Most parents do more harm than good when they try to teach their children about money. They make saving seem like a punishment, and force their children to view reckless spending as their only rational choice. To most kids, a savings account is just a black hole that swallows birthday checks.
David Owen, a New Yorker staff writer and the father of two children, has devised a revolutionary new way to teach kids about money. In The First National Bank of Dad, he explains how he helped his own son and daughter become eager savers and rational spenders. He started by setting up a bank of his own at home and offering his young children an attractively high rate of return on any amount they chose to save. "If you hang on to some of your wealth instead of spending it immediately," he told them, "in a little while, you'll be able to double or even triple your allowance." A few years later, he started his own stock market and money-market fund for them.
Most children already have a pretty good idea of how money works, Owen believes; that's why they are seldom interested in punitive savings schemes mandated by their parents. The first step in making children financially responsible, he writes, is to take advantage of human nature rather than ignoring it or futilely trying to change it.
"My children are often quite irresponsible with my money, and why shouldn't they be?" he writes. "But they are extremely careful with their own." The First National Bank of Dad also explains how to give children real experience with all kinds of investments, how to foster their charitable instincts, how to make them more helpful around the house, how to set their allowances, and how to help them acquire a sense of value that goes far beyond money. He also describes at length what he feels is the best investment any parent can make for a child -- an idea that will surprise most readers.
This is a terrific little book that could completely change the way many parents think about children and money. Owen, a staff writer for the New Yorker, entertainingly details ways to "raise children who aren't overwhelmed by the financial side of life." He convincingly argues that the purpose of most parental savings plans for children "is not to promote saving but to prevent consumption." His book sets forth a very clever idea: by setting up a checking account for his children using a Quicken program with a high interest rate 5% per month Owen shows how he was able to teach them that "the more you save, and the longer you hold it, the more you will be able to spend." In each case, he deftly proves his main idea: that "they became savers because I created a system that rewarded them for spending less than they earned." Most important for parents beleaguered by kids demands to "buy them something," Owen shows how a savings program such as his can help take the emotion out of buying, so that the question kids have to answer "is not 'How can I talk Dad into paying for this?' but 'Is this something I really want?'" His savings plan (along with his equally interesting "Dad Stock Exchange" idea) is rooted in a clear-headed view of economics as well as a good-faith desire to help parents help kids to become responsible, not greedy, adults.