend jar. I thought that was just brilliant as she clearly understood the purposes of each of the jars. I offered her cash in exchange for her $20 gift card and she took the cash and wanted to split it across the three jars. I was so proud of her for not only understanding the exercise but also for wanting to save and give more. I commended her on the approach but also insisted that the $20 go in her spend jar - it's meant for her to buy something with. For their efforts, I rewarded each of the girls with a bonus $5 to place in their spend jars.
The kids are proudly displaying their jars on their dressers and are looking forward to the next opportunity to add to them. I've also noticed that they are far more cautious as to what they pull out of the spend jar - it has become a very tangible and finite resource and they are forced to think prior to dipping in.
I learned a few things from this exercise:
- Kids can be extremely generous. I was absolutely blown away by how much money they chose to give to charity. It's a huge lesson for kids and a value they will carry into adulthood.
- Gamification can have positive and negative consequences. I did not intend for the girls to view this as a competitive exercise but I should have known better. Individuality needs to be respected and if I were doing this again I would take the time to do this separately with each child. I guess I can try again when my 4 year old little guy is a bit older. There are positive aspects however to the gamification. A visual of a jar getting fuller is a great motivator. Positively reinforcing their behavior with a monetary reward will incent them to keep at it. Dad provided a better interest rate than the bank but the concept is still the same.
- As digitally oriented as kids are, cash is a far more tangible way to learn about money. Bank branches and mobile banking apps are abstract concepts for kids. Cash is real, you can touch it and you can see what happens when you add to it or take away from it.
- Visualizations are critical when it comes to money management. This applies to individuals of all ages. For kids the jars are a great tool. For adults it may be a mobile alert or a chart full of rich data.
Round 1 of jar-based money management was a huge success. I'm curious to see what happens as the kids add to and dip into the jars and I will report back with material findings.