For years, money gurus have asserted that, with help from parents, kids use separate spend, save and give banks with their money. Although the advice is sound, the experts who spout it rarely provide an explanation about why the technique works, let alone how it concretely connects to their financial savvy later in life. Here’s the breakdown that maps it all out for you.
Concrete Thinking and Good Money Habits
When kids are first learning about money, thinking abstractly or based on concepts—which sound financial management requires—is still challenging. They do better with real or physical tools until around age 7, after which they slowly start to develop their ability to understand logic. By age 12, most kids can work with fairly advanced rationalization skills.
All this sounds well and good until you realize that, based on a 2013 study by Cambridge University, kids already have established their money habits by age 7. If you wait until your kids are older to teach, your children might struggle, with new rationalizations conflicting with the way they’ve always worked with their funds. This is a huge problem, because ideally, money management should feel natural. It’s the feeling of ease and naturalness that gives kids the confidence they need to plug away at money tasks and that prevents them from neglecting their responsibilities.
When kids have three separate piggy banks, they can work physically with them and the cash they have. They have an easier time seeing the reality of what they are doing, as they can see that a bill or coin is there or in a specific bank. They can visualize that not all their money gets distributed for the same purpose, establishing the habit of allocation long before they need to rationalize it.
Using Old Habit in the New Abstract
At their heart, things like budgets and bank accounts—abstract tools—are no different than the initial spend, save and give jars or banks experts recommend. They are all just ways of putting some or all of your money in a specific place. If you can get your kids to use the jars or banks consistently, then when they’re ready to work abstractly, they just need to apply their old habit of allocation to new tools.
Of course, there’s a caveat to this shift. Kids are unique. They learn in different ways, and some kids will have an easier time with certain tools than others. For instance, if your kids are visual learners, then a budget app that shows their work using plenty of charts and graphs might work best. Sometimes, it’s not that kids aren’t ready to think about money abstractly. It’s that they need to have an abstract tool that aligns with the way their brain functions best.
Money experts recommend the specific categories of spend, save and give with good reason. The reality is that, although kids might have you cover a lot of their costs initially, they’re going to need to get used to spending if they want to meet their own needs as adults. They have to spend for food and rent, for example, so a spending jar shows that some of their money is going to flow outward. At the same time, most people won’t have incomes that allow for huge purchases outright, and some items, like a new roof, aren’t necessary to buy until a few years down the road. The save jar prepares your kids for these types of situations, getting them to set goals and think about the future (that’s harder than you might think for young, gimme-now-based-on-my-feelings children!).
The giving jar sometimes gets neglected, but it is of no less importance compared to the others. It’s the jar that teaches kids that money has the potential to do good not just for them, but for their community or the entire world, too. It takes money from being egocentric to being wildly external, letting kids develop empathy for others as they become more socially aware.
The traditional spend, save and give jars or banks most money experts laud have earned their place at the financial management table. They establish the habits your kids will need once they can work with money more abstractly, and they address the realities of how people really need to work with funds. With such strengths, they deserve consideration from any parent or caregiver