Piggy Bank Approach Misses the Mark

Reason Number 2: Why Piggy Banks Don’t Teach Your Kids Money Management

A piggy bank is an inert artifact that uses only one form of money, namely cash. Does a piggy bank teach your child how to use checks? Typically, when a child receives a check, parents “cash” the check, then direct the money to some account the child has, maybe savings, maybe checking, or simply hand over the cash. All the kid learns is that a check is a piece of paper that may or may not be cash.

Granted, checks are being used less and less today, but kids still need to understand how this form of money works. Check writing has a long history of being the preferred method to pay bills, both at checkout and for big monthly payments like mortgages and cars. Many people still use checks, although increasingly more places no longer accept them at all.

Forty years ago writing checks to pay bills took me hours, now I only write a handful a year. Checks are still an important money tool. But a check is worthless without a checking account to go with it and the recordkeeping skill to keep the balance above zero.

Today’s adults today have grown up with a checkbook, and, more importantly a checking account. Many people look at their checking account like a pesky math problem that keeps coming back.

Likewise, many adults learned that not keeping one’s checkbook up to date leads to an embarrassing overdraft with annoying fees. A continued history of overdrafts lowers one’s credit score. When things get bad enough, the bank can close the account. This is bad money management because of bad record keeping.

So does a piggy bank show your kids anything about how adults manage their money or teach anything about record keeping?  A piggy bank is a toy for children. Few adults today could manage finances by dropping cash in a container.

If we agree that money management is an acquired skill, then our kids will benefit and learn from opportunities to simulate adult money management activities. By setting up a system as explained in The No-Cash Allowance, your kids can practice with the concepts of managing money they can’t see or touch. They can learn that checks are one way of transferring money from one account to another. Kids can learn that there is a bottom line to their account, just as you see the bottom line in your account.

Take a moment to consider how technology keeps changing how we use and transfer money. Checks have gone paperless. Electronic checks floating through cyberspace perform the same function as a conventional paper check.

Even paper checks can travel through the Internet at the touch of your fingertips. Today you can deposit a check to your bank account using your iPhone, no ATM or bank teller needed. If mobile depositing is available in 2010 how might your children be depositing money ten years from now?

Just as driving a toy car won’t teach your children how to drive a real car, using a piggy bank won’t teach your children how to manage real money.

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