Updated on 10.16.14

Further Thoughts on Children and Piggy Banks

Trent Hamm

As I’ve mentioned a few times on The Simple Dollar, we use piggy banks and allowances with our young children in our home. We have a few simple rules that go along with this, mostly allowing them to freely spend part of their allowance while they save another part of their allowance for longer-term goals (and our oldest has a few other restrictions as well). The amounts we’re talking about are small – we give them fifty cents per week for each year old they are.

When we first started doing this, we expected our children would save for small goals. Since their allowances were on the order of $2, we assumed that they would set relatively modest goals out of a lack of patience.

Saving Big

Instead, they both took the opposite approach. Instead of saving for small items, both of our children chose to save for big items – or, to be more accurate, item lots that save them money per item.

Our son is a big fan of Dragonball Z (an animated series), but the action figures are a bit hard to find around here. Since he’s wanted to use his allowance to buy the action figures, we’ve had to turn to the internet to find figures for him.

While we were searching various sites for figures, I found that time and time again, he was more interested in buying a bundle of used figures over anything else. This was the best way for him to get a low per-figure price, even if the total cost was quite high.

The amazing part? He didn’t grow impatient with the process. He kept saving week after week for a big lot of used figures (with a requirement that two specific characters be a part of whatever lot he wound up with). Eventually, after saving for many, many weeks, he bought a six-figure used lot.

Interestingly, our daughter (who is a bit younger, only three) did almost the exact same thing with the princess dolls she’s enamored with. Rather than going to the store the first second she could afford anything, she waited because she understood that she would get more for her money by waiting. Similarly, she wound up purchasing a mixed lot of dolls at roughly the same time as our son’s action figure purchase.

The patience and willingness to bargain hunt exhibited by both children during this process impressed me greatly. I could not be happier with their progress in terms of setting goals and saving for them, particularly considering the children are five and three years old, respectively.

Making This Work: Five Tactics that Work

So, how did we get to this point? Here are some of the tactics we’ve used along the way to get our children on a good path for saving for the future.

1. “Do as I do

We don’t have a practice of telling our children one thing, then doing another. We save for goals, too, and often do this visually right in front of the children. I actually have a savings jar that I put money in to save for a goal, and that jar will often sit for months, slowly accumulating money.

2. Very regular goal discussion

We talk about goals of all kinds all the time. What do we want to accomplish this week? This month? Where do we want to be in a year? What are we saving for? All of these questions come up very regularly in discussions with our children. We share what we’re doing and encourage our children to do the same.

3. Visual money use

As often as possible, we use money in a visual fashion. We pay their allowance in quarters. We allow them to swap quarters for dollar bills, so that they visually understand that connection. We also count the dollars they accumulate. The money doesn’t just disappear into a savings account or a checking account. Even on the occasions when we pay using a debit card or a credit card in front of the children, we immediately relate to them that the card is just telling the store that we will pay them the money later so that it’s easier to pay.

4. Minimizing focus on material acquisitions

Our children don’t feel the need to have something new every week because we don’t put much of an emphasis on acquiring more material things. We already have lots of things to enjoy, so why should we have more? We’re far better off waiting around for something we genuinely want instead of spending money on an impulse.

5. Imaginative play

As often as possible, we channel play in imaginative directions. We have a “dress up” tub that our children delve into for things to wear. Quite often, we’ll pull out building blocks and build something entirely new. We’ll make up games or play simplified versions of others (like the current favorite, “Dad Is a Zombie”). Such play doesn’t require material things – in the cases where material things are used, they’re incidental. Doing this as often as possible shows that fun and joy and the good things in life do not have to come from material items.

I can’t guarantee that my children will be financially sensible as adults, but I can be sure that I’m doing what I can to give them the tools to be financially sensible as adults.

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  1. Thomas says:

    I read posts like this and feel defeated. We did extensive testing on our son, 13, and concluded Inattentive ADD and very low executive function. This means, in a nutshell, organization excapes him and he has almost zero ability to plan.

    Financially, things will be tough for him. When he gets $20, he immediately wants to go to the store, with no clue what he wants. We give him $40 on the 1st, of which he pays us $20 on the 15th for his phone. We’ve tried mandated saving, but it doesn’t work. The phone bill trick makes him hold $20 in his hand for 2 weeks.

    In a few months, at 14, we’re going to open a savings account at the closest bank for him. We’ll deposit $40 on the 1st of each month into his account and he’ll have to go get money out. This will teach him how to make deposits and withdrawals and hopefully give him incentive to just leave the money there.

  2. maggie says:

    Don’t give up, Thomas. My son has similar issues, and he just turned 21 and is away at college living in a place off campus. We do still need to do some enforced budgeting with him, like he has to leave most of his money in a savings account, and just transfer his monthly budget amount or else he blasts through his money. We all just learn the “tricks” we need to get through every situation.

  3. Des says:

    “We already have lots of things to enjoy, so why should we have more?”

