Updated on 11.16.09

# Starting a Lifetime Savings Journey

Recently, my son Joe had his fourth birthday. Sarah and I had made the decision that we were going to introduce the idea of an allowance to him after his fourth birthday, along with the idea of saving for specific goals.

In order to accomplish this goal, we decided to get him a Money Savvy Pig for his fourth birthday. Here’s the happy birthday boy with his pig (and an over-the-top goofy grin):

What is a “Money Savvy Pig”?
As you can see from the picture above, a Money Savvy Pig is a bank with four distinct compartments: Save, Spend, Donate, and Invest. The bank has four slots along the top – one for each compartment – and each of the pig’s feet provides access to one of the chambers to empty it individually.

The idea behind it is pretty simple – it makes it very easy and tangible for children to separate (and effectively budget) their money.

How We’re Using It
Each week, we’re giving him \$2 in quarters for his allowance – \$0.50 for each year he’s been alive. Thus, next year, he’ll get \$2.50. We may at some point in the future change this rate, but it works for the time being.

He then splits the money into four roughly equal amounts. Two quarters go in the “Spend” slot, two quarters go in the “Save” slot, two quarters go in the “Donate” slot, and two quarters go in the “Invest” slot.

He is completely free to spend all money that goes in the “Spend” slot as he wishes. If he wants, he can take that money and put it in the other slots in his bank, or he can put it in his pocket and take it to the store with him to buy something small.

With the “Save” slot, we had him identify something that he wanted that was much more expensive than a dollar or two. We told him to think about it and later he told us he was saving for a Batman action figure that costs about \$10. So, we told him that he could keep adding to the “Save” slot and in a few weeks, we’ll count it up and see how close he is to it.

With the other two slots, we told him that for now, they’re going to just build up.

For the “Donate” slot, we’re talking right now about the various things that people can donate money to – the local church, the local food pantry where people who don’t have much money can get food, Heifer International, PBS, and so on. We told him that when he gets \$5 in that slot, he can pick something to donate to. He has expressed positive interest in donating to PBS, so I more or less expect that to be his first donation in two months or so.

For the “Invest” slot, we’ve told him that it’s just going to build up for a while. Our plan with that is to wait until there’s a “lot” of money in it (from his perspective). Then we’ll use that money to introduce various ways to invest, starting with a savings account at the local bank.

Does a Four Year Old Understand All of That?
No, nor do I expect him to.

We’ve started doing this when he’s young so that saving seems like a completely natural thing to him as he becomes more aware of money and how a person can use it.

I don’t expect him to fully understand, and he doesn’t. For now, he really only understands the “spend” part and the “save” part of the bank – the other two are mysterious.

We are quite sure he understands the “save” slot. We told him that he’s free to put any money he gets as a gift into any slots he wishes and he chose to put almost all of it into the “save” slot because he wants the Batman action figure that he had chosen as a goal. He put a smaller portion of it in the “spend” slot and a bit each in the “invest” and “donate” slots.

We’re also quite sure he understands the “spend” slot, since he wanted to take a dollar out of it a couple of days ago to buy a Hot Wheels car for the race track his grandparents gave him for his birthday. We, of course, approved this, since it’s money he can spend as he chooses.

The other slots are a mystery at this point – they’re clearly there for him to grow into it.

Joe has a two year old sister who loves to do exactly what her big brother is doing. So how are we handling that? We decided to start her on an allowance, too, but a much simpler setup is in the offing for her.

For her, we’re just giving her four quarters on allowance day (again, fifty cents for each year) and allowing her to put it in her bank. We don’t have any rules on how she can use it, but for now they’re really not needed. She simply enjoys putting “monies” in her bank, just like her big brother.

When she’s four, if Joe is seeing success with his bank and we’ve seen it as a valuable tool, we’ll get her one, too.

One big reason for doing this is the idea of peer reinforcement. If they’re both saving together, it seems more normal. It isn’t just them doing it – one of their peers is saving, too.

1. Broke M.B.A. says:

Very good idea. I grew up with three jars. One for saving, spending, and giving. I credit this with my interest in personal finance at a young age. I began reading books on investing as early as high school. Good luck, hope all goes well!

2. Daniel says:

It sounds like a great idea, and as they get older, they’ll start to understand exactly what they’re doing. It may take awhile to understand the point of investing, but donating shouldn’t take too long. Kids love helping others.

What else did Joe get on his birthday?

