Browse Tag: banking

Making the transition from cash to card - dollar bills and credit card

Making the Transition from Cash to Card

For two years now, J has been using cash, paper and pencil to manage his money. I’ve been paying monthly interest and bi-weekly allowance in cash. I’ve been calculating interest payments in Excel and emailing statements.

My goal was to help him understand cash (and math) by using hands-on, practical examples.

It’s been awesome. J started with $40 in his savings envelope in April 2016 and had over $500 by June 2018. (Pretty good for a kid with no job.)

Time to move on

When he turned 10 a few months ago, I knew it was time to learn something else. Cash is great, but how many of us really use cash and only cash every day? His financial education needed to include the responsible use of cards.

Continue Reading

Bar chart for post on Risky Business of CD Rates

The Risky Business of CD Rates

Last November, J opened a CD at Ally Bank. The idea came from a big conversation we had about making his money work harder.

He invested $500 in a 2-year Raise Your Rate CD at 1.5% at Ally. This type of CD allowed him to increase the rate once during the term. (For reference, his online savings account was earning 1.25%.)

What happened

Fast foward to this spring and I saw the rates going up. And up. And up.

Continue Reading

Header image for making your money work harder part 1

Having “The Talk” About Making Your Money Work Harder: Part 1

I’m really excited to start this post today! J and I had some great conversations this weekend that I will write about in a five-part series on Making Your Money Work Harder.

First, we reviewed how we’ve already started making our money work harder by saving.

If you’ve been around for awhile, you know the drill, but just in case you’re new, here’s the skinny:

  • I pay J 3% interest on the money he puts into his savings envelope every month. I give him a paper statement and email him the same statement each month (posterity!). As he records the interest in his register, we review how the month went and look at how he earned more interest than in previous months. (Read one of our recent summaries here.)
  • A few times each year, we take a trip to our local bank and deposit the money. Bank visits are a great time for conversation, and J always enjoys going because the tellers are often really nice to him. They love to see kids!
  • After that, I keep the minimum in the account to avoid a fee and transfer the rest to an online bank that pays a higher interest rate. Read all about that here.

Today we logged in to the local and online bank accounts. We reviewed the amount in each account and noted the current interest rate. The local bank account has a rate of 0.01% — yikes! The online bank account’s rate is 1.20% — not too bad (comparatively speaking).

We discussed wanting a high interest rate when you’re saving (so you earn more). And when you’re borrowing, you want the interest rate to be low (so it doesn’t cost you as much).

Just a side note, we haven’t really talked about borrowing or debt yet. I’m hoping to get the savings and growth lessons underway to have more TIME on our side. After we talk about saving and investing, start the accounts we want to start and look/talk about them monthly, we’ll move on to borrowing and debt.

I told J that there were OTHER ways of putting his money to work, ways that may pay even more. He was excited! He pulled up a chair and said, “Okay, I want to know those things.”

I’ll cover each topic in depth in the subsequent posts, but as an overview, we dived into:

Continue Reading

How National Bank of Mom Rewards Savings

By this time, you already know that we subscribe to a three-envelope system (complete with registers) for savings, spending and giving. At times, we also use an additional envelope for short-term savings — when J is saving for a larger purchase a few months in advance.

The first stop in our banking process (and the reason for the name of this blog) centers around the savings envelope.

Every month on the 9th, I pay interest on the total in J’s savings envelope. To make it enough that he can see a tangible result (and earn more than the few cents he would at a bank), I pay 3% monthly.

I create a bank statement, give him a printout and also email him a copy. He writes the interest amount in his savings register to balance the account.

I developed a spreadsheet to calculate the amount and format a nice-looking statement for him. You can download it here! Fill in the sections in blue on the first sheet. Each month, enter the deposits made in the appropriate section, and the interest and totals will recalculate. Print a copy or save as a PDF and email away.

What is interest?

When borrowing money, interest is the money that you pay on top of what you borrow. Borrow money, pay it back AND extra.

When saving money, interest is the money that you earn. The bank “borrows” money from you and gives you a percentage of that money (for the privilege of using it). Put money in and get that amount back PLUS more.

Continue Reading

National Bank of Mom Banking for Kids

Banking for Kids

In order to maximize savings and provide a good learning experience, I subscribe to a three-bank system. J has savings accounts at the National Bank of Mom, our local bank and an online bank.

Bank of Mom

The first stop for savings is the National Bank of Mom. J divides his money between his savings, spending and giving envelopes, and I pay interest monthly on the money in his savings envelope. He gets a statement printed and emailed to him, and he writes the interest in the register, keeping the account balanced. We make note of the increasing amount of interest each month, which will prepare us for a more in-depth conversation about compounding. Right now, our focus is on putting at least 10% of all money into savings and the idea that your money can make money.

Local Bank

Every few months, we take the cash from the savings envelope to our local bank. I think it’s important for him to go to a physical bank and deposit money. (So much happens electronically nowadays, and I think it can be difficult for kids to understand. This is why I pay his interest and allowance in cash, so that he can hold it in his hands and work with it.) The tellers are also very nice to him, which adds to his experience.

When looking for a bank, you might want to start with your own bank, but you could also look at other local banks or credit unions. Also important when choosing a bank:

Continue Reading