Kids and Money

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 We live in the digital age where communication is instant, current events are updated every minute, and most people pay for goods and services using plastic cards or a smartphone app. Almost everything is digital, including our finances, so how do we teach our kids to save money? And how easy are those lessons to continue in adulthood?

I’ve worked retail in a local toy store, which means I often witnessed parents teaching their kids the ins and outs of saving money and purchasing goods. Even with the pandemic, where people tried to stop using as much cash, most of the children I met were receiving their allowances in cash. Cash really is a good way to teach your kids to save money; a number on a screen just doesn’t have the same sort of permanence as the coins you can physically count.

There were many ways kids brought their cash in to buy that cool toy they saw and wanted but most had wallets. Now, as the store associate, I had no idea how they stored their money at home. Was the wallet used at home as storage as well, or was that what they used to carry their money in public? They most likely had a money bank at home if their parents weren’t keeping track of it.

The 3 Bank Method

With many types of piggy banks now on the market on top of all the internet “experts” giving advice (I willingly include myself in this category, though some truly are experts), it can be overwhelming to know the best methods for teaching children the importance of money. The most common thing I’ve come across is the ‘3 Bank Method’. There’s no official name for this teaching method, so that’s the name I’ll be using going forward. It’s fitting but simple!

The basic idea is to use 3 different piggy banks to store your money. One for spending, one for saving, and one for sharing. Cash makes this much more concrete, especially for children.


First up is the Spending Bank. This is the piggy bank that holds the cash that is ready -o-go whenever your child has something they want. Bank of America’s Better Money Habits financial resource site recommends putting 50-80% of money earned towards this piggy bank in their article on this subject. This bank goes towards small things like sweets, small toys, or maybe an app on a smartphone or tablet.

Each time I rang out a child spending their money, I’d ask the young shopper if they’d like a receipt. The parents often said “no” if their child looked for guidance, but my opinion is the opposite. Make your kids get receipts. In the case of smartphone or tablet apps, I really highly recommend a receipt. Print it either from the store used to purchase the app or have the parent who completed the purchase write it . It turns the purchase into something real and you’re less likely to run into the “but I didn’t spend that money!” complaint. I actually heard that quite often while working retail.

As a millennial, my generation often laments the lack of preparation we were given as kids to succeed financially. I agree: we could have been prepared better, but now that we are of age to be raising our own kids, we have the ability to do better. That little receipt can be a hassle and cause clutter, but maybe that means you include a little folder for your child to keep them in. Using a method to keep track of the Spending Bank’s finances will make the other two banks easier to track, especially as an adult.


Second on our list is the Saving Bank. Bank of America’s Better Money Habits recommends allocating 10-25% to this piggy bank. These funds are your child reserves for that big ticket item they really want. Good examples are a scooter, a video game system, or an expensive toy. Maybe you even put it into a bank account, making it more long-term than the Spending Bank.

If your child is saving for an item, print a picture of their goal and tape it to the bank. Add the amount they’re aiming for as well. Additionally, to drive the point that saving is better than spending, offer to match the amount they’re saving. A small percentage matched is an excellent motivator. Is the money is going into a bank account? If so, you can do a similar thing to teach them about how interest works.


Finally, there’s the Sharing Bank. This bank teaches children about how donations can help others. Together, you and your child can pick a charity that’s close to your child’s heart. Putting 10-25% of their earnings towards something they’re passionate about makes the idea of not keeping that money easier to swallow. Even if you’re not absolutely in love with the cause they want to donate to, that’s okay! Supporting your child passions helps foster a great relationship between the two of you.

The Better Money Habits article mentioned above lists a few resources to help your child find and pick a cause to put this money towards. They could pick an international cause like the World Wildlife Fund or even something closer to home. Consider a local shelter or the GoFundMe of a friend or family member. Some organizations, like the aforementioned World Wildlife Fund, let donators “adopt” wild animals, which could also be a fun perk for your child.

Translation to Adulthood

Unsurprisingly, adults can use the 3 Bank Method as well. Instead of saving up for a huge toy or a scooter, maybe we’re saving for a new car or the down payment on a house. And while our third bank could certainly be used for charity, perhaps retirement savings is more prudent.

As adults we have more access to cash so these banks will grow faster. Unfortunately, that access means there is way more temptation into spending it before we really want to. This article by Jessica Weaver on mentions making your retirement funds even harder to access than the typical penalties a 401(k), IRA, or Roth IRA might apply. This could be done through a trusted financial advisor, according to Jessica, but that’s not the path for everyone. If you’ve got a friend or family member in a similar situation- trying to save for retirement- an accountability partner is another good avenue to take, writes Alli Williams, CEO of FinanciALLI Focused, LLC in her article about financial accountability.

As for myself, I asked my sister to be my accountability partner. We’re both around 30with sparce financial knowledge, but even having someone to remind you “hey, you could buy that, but you could also put it in your savings account” is a very helpful thing. We may not be using physical piggy banks, but the concept is the same. Some spending money, some savings, some retirement money.

Financial knowledge is crucial for both kids and adults. If you teach your kids to be financially savvy now, they’ll have a much easier time as adults! The 3 bank method is, in my opinion, an almost-perfect introduction into the world of money. The only thing that would be more perfect would be the ability to harvest money from trees!

Mo is the ecommerce associate for Dreams USA.

Learn more about the Dreams Team here!