3. Johanna says:

You’ve written about this scheme a bunch of times before, but I still have one question: What happens if, in the time it takes him to save up for the Batman figure, he decides he doesn’t want it anymore, or that there’s something else that he wants more? Are you going to keep checking in with him to see if he’s still happy with that goal, or does he have to take the initiative to come to you and say so?

nice! looks like you changed it a bit from your september post, specifically how you treat his gift money. i think people will like the change.

5. Little House says:

What a terrific idea. Those kids will have a really good start to understanding the idea of saving and budgeting.

I don’t have kids, but I want to start thinking of ways to introduce this idea to my kinders and first grader students. I may have to use something like this, with a saving and spending compartment, for building up rewards and gifts from the treasure box. Using play money,of course. Any suggestions?

6. Amy says:

This was helpful. I read about one of these piggy banks yesterday, and was not clear on the “save” versus “invest” since saving is a kind of investment. But “saving for something specific” makes perfect sense.

7. Do they make the Money Savvy Pig in adult sizes?

8. Vicky says:

Wow! This is a really, really neat idea for teaching money management!

I wish my own parents had done this!

9. Shevy says:

@Johanna
He’s a little kid. If he changes his mind Trent will hear about it. He’ll come running up, saying “I want THIS.”

At that point Trent’s job is to remind him once about his previous goal. “Wow, Joe, that Play Doh maker really interests you. Do you like it better than the Batman?”

If Joe says “Yes!” then they can talk about how sometimes people change their minds and it’s okay to put his savings toward the Play Doh instead, if that’s what he wants to do.

If he says “No” then he’s still saving for the Batman figure.

What Trent shouldn’t do is hover over his shoulder, asking him every week if this is still what he wants to do. Joe will eventually pick up on the idea that Daddy wants him to change his goal and may change even if he didn’t really want to, just because he’s been asked so many times.

10. Joanna says:

@Little House: Do you have Junior Achievement in your area? It’s a not for profit program that teaches children about economics starting with kindergarten & ending I’m not sure when. For sure it goes through all of elementary. At any rate, my employer supports the program & we descend upon a school to do JA in a Day every year in early December. I taught the kinders one year (and they were so freaking CUTE!). It was a lot of fun. We talked about identifying different coins & how much they’re worth, saving your money for something you want, giving to others (in one story a little girl saved her \$\$ to give a present to her friend), earning money (same little girl organized her older sister’s toys for \$\$), and the difference between a need & a want. They seemed to have a good handle on that last one, understanding that water, food, clothing are needs (except for the one boy who excitedly raised his hand and said that beer was a need ).

At any rate, as a teacher, you probably already know all about it but in case you don’t it could be one more resource for teaching your kiddos about money. Our teacher also had some videos that discussed need v. want that she showed that day.

11. I’ve never seen the money savvy pig before and I think that it’s awesome. A great idea and something I look forward to doing with my kids. How did you decide on age 4?

12. Johanna says:

@Shevy: As you may have guessed, I’m no expert on child psychology, but it seems to me like it would be pretty hard to strike a balance where he neither feels pressured to change his goal nor pressured to keep it the same. At one point, I think Trent mentioned a plan to cut out a picture of the toy he picked out and taping it to the savings jar to remind him of his goal – it seems that that might give him the impression that the savings goal is more immutable than it really is.

My impression is that the whole point of the forced budgeting scheme is to get him in the habit of thinking that what he does with his money is not completely up to him – that just because some money comes into his hands and is “his” doesn’t mean it’s available for him to blow on any old thing. (And I’m starting to understand why this might be a good way to teach a kid how to handle money, although I still don’t think it’s the only good way.) So it seems to me that it might be a challenge to get him to realize that although some aspects of the scheme are set in stone, he really is completely free to choose what he’s saving for. But maybe I’m overthinking it.

13. Kat says:

Johanna, 4 year olds think very little is immutable, especially when they see something new they want instead. They also aren’t very good at abstract thinking yet, so a picture isn’t a bad idea either I think (which is why the segmented piggy banks are good, visually they explain what is happening).

14. Jennifer says:

I think this is a great idea! Home Depot has free workshops for kids once a month, and both of my boys came home from one with a cute fire station bank that has a slot for everything but “invest”. Maybe we’ll start our four year old on an allowance this year, divvying up what he has already impressively accumulated in his Spiderman wallet. (Could not believe how much was in there!)

I didn’t understand the comments regarding what happens if his “save” goal changes. Don’t we all change our goals along the way? So what if he changes his mind? He is still learning about saving for different things, and to work towards a goal. All good!