    I’m all for teaching kids delayed gratification, don’t get me wrong, but it doesn’t seem like this method is any less focused on material things than buying the dolls they want in the store. Instead they are waiting to get the same dolls, plus several others that they didn’t even want or need.

    Maybe the next step will be teaching them to resell the excess dolls and bank the funds…essentially “playing” on house money :)

  4. Caz says:

    This is interesting!

    As a kid, I grew up with very frugal parents and we lived a modest lifestyle compared to my friends and the town we lived in. (Think kids driving their parents BMW’s to high school…)

    We had the Wal-Mart jeans, no-name sneakers and a very small allowance which we needed to save for the fun things we wanted (movies, clothes, toys).

    What this meant, was that the second I had a salary and a credit card, I had more money than I knew what to do with. All the saving and missing out on “cool” stuff and junk food as a kid, became instant gratification. I had no parents telling me that I couldn’t do things so I bought fancy dresses and shoes, bought takeaway food like crazy, went out for fancy dinners and drinks multiple times a week and essentially spent all my disposable income within the first two weeks of getting it.

    I’m better at saving now, but it’s still a daily struggle and came with it’s fair share of mistakes (credit card debt etc.)

  5. Rick says:

    Thanks for this whole series of articles. My son just turned 4, my daughter will soon be 2. I just bought the 4-section piggy bank and will introduce allowance shortly — basically mimicking your method.

    The big difference is that my wife and I are (historically) pretty sloppy with money. We’ve turned ourselves around over the last few years, but we’re not the best role models.

    I’m hoping that trying this method with my kids will both teach them better habits and help keep us honest. We’ll see how that works out…

  6. ChrisD says:

    It’s good that your kids are learning the value of a dollar, just don’t let them near my mother. When she was little she very generously swapped some coins from their pocket money with her little brother. It was a win/win situation. He swapped tiny little coins for nice big ones and she got 50 rap coins in exchange for 20 rap ones (Swiss pennies). :-)

  7. Riki says:

    Thomas –

    I understand your frustration. I’m a teacher who specializes in students with learning disabilities and I know that challenges with Executive Function can be paticularly frustrating.

    I’ve found that establishing very clear guidelines and making visual reminders of those guidelines are the best tools for building organizational skills. In terms of school work, that means big, multi-coloured calendars that show due dates and a specific plan for when to study. I don’t know how this might translate into money skills for your family, but the more visual the better. Typically students who have executive function issues can’t hold details in their heads, nor can they really visualize/understand things like consequences. If you can SHOW him what you want him to learn, that might help. Make it visual and make it consistent are the mottos I go by.

    I can feel the frustration in your comment and I just wanted to touch base because I see families dealing with the same issues every single day. It’s not easy, particularly with that ADD/EF combination. It takes a lot longer, usually, but your son CAN learn the skills he needs to thrive.

  8. krantcents says:

    When my children was young, we required them to save 50%. They are successful adults now. As a further incentive to save, I said I would match every dollar they earned and saved to buy a car. My children bought cars when they were 16 yrs. old and used those cars through college.

  9. “Do as I do” is a cool way to teach kids!! I did write something similar last week.. but your post is more specific and in detail about the how to do it!!

  10. deRuiter says:

    “Maybe the next step will be teaching them to resell the excess dolls and bank the funds…essentially “playing” on house money” Des’ remark is brilliant! Teaching children the value of used vs new goods is crucial. This is even more important if they paid a high price for a shiny new “something” and six months later they sell it at a yard sale for a pittance, and pocket the money. The child will learn to do business, to negotiate, to display his / her items, how to deal with all kinds of people, how to exchange their goods for cash they can keep, a strong work ethic. If, as an adult, you want to run a yard sale (or open a business), with a friend, choose one whose father ran a hot dog wagon, a hardware store, sold tombstones or grave plots for a living, bibles door to door, had a lawn service, whatever. You will have a partner who is business savvy and will work at hard selling with you. You can choose to run a sale (or any other business venture) with someone who works for a large corporation, a non profit, a teacher or the government, but they generally will not be as satisfactory a partner because the connection between working harder, doing more, and making a larger profit, producing more of a result through hard work, is not there. THIS ISN’T CRITICISM, IT IS FACT. Those whose parents were in small businesses, or who had side businesses, equate increased effort with increased profit. Let your child set up at every one of your sales with his own table, and sell his / her stuff. Do not criticise if the expensive whatsit you paid so much money to buy, is sold for pennies on the dollar, the child is learning the value of used goods (extraordinarily low compared to the same item in a “new stuff” store), how to sell, how to present merchandise, interacting with people, and that things bought new lose their value upon leaving the store. Trent’s techniques with his children are excellent. Now it’s time to for the children to sell the extra figures and dolls at a yard sale, and pocket the money. When Trent’s children are older, they won’t have to hunt for a part time job, they can cruise yard sales for action figures or collectible dolls, and sell them on ebay to make money. They will always have a skill to fall back on if they need extra cash, and they will have the knowledge of how money works, how to get more legally, and how to run a business.

