How the Bank of Dad Works
- Each child gets a weekly allowance on Sunday that is equal to 50 cents for each year they are old (ie. 9 gets you $4.50 a week). The allowance increases each birthday by 50 cents.
- At the first of the month the kids get 10% interest on the balance of what they have on the last day of the previous month. Ya, pretty sweet for them.
- The kids decide how they use their money within reason.
The money is all handled by Dad and there is an account book for the boys that is in a shared location (a kitchen drawer for us) so anyone can check the balance. Only Mom and Dad can do updates to the account book but the boys are free to review their balances and check the deposits/withdrawals.
The interest of 10% is high, especially as their savings climb but here is the goal with that. We are teaching them to save. We have let them know that normal banks for not pay back this well but we want to show them what saving can do for your money in the long term.
We explain that when you give the bank money it uses your money to make more money. By loaning your money to them to use they pay you back a bit of the money you loaned them.
The fact that they can see that they are making money by keeping it in the Bank of Dad has encouraged one of our sons to never spend a cent. The other son tries to device schemes where he has enough money in the Bank of Dad that he is buying toys and games off the interest. I saw, great to both of them. They are learning the power of money and what it can do for them.
The fun for Mom and Dad begins when we go out and one of the boys decides he wants something. Certain things are covered by Mom and Dad. For example, food, clothing, school supplies, sun screen, etc. You get the picture.
For other things, comics, toys, new lunch boxes to replace the lunch box they lost comes out of the boys allowance.
Many times, just this weekend for example, I have said, "No, problem, if you want to pay for it out of your allowance you can have that." The kids will all of a sudden wonder what is the price? They generally remember how much money they have. Once they see the price and do the math against what they have saved, they decide to put it back.
We use many of these times to also have discussions about value. We talk about how cool or fun something looks but is it really worth so much of their savings? We let them know that if they think it is then by all means buy it.
We have some failures (a huge number of Magic Cards) but many successes (they have learned that gift shops are generally a bad idea).
That's one way we are trying to teach our kids the value of money. What do you do?