Age Old Goals

I've advocated the idea that saving for a short-term goal is a good way to teach young kids about the value of money. So, for example, during the Money Mammals Challenge, my daughter saved her weekly allowance over a month to buy a new shirt (she's now five and needs some new clothes). My wife and I both saved for tangible things as well so that she could see that we were engaged in the Challenge as a family. As I've noted in this blog, I've used this approach of short-term savings goals numerous times in order to teach the concept of saving. My wife - who is much more financially savvy than me - asked me if it's such a good idea to associate saving so directly with spending, albeit delayed gratification spending. I told her that I thought it was, but I figured another source could more effectively make my case. So I turned to a classic. I read a nice piece in a terrific book I picked up from Amazon from 1969, The Time-Life Book of Family Finance. This 40-year-old tome makes a terrific case for the need to be practical in our approach to teaching kids to save:

"One idea about money that nearly all parent try to inculcate in very young children is the importance of saving. The effort is frequently wasted, perhaps because so many people go about it in the wrong way. Too often saving is not presented in its true light, as a practical method of satisfying needs and desires, but as a vague ideal, a Good Thing symbolized by the ubiquitous piggy bank...Saving can be either a negative action - a self-denial - or a positive action leading to some desired goal. For most of us, saving must be positive: The desire for some future good has to be stronger than that for an immediate satisfaction...the reward must always be attainable and attractive. If it is not, we will not save, and neither will Junior.
Against this backdrop, let's try to imagine what goes in Junior's mind vis-a-vis his piggy bank. [When he receives pennies] he is instructed to "put them in Piggy." This is accompanied by smiles and a general air of "we're doing a good thing." It seems to be a game that adults enjoy playing, possibly because of the interesting noise the pennies make when Piggy is shaken. It is also an interesting kind of magic, because the pennies do a disappearing act. You never see them again. In fact, Junior is admonished that you never take money out of Piggy. That money is being saved.
It is not clear what Junior is learning from all this, unless what the parents have in mind is training him to be a miser. It certainly is not teaching him that a deferred use of money can be more satisfying than a present one..."

The article also makes a great case for using clear or translucent savings jars or banks.