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Teaching Children to Save

This all happened long ago, and I am unsure if schools these days continue to provide the service. The banks, however, and some savings and loan companies do. They offer accounts for children that are usually better deals than those available to adults. They are simple to set up and don't require huge sums to open. Interest rates tend to be relatively attractive, and there is often an extra incentive for customers who make regular deposits. Some accounts may already be in existence, opened by relatives on the child's birth. Parents may put money in these occasionally and there is no reason the children themselves shouldn't do the same; perhaps by allotting a portion of their birthday cash gifts. Considering the inflation factor, every addition, no matter how small, helps money in the account to appreciate - left to its own devices, the starter sum will eventually be worth far less than it was when first banked. In fact, in Australia, any account that experiences no movement during a three year period - deposits or withdrawals - is taken into the government's coffers (presumably for safe-keeping!) and is the Devil's own job to reclaim.

Most youngsters having a short attention span, when watching money grow is the only apparent benefit, they will eventually lose interest; mentally, and financially as a consequence. Then it is back to the original incentive scheme of material rewards. There is bound to be something they would like to have that is out of their normal price range. It could be a ticket to a rock concert, usually costing a fortune. Avoid making them a deal - half the amount from their account while you pay the balance. All that will teach them is that you are still a soft touch. And, unless they have already saved a bundle, don't let them drain their account. Use it as an example: forget this concert, but save for a future one. Suggest a minimum figure that must remain in the account; anything over goes towards the next big event. They'll be glum at first, and you'll be the world's biggest party-pooper; but if they are desperate enough, they will go with the plan.

When we tried this ploy it actually worked. Money in the account grew to the point where there was enough over the top of the reserve to buy the ticket. By then, though, considerable effort and restraint had gone into accumulating the tidy sum which was suddenly regarded in a very different light. Withdrawing the cost of the concert made a huge hole in savings that were starting to look pretty impressive. This posed the question: is it really worth blowing all that hard-earned cash just to spend four hours being jostled by a crowd making so much noise that the band can barely be heard? Might it not be better - and a lot cheaper - to buy a couple or three CD's that can be played over and over in comfort? Actually having money had become more important than spending it.

This, of course, is the ultimate aim - to have money to spend. There will be the odd few who seem to be pathological spendthrifts - we have one of our own - and their idea of money-management is to blow the lot as quickly as possible so that there's nothing left to manage. No amount of sagely advice can cure their disease. On the brighter side, most children grow up to be responsible adults who recognise when the budget is starting to suffer and will hopefully recall the lessons of long ago that will set them back on the right road. There may even be some who learn so well that they become obscenely rich. It would be nice to think that these plutocrats remember who helped them towards their fortune; and that they will toss a little back by way of thanks.

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