How many of your kids use piggy banks? Ok now think about your family budget. Do you just toss all of your money into one account, or do you divide it into chequing, savings, retirement, investment, emergency funds? If we want to teach our kids how to segregate money into different accounts, we should help them, and we should help them early.
Stop Using Piggy Banks
I don’t know the historical origins of a piggy bank. But regardless of where they came from, I don’t see how pigs have anything to do with money, and I think piggy banks are a terrible way to have kids store their money.
First off, you can’t put in bills easily, and if you are Canadian, some coins won’t fit either. Once the money is in, you have no idea how much you have. Which one of you would keep your money in a bank if you couldn’t see the balance? Then either the bottom comes out too easily, and money rains down on you, or the hole in the base is too small, and you can’t get anything out.
Bad at deposits, balances and withdrawals? Banking shouldn’t be this hard! Toss those piggy banks out!
A big part of money management is compartmentalizing the money you have. I’m sure you do this all the time. I have a paycheck coming, part of it will go to rent, some to groceries, and some to entertainment.
That compartmentalizing is easy for us because we have had practice. But even with practice, we still like to put up barriers to the different compartments. This is why we have savings chequing and retirement accounts.
We need to do this because money is money. The money in my savings account is the same as the money in my retirement account. The only way to distinguish them is to set up some compartment, or in this case, accounts to separate the two. In economic terms, they call this fungibility.
So why are we not doing this with our kids?
A Better Way for Your Kids To Keep Their Money
What is the simplest way to delineate money for different purposes? Put it in different places.
When I started my son’s allowance, I found three clear jars with wide openings and twist on lids.
We labelled each jar.
Save – this is equivalent to a savings account which he uses to save up for something special.
Spend – This is his chequing account for buying smaller things that come up
Give – This is his donation account that he uses to be philanthropic.
Why Clear Jars.
Deposits/Withdrawals – easy to open and put money in or take cash out
Balance – easy to see your wealth increase and decrease at a glance
By keeping his money in three jars, he is building the habit of budgeting and accounting. By using clear jars, he can keep a tally of what he has. It is not hard for him to get a statement of his accounts with a glance. And by making the jars easy to open and access, it makes his money easy to access. The idea of having to find a hammer to access your money might sound like a wise saving strategy to some, but trust me, it is not.
I love the three jar method. I think it is simplicity at its finest. How better to teach accounting without having to teach accounting?
Toss those piggy banks and let me know if you have tried this method and how it is going for you.