Savings plan for kids


One time I abandoned an entire cart of groceries because my then three year-old threw a fit over a toy. I regularly avoided roads that would take us by a toy store (or even a landmark that would mean a toy store was nearby) and certain grocery stores with large toy sections. My older son, now seven, was like a drug addict, always looking for his next fix in a cheap toy. Our house slowly filled with cheap junk purchased for $1 – probably we’ve spent $1,000 in $1 junk.

We’d try to get him to save his money, save our money, but we aren’t really the best models of saving ourselves and so eventually we’d give in. It weighs on you though: that you’re not teaching your kids how to be responsible, that you’re supporting a terrible economy of “quick fixes” and imported junk, that you have an Hawaiian vacation worth of toys your kids don’t touch again after they get out of the car.

Then we heard a little blurb on NPR’s Marketplace about how parents regulate allowances. Most people spoke about giving an amount equivalent to the child’s age per week. $7 a week! Amazing! And then a listener (see the embedded link above) said that they matched their daughter’s allowance once she’d saved $100. Commentator Dan Zevin remarked on what his kids would save for.

We were transfixed. And started talking about what Cormac’s “rules” of saving would be. After consulting with Daddy, this is what we put in place.

1) $7 a week – must help around the house (with pets, brother, general picking up and fetching for lazy parents)

2) opportunities to earn up to $3 for working hard at soccer, picking up dog poop, etc.

3) can’t spend anything until he reaches $100

4) once $100 has been saved parents will match it (this is a stretch for us so we are saving up to help him save – it is a BIG incentive for him)

5) 20% of that $200 must then go into a savings account and stay there until he’s 16 (he thinks he wants to save up for his own car)

6) then the saving starts up again from scratch, even if he chooses not to spend all (or any) of the $160 he has

7) he can window shop and Mom or Dad will take pictures of the things he thinks he wants at the store

We had to really go into a big toy store/department in order for him to understand what $160 would buy. Three big Lego sets, a scooter and some Lego sets, 640 gumballs…

And we’ve done well! He should have $100 this coming weekend. He’s so close that he can taste it. We went to Toys R Us on Friday and he was desperate, DESPERATE for something new. Anything. I needed a birthday present for a friend’s son and while I shopped for it, Cormac tried to work deals out of me. Finally I told him I would buy him a present if he could find something for $10 or less. I refuses Bey Blades that were $10.49. He didn’t need any of the ones that cost $8.99.

Then I got him interested in picking out a $1.50 Matchbox car. We got in line. I handed Cormac $2 and told him he could keep the change. The line was slow, really slow. I put down the birthday present and told Cormac he could keep the $2 of he put down the car and we left the store. He refused. A few minutes later I offered again. He put down the car. We walked out of the store.

And then, on a whim, I gave him another $2 because he was willing to save instead of spend. It was awesome to see his already proud and excited face filled with absolute joy because he was saving money. It is one of my most proud moments.



4 thoughts on “Savings plan for kids

  1. Do you physically give him $7 each week to put in a bank or do you have a running tally sheet for him? Great idea–we need to work on that as well.

  2. Sounds like a great plan! Teaching kids money management is critically important. Allowance and spending money are the reasons my kids were so good at math. Since we live so far out of town, we only went shopping once a week. The kids would spend all week planning how to spend their allowance, or what to save it for. A few times, they pooled their money. When Wasilla instituted a sales tax, the kids got very good at prefiguring what you could still buy for $5 if you had to pay 2% sales tax. Later, when they wanted to buy their own school clothes, we would give them each $100 or $150, and the rest was up to them; again they were great about figuring discounts, taxes, and totals. By the time they were in high school, they were both avid thrift store shoppers, going for personal style rather than current fads.

    During most summers, my kids would help set up a yard sale and end up selling most of their junky cheap toys. They got to keep any money they made, but we would not let them sell certain high-value toys such as duplo, Star Wars, and collectibles they had received as gifts. When they really did outgrow the Duplo, Michelle got $200 for it, and the Star Wars figurines fetched nearly $150.

    Another touchy topic is money for grades. We came up with the following; an A earns $5, a B earns $1. C’s are neutral, D’s cost $1, and F’s cost all the money you own. We never had to deal with C’s or lower. Additionally, when the kids are older, they can get free stuff for good grades. Several merchants offer a good grade discount, gift cards, or freebies, and many insurance companies offer good grade discounts. We passed these savings on to the kids in the form of gas money when they were driving.

    We always tried to show our kids how working and spending relate to each other. We also emphasized that buying things does not equal happiness, but that being able to spend after working and planning bring more satisfaction. Of course, now that our kids are grown and moved out, we spend with impunity, buying whatever we want whenever we want it. Which reminds me, I have to go shopping; I need two new pairs of Danskos.

    • I didn’t realize what an abstract concept it is for kids. We’ve been trying things like this for years but then it just clicked in with the right plan at the right time.

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