  11. Mandolin says:

    I was impressed with your three year old. I do worry about how I can get my 2 year old to act the same in a year or two. This year at Christmas she expected gifts every time we came home. It probably does not help her birthday falls around Christmas. She is also the only young child in my in-laws family. They gave her so many gifts this year we put some away to give to her later.

    I do give away her toys regularly, but I also worry about her not wanting for things when she is a little older. I think I spent about 60 dollars this year for her birthday and Christmas when I probably didn’t need to spend anything considering all she gets from our relatives at this age.

    Trent mentioned this issue in an earlier post. I wonder if he buys less for his kids because his relatives purchase gifts for them.

    As for the kids with ADHD and poor executive function. There’s a few tasks you can do with them that can be helpful. You can set yourself a budget and an allowance for something you want and talk to them about it. I am saving 20 dollars a week for X. Bring them with you when you buy it. Talk about why you saved for it. Try to make it something that he’d understand is valuable to you.

    Secondly couponing can be informative. If you know a store that double/triple coupons sometimes you can get some products free. If you save the coupons and plan. You can get toothpaste, razors, frozen products free or close to it. So learn if any stores in your area have double or triple coupon days and bring your son once you figured it out. Purposely try to spend a little as possible and have as much in your cart. Ask him to help you the next time find the coupons and the products.

    Kids with ADHD can focus…think of the video game phenomenon where most kids with ADHD can play for hours on end. They just have to find the activity fun/stimulating. If you can find a way to make being frugal fun, then you can probably encourage him to develop his financial skills.

  12. David says:

    From conversations I’ve had with other parents, these delicate interactions with money come in very handy when the child reaches early adulthood. Perhaps being able to trust your parents with questions about money is more likely to happen when parents gradually and consistently teach wise financial practices while their children are very young. This is all very anecdotal, though. I’ve seen research that suggests financial literacy education is most successful after high school. But, unless the lessons and experiences have been ocurring for years, I wonder if even then, it might be too late.

  13. Kate says:

    Thomas, it really depends on the severity and nature of his ADD.

    I have an older brother and a younger sister, and we all have documented (over 20 years) ADD. Our experiences with it have been wildly different.

    My brother is now 37 years old. He has extremely poor impulse control and a complete inability to plan ahead or budget. He has had the heat and power cut off more times than I can count, he has been homeless on more than one occasion, and I don’t think he has ever been able to hold down a job for more than 3 months at a time. He is, in many ways, the epitome of how bad ADD can affect someone’s life. There are few, if any, “tips or tricks” that will be able to nudge him on to the right course.

    By contrast, I am 27 years old. Stable (and fulfilling!) career, lived successfully on my own, married and settled down. I have much *much* less severe ADD than he does. That doesn’t mean it’s easy, and doesn’t affect my work life or relationships, but it *is* something I can use tips or tricks to help overcome. For example, setting very high “pay yourself first” amounts into inaccessible accounts. If it’s not accessible, I can’t spend it. Or divvying up responsibilities with my husband- he takes care of the recurring bills since I almost never successfully pay them on time- while I handle other, less time-sensitive elements of our lives and finances. For activities where I do need to retain information, it takes a constant and consistent commitment to drilling it into my head- reminders everywhere, from a sign on the back of my door, to a post-it note on my office computer, to a reminder on my cell phone, etc. I also deliberately aimed for a career where impulsivity and quick attention transfer are an asset, rather than a liability, although I certainly still have issues there!

    My sister is somewhat in between the two of us. She’s also only 21, so we’ll see how things develop as her life stabilizes a bit. Certainly the tips and tricks that work for me don’t for her (so far). She is definitely impulsive and has poor planning control, but I don’t think it’s likely to turn out as bad as my brother’s. Both of us can take direction, my brother simply can’t. She is better at planning than he is, but still has trouble visualizing consequences and adjusting accordingly.

  14. Rockledge says:

    I’m not quite sure how we managed it other than modeling frugality and discussing money as a family, but both my kids are quite frugal.

    My daughter surprised us when she was 8 by saying she wanted to go to China and started saving her birthday money, pet-sitting payments, and meager allowance for the trip. Sure enough, at age 12 she could afford a ten-day trip to China including airflight and all expenses. We had a great time. Now she’s saving for college.

    Her brother is also really frugal and will scour thrift shops and pawn shops if he wants to buy something in particular. He has kept his living expenses at college amazingly low.

    I know some of it is our example, but from the comments above, I think some of it is just good luck, too.

  15. Glen & Shirley says:

    Trent, What a wonderful learning example you both have done for your children…I wish I had known about this when I was raising my own! Great Job! Thanks, Shirley

  16. Love this story about your kid’s patient and savvy saving/spending habits and how you’re modeling smart money behavior.

    “We immediately relate to them that the card is just telling the store that we will pay them the money later so that it’s easier to pay”. Awesome. I think this is a really important issue. In my opinion, as the kids mature, they need to become accustomed with and ultimately practice using all forms of payment and accounts – not just physical coins/cash. They need to learn that all of these forms are equally real. They just have different properties, risks, benefits, etc.

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