15. Heidi says:

Better get a Money Savvy Pig ready for child #3 if she’s anything like the third in my family – my youngest sister watched her two older sisters with their pocket money and was the entrepreneur/saver/investor from the time her feet hit the ground. We’d go to the neighborhood pool, and she’d spend some of the time swimming, and some of the time scouring the pool deck for loose change. She was the youngest paper carrier for our local paper when she started her route. And let’s just say that if I had her bank account right now, I’d owe Sallie Mae a lot less money!

16. Trent, I have heard about these before, and I think it is a GREAT idea for teaching kids about money… even if it will be a little bit before they actually pick up on all the parts of it. I don’t have any kids yet, but hope to before too long, and I fully intend to do something along these lines when they are “ready” to start learning.

@Heidi,
I was the same way… every trip to the community pool was a chance to make a couple bucks in change. I would jump off the diving board and swim around on the bottom for a good full minute (I could hold my breath a long time) just grabbing every coin I could see. But, I’m not the third, I am the oldest of two.

17. Oh, I forgot I wanted to add one more thing…

Trent, I would even encourage you to add an incentive onto the investing and donating portions of the bank. For example, you might tell him that when he is ready to make the donation to his charity/good cause, you will match whatever he puts in. Same thing if he wants to use the invest part to buy a CD or something…

My father gave me a similar type of extra reward when I worked hard on saving my money, and it was a huge incentive for me…

18. kim says:

When helping your son make donation decisions, think about your local animal shelter. It’s a great charity opportunity for young kids. Take the money, buy some pet food at the store and bring it right in to the shelter. It is very easy for the child to understand exactly how their donation will work and most kids have a soft spot for animals. With parental supervision, many shelters will let even young children volunteer. My five year old donates two hours a week. We care for cats. She pets them, puts clean water and food in the bowls, and folds clean laundry. I handle the dirty stuff. She takes a lot of pride in her “job”.

One question Trent: Why do you get to decide what goes where in the bank? Shouldnt your son determine that? Please give him some freedom =] and allow him to think for himself. I know he’s a 4 year old, but you deciding where HIS money goes, it think is too controlling. Maybe you should explain each slot to him in a way he will understand and let him decide how much he wants to put in each slot….

hes already made big progress. a few months ago he was talking about making him break up gift money the same way as his allowance. so if g-ma gave him 20 he would have to put x here, x there, x there, and x here, no choice about it. maybe in a few months he will relinquish the rest of the control :)

21. Kristen says:

Sounds like a wonderful gift! And the best part is that you are keeping your kids excited about the system and not putting any negatives on it. I think you are doing a great job giving your kids a good foundation for money that should benefit them greatly for the rest of their lives.

22. *sara* says:

@Adriana The purpose of parenting is to teach children what to do and how to do it- letting kids learn everything the hard way, (ie. constantly doing things the wrong way) is cruel when the parent has knowledge that could have helped them do things the right way. A four year old is definitely be in the “learning” stage of life, not the “freedom” stage of life, and instructing him where to put how much money is not only appropriate but part of a parent’s responsibility in passing along critical information to their children about how the world works. Trent bought this as a teaching tool, and it should be used to facilitate the intended lessons.

23. That is a wonderful way to instill the habit of saving money for something.

24. BJD says:

Sounds like Joe had a much better bday this year. If I remember right most of his friends got sick the day of his birthday party and no one was able to go to the party. His grin looks like he had a much better 4th birthday than 3rd!!!

25. Jessie says:

Question: What do you do when he’s 5 years old and getting 2.50? That doesn’t divide into 4 slots in quarter form! Would you just do \$2 one week and \$3 the other week so it would work out? I only ask because I would love to do this for my children when they are old enough.

26. friend says:

I really like everything about this idea. I’ve been teaching my preteen about those four money categories for years, and he has his jars and his bank account, but the pig is such a wonderful way to visualize the categories. And kudos to the way you’re bringing little sis into the picture at her own speed.

27. Carey says:

I’m sort of with Johanna here with the “Save” compartment. In 20 weeks, when the little lad has saved up \$10 for Batman, will he have moved on from the Batman phase? At this point, 20 weeks represents 10% of his lifespan up to that point (I know, crazy to think about it that way), so I doubt he’s going to be into the same things.

28. SMG says:

btw, both of your children are very cute!

29. Patty says:

Gotta love this! Thanks – I think a niece or nephew may need this very soon.

