BOSTON (CBS) – April is Financial Literacy month and today The American Bankers Association is sponsoring a Teach Children to Save Day.

Close to 30 participating banks in Massachusetts are sending bankers into the schools today to talk to the students about saving.

We are doing a lousy job as parents teaching the next generation to save. Our savings rate as a nation at one point was negative. It’s close to 6% right now. We should be saving 10 to 15%.

All kids should master the concept of saving. A savings account at a bank is good although interest rates are so low it’s hard for them to see much of an increase month to month. You can always be the banker and offer a higher interest rate for them to save. 10% would be an easy number for them to understand and calculate.

Get a few piggy banks and label them, spending and saving and college savings. Long term for an 8-year-old is about 6 months. Encourage saving part of their money gifts and allowance. Each month take the money out of the banks marked savings and add the interest earned. You are teaching them about compounding interest! Once they manage to save $50 then set up a savings account at a bank.

The other piggy bank is theirs to spend how they wish. No restrictions! Let them make mistakes with small amounts of money. Better to learn a lesson with $30 than $3000.

Once your child is working and earning money consider helping them open a checking account. You want them to have the experience of budgeting and paying bills before they go off to college or are out on their own. Everyone should know how to balance a checkbook!

Consider letting them be the family bookkeeper for a couple of months, paying the bills and balancing the check book. I let my kids do this and they were surprised at how much money it cost to run our household. They were shocked that we had to pay for things like water.

Teach your kids banking skills. Should they have their paycheck automatically deposited or will they stop in each Friday with the check to make a deposit? Should they have an ATM card so they can withdraw their spending money?

Should they try using bill-paying software such as Quicken? Much easier to balance their checkbook using computer software but they should do it a few times manually so they understand the mechanics of it. How far do you carry this? Checks they can print out on their computer? On line banking would be a good skill to learn.

While you are at the bank pick up all of the free literature at the bank. Talk to your kid about checking accounts, CDs, ATM cards, credit cards, loans, mortgages, car loans, school loans and business loans. How does a bank make money? Why do they charge for checking accounts? Use of the ATM machine? What’s the interest rate on a home mortgage? If you have a 30-year mortgage how much interest will you pay over the life of the loan?

State chartered banks are required to offer one personal checking and savings account free of maintenance charges to customers 18 years of age or younger or 65 years of age and over. Getting a checking account for someone who is a minor (under 18) may not be that simple. Banks don’t like to deal with minors so you may have to co-sign on the account or set up a custodial account. Doable!

One more thing:  Origin of Piggy banks: In the 15th century the poor used clay dishes made from a type of clay referred to as pygg. They saved their coins in pygg clay jars. Soon becoming piggy clay and then piggy banks and then an actual pig shaped container.

Comments (2)
  1. Emma Braughin says:

    I think the mom did it with my and my younger brother is a way that I hope other parents bring their kids into money spending – giving them some control. I really had no say over paying the big bills in the house, but things like groceries and cell phone bills I did have a say in because they affected me a way I could understand as a kid. I always helped her clip coupons and go to the store and find the best deals when it came to food. With other bills, like the cell phone bill, we would sit down together and talk about what the phone was for and how it was to be used and then, once I understood that, would we go shopping. I’m 28 now and got my first phone over a decade ago and the company I started with then, Tracfone, I’m still with now and its because I learned to find the best deals when I was a child. I’m just as budget conscience as my mom was then so I can understand why she got me a really simple, baisc prepaid phone rather than adding another bill with a contract. What I loved then was being able to save my allowance and birthday money to load the phone with minute cards – I do the same thing now.

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