My 5-year-old opens a savings account -- you can, too

Piggy bankAs with too many lessons I try to teach my daughter, now 5, I end up caving in and the lesson I set out to instill is lost.

We'll see if it turns out the same way with her savings account we recently opened together, but it couldn't have been a strong lesson in how to save money when immediately after leaving the bank, we went to a store where I bought her a promised toy.

I'll get back to the toy spending in a bit, but first I'd like to focus on the good part of that afternoon -- opening a savings account in her name in an effort to teach her about saving money.

I felt like the banker in "Mary Poppins," explaining how "tuppence" multiply:

My wife and I opened a college savings account for Emma a few months after she was born, so she should at least have a head start on paying for college when classes start in 13 years. It's an account we contribute to regularly each month.

But the goal for Emma's savings account is for it to be a start for her saving plan -- whether for college, a car, clothes or whatever she wants to buy. Hopefully it will be a long-term goal. It's also a way to slowly build up the money she gets from grandparents and birthdays, with at least half of those gifts going into the savings account.

I forgot how easy it is to open a savings account. With more people saving during the recession, it's a habit that's easy to start. Economists may argue that saving won't help the economy - that people need to spend - but saving for a rainy day never hurts.

Only Emma's Social Security number and signature were required. We could have opened the account without her signature, and used mine instead, but my kindergarten student dutifully printed her first and last name.

To open an account required $25, which dad happily contributed to start her off. Emma deposited $2.02 - 2 cents from a drawer where she keeps rocks and other jewels she finds, including pennies, and $2 she earned from her dentist the previous day for turning in two pounds of Halloween candy.

With $27.02 in her savings account on opening day, we attempted to discuss with her why she should save her money. She has a piggy bank at home that she occasionally puts coins into, but a bank is better, I explained, because it will pay her to keep her money in the bank.

I don't think she understood it, so I tried explaining how, if she gave the bank her money to hold, she could save her money and buy a bigger and better toy or whatever else later on. She kept asking me why she would want to wait to buy a toy later when she could buy it now.

My response was that the toy she saved up for could be better and bigger and cost more money than something she could afford now. It didn't sink in, and I don't expect it will until she starts learning the value of a dollar and how much things cost.

That leads me to the toy. Emma reminded me that last year when we turned most of her Halloween candy over to the dentist, we went out and bought a toy as a reward for giving up her candy. I made the mistake of adding a few dollars to her take from the dentist, buying her a toy truck that she wouldn't have been able to afford.

With the memory that only a child can have, she pulled that out this year and I promised to again buy her a toy after going to the dentist's office for the trade-in. So after going to the bank to open her savings account, she reminded me of my promise of a toy, since she had done her part and turned her candy in.

I caved, and she won twice: A new toy costing much more than the $2 she got from the dentist, and getting to keep her $2 in her savings account.

It wasn't the greatest financial lesson I could have taught my daughter, but it was a start. If the grandparents keep giving her money, putting at least half of it in her savings account is a lesson I'm going to have to learn.

Aaron Crowe is a freelance journalist in the San Francisco Bay Area who can be reached at

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