30. bethh says:

I was volunteering on the phones taking pledges for my local NPR station, and a kid called in to donate seven dollars/month for a year. It sounded like his parents let him pick an organization each year, and they contributed a dollar amount equal to his age. It was a very cute phone call! Good luck with this Trent – no matter how it goes, it’ll be a learning experience.

31. Rachel says:

I love the idea, and I also like the adjustment of what to do with gift money – split it how he wants, rather than 25% each way.

The research psychologist in me wants to be sure that you are noting exactly how each windfall is split up, and how everything is spent, and that we will be seeing graphs as soon as enough data has been collected!

About changing the goal – as long as it’s a reasonable goal – saving \$10 for a batman figure should take 5 months, not counting any gift money that might go to that, and if he changes his goal, it’s likely to cost roughly the same (or more) – so it might be enough to recheck the goal when counting how much is saved up. If Trent notices that gift money isn’t being put in the saving slot as much as before, he might ask then as well.

Another question of how this works: other than basic needs – food, shelter, medical, clothing – is there anything else that you will buy for him, or does everything else have to come out of his spending section?

32. Adriana, as someone else mentioned, when a kid is four, a parent has to do a LOT of controlling/deciding because the kid is, well, four! I see nothing wrong with this. Trent knows more about managing money than his 4 year old does, and so he’s working to ingrain good habits in his kids. And honestly, four year olds don’t do very well if they don’t have a parent kindly controlling a lot of their lives.

The only difficulty here would be if Trent continued to exercise this much control until his kid is 18.

My plan is to gradually reduce the amount of control I have over my kids until they are mostly functioning on their own by the time they leave home. For example, I exercise a lot more control over my three-year old’s money than I do over my 10-year old’s money.

33. I forgot to add that, Trent, I can hardly believe how big your kids are! You post pictures so infrequently, your daughter is still a baby in my mind! lol

34. danielle says:

Can you post a link to where you got that bank? It is great!

35. Shevy says:

Do you allow your children (if you have kids) to decide whether or not they will brush their teeth, or to pick every meal they eat, or to choose to go to school or not?

The issue here is not “controlling” the child; it is education. The smaller the child, the more you limit choices and provide specific opportunities to learn about choices and consequences. As they grow, they have more and more input. The goal is to raise a self-disciplined, mature adult who is ready to go out into the world in 18 or 20 years time.

36. Karen says:

Very cute kids!!

37. SoCalGal says:

I love Kim’s idea of the animal shelter for giving. What a great way to see where the \$ goes. Trent, those are some seriously cute ninos!

38. Courtney says:

Cute kids!

My son just donated his allowance to feed an elephant for a day at the Elephant Sanctuary in Hohenwald, TN. He got to choose the elephant he wanted to feed and got a picture of her in the mail – it was really neat.

The Humane Society is a favorite with our kids, too, as well as the USO.

39. aevans says:

Trent! This is just great. Good for you. I wish my parent’s had done this. They might have tried to but we probably would have pitched a fit about the saving or donating parts. I wish my parents HAD been a bit more controlling at that young age. We would have learned a lot. Instead we had a lot of Power given to us (THey were afraid of being too controlling) and now we can see a lot of the results that aren’t great as adults.

The comments made about parenting and being the one in charge at that young age are really right on.
The other approach, giving the kids ALL that power also feels kind of empty as a kid. You WANT your parents attention and input. THEN when you get older your foundation is strong when you really start to rebel.

I am going to buy that bank for the grandkids!

40. carmen says:

@ Sara, I don’t believe the purpose of parenting is to teach our children what to do and how to do it. We are all our own best teachers, but in need of guidance, acceptance and love by our parents and other key people in our lives.

As far as the allowance goes, good start Trent! I intensely dislike the split of money, but agree that all aspects of the budget have value and having not implemented the formal controlling approach, it is hard to keep momentum with donations for example.

I would be keen to hear what options you will consider for investing. Some traditional vehicles require transactions of at least £50 (c\$80), some monthly. Company stock? I think my kids would love to own shares in Coke, Disney etc.

41. carmen says:

… not that they drink coke :)

20 weeks is too long, IMO, to save for a \$10 Batman toy at the age of 4. But maybe it’s right for him. My 6 year old saved enough for a Wii in about 9 months, with a similar allowance plus gift/extra earned money.

42. Laura says:

That is pretty cool. Wish my parents had given me one! Maybe once he gets a little bit older, you should open a lifetime savings account for him?