National Bank of MomJ will be 9 in a few months (!) and we’re having a swimming birthday party at the Y. For his last party, we went mini golfing with his friends, and we came home with more presents than we knew what to do with.
This time around, we’re going to scale down a bit, starting with presents.
Calculating the tip is a great way to practice percentages. These days, I don’t think many people do much math with a pencil and paper. We rely on technology for almost everything — even things as simple as calculating the tip at a restaurant are now done with a tablet on the table or an app on your phone.
I think it’s important, however, to put the technology aside for a bit and work through a problem by yourself. That’s what we’ve been doing here for awhile — by keeping account registers, learning how to calculate percentages, practicing those calculations, and even tracking our spending on vacation. All with pencil and paper. Old school.
My favorite lessons are those that he can practice himself (hands-on!), that make sense in the real-world (are meaningful, relatable and useful), appropriate for his age and are interesting and even fun. (I realize I may be stretching the definition of fun.)
In that vein, I taught J how to calculate a 20% tip at a restaurant.
Awhile back I came upon a question on Reddit — “What did your family teach you about money and finance?” I love these types of topics (almost as much as I love topics like, “Besides your main job, what additional income streams do you have?”). There is always a wealth of information, and it’s a great opportunity to pick up a new idea to try.
One Redditor mentioned that his family did driving vacations almost exclusively. By the time he and his brother were 10 or so, they were responsible for keeping track of the “trip binder” where they logged expenses into categories and maintained receipts. Their mom wanted them to appreciate how much things cost and think critically about if they felt things were worth the price.
What a great idea! I bookmarked it for the next time we took a trip, which was this past weekend. We went to Brooklyn for a family birthday party and to the Statue of Liberty the next day.
I put together a basic log and organized our preliminary expenses — the Airbnb that we prepaid for as well as the tickets for the Statue of Liberty. I knew we would be traveling on toll roads, so I even tried to research which tolls we’d incur (based on what roads we planned to travel).
All grand plans!
And it didn’t work at all.
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. (Download a copy of the spreadsheet.) 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.
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.
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.
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.
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:
