The Piggy, The Wallet, And the Bank – the Children's Cycle of Saving

The Piggy, the Wallet, and the Bank – The Children's Cycle of Saving

The need to teach my child the value of savings really hit home when he made it abundantly clear that without the latest video game console, his life would effectively be over. The game system was not a cheap device, and at my son's allowance, saving up enough money would take him the better part of a year.

This isn't the first time that my son has needed to save up for something, but it was certainly his biggest ticket item to date. For all intents and purposes, my son was reaching the final stage of the saving cycle.

The Piggy Bank

The first stage of a child's saving cycle is usually some variation on the classic piggy bank. The bank can be any variation on that classic enclosure – a purchased bank, a large bottle or jar, even a shoe box – what matters is that the child knows that the purpose of the bank is store money in. For the child it is the act of saving, not the money, that is important. While this can be classified as collecting as much as saving, the association with money sets a precedent for the child: put the pennies in the bank.

The Wallet

As a child grows, the collecting of pennies is frequently replaced by the allowance. When that allowance is paper money, the child enters the wallet portion of the savings cycle. For a child, this is the phase that typically separates the natural savers from the spenders. For the first time in their lives, a child is carrying around currency, and has the ability to buy things. It's a learning experience, and one that requires varying levels of hands on supervision from you the parent.

The Savings Account

The final stage of the saving cycle has a child moving their money from the wallet and into a bank. Different children will enter this phase at different times. For the savers, it can come rather quickly. For the spenders, getting to this point is typically motivated by the desire for a large ticket item. One telling sign is the desire or need to store more money than you're comfortable with a child walking around with.

When deciding on a bank for, or with, your child it's important to look at several different factors, and to explain them all to your child. For instance, what is the minimum amount of money required to open a savings account? Does that differ from the minimum required balance? What is the interest rate on the account?

These might seem like abstract and adult concepts, but so is having a savings account. This is the first time that your child will have money that they can't readily reach. After all, the wallet and piggy bank were constantly there, where as the bank will close. For the child, understanding that their money is safe and sound, and actually growing, is an important lesson, and one of those things that a helping parent can really impart.