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technology Introduction: Teaching the Kids (and Me) Delayed Gratification

Recently I was introduced to It’s an online Piggy Bank for people who are saving for specific financial goals. Which means…. what?

It means that SmartyPig is not only a fabulous way to save for something you’re longing for (or need), but it’s also an incredible way to teach your kids about money. I try to teach my kids about money, but I’m pretty sure that I fall into the same trap as a lot of parents.

I just buy them stuff.

Which strips the kids of the opportunity to learn how to save money, how to wait for things, and how to spend money. SmartyPig is a perfectly named site. It’s a smart piggy bank. Do not let the adorable icons and pink and green fool you, this is real banking. There’s a twist though.

I used to take my kids to the bank every Monday and they’d deposit a portion of their weekly allowance into a savings account. But, like I said before I buy these kids what they want, so they never really cared much about the money. Oh, except when they have friends over, then it’s like, “I have twenty bajillion dollars in the bank and I’m going to use it to buy an electric guitar and pop rocks!” And then their friends say, “Oh wow, that’s great. We have eighty three gazillion dollars in the bank and we’re going to make a whole house out of bubble gum with it.”

After the boys are done comparing how rich they are Alexander asks me to buy him an acoustic guitar. He promises he will practice every day. This I’ve heard before.

For something like an acoustic guitar SmartyPig is great for kids. Each savings goal has to begin with a $25 minimum deposit (this is the only bummer for teaching kids) and then you enter the amount that you want to save, and a timeline for the savings to occur.

What you do is decide that you want something (or your kid wants something) and you create a savings plan with about four clicks on SmartyPig. My son really wants that acoustic guitar. It’s $300. I’ve started a SmartyPig savings fund for him, and I’m giving him the first $25. Now Alexander can earn money by helping out around the house, and his allowance (remember that thing he didn’t care about?) can go straight to the guitar fund.

He sat with me while we figured out the math, and determined that he’d need $24.90 every two weeks. We made a list of jobs he could do around the house to earn $12.50 a week, and we’ll just check them off the list. The money will be automatically deducted from my checking account every two weeks. Understand that you don’t have to have any sort of automatic deposits. You can deposit as frequently or infrequently as you like. if you have a windfall add more, if it’s a tough week, deposit a dollar. demonstration

Here’s what’s great about saving in this manner:

  • You untrain your kids to use credit cards. This is a HUGE GIFT. Teaching your kids to pay for things with money they have, as opposed to money they hope to have is the single most important money management lesson we can teach.
  • Interest: Remember home ec? Remember when we had savings passbooks and we’d get a few pennies of interest and we felt rich? I know that interest rates aren’t exactly soaring right now, but even at a modest 1.35% $1,000 will earn you another $13.50. That’s money you didn’t have.
  • Cash back on a prepaid debit card: If you use the SmartyPig ¬†prepaid debit card you can earn up to 10% cash back. When I was an ebay seller I lived on paypal and I remember their debit card gave me just 2% cash back. At the end of the year I’d do my books and 2% was a LOT of money. Not all the retailers give 10%, it seems as if the bulk of them are between 4-6%
  • Bonuses from National Retailers: When you complete your goal you can get gift cards from national retailers complete with instant bonuses of us to 10%. Yes, Neiman Marcus is on the list. Hold. Me. Now.
  • FDIC Insured: Although online complete with widgets and the opportunity to be social, this is banking and it’s FDIC Insured.

I just set up my SmartyPig account and it was as simple as can be. Social Security Number, Driver’s License, Checking account number, and you’re done. They make two small depoisits to your account to verify it, and then they withdraw the same funds (both of my deposits were less than a dollar). In order to verify your account you have to enter the deposit amounts with Smarty Pig. The only glitch I ran into was that I entered the amounts without a zero in front of the decimal point. I entered $.43 instead of $0.43 and had to reenter the amount. If this happens to you do not panic, you just need the zero.

Redeeming matters. I remember the first time I opened up a brokerage account. I was 22 and bought some oil stock. I sold it almost¬†immediately¬†because I was 22 and I did not understand the stock market at all. I was confused and annoyed when they wouldn’t give me my money for five days. Although SmartyPig is savings tied to goals, it’s not holding your money hostage like a certificate of deposit or a brokerage account. It’s all there for you, and if your needs change (leaky roof or a medical emergency), you can cancel the savings goal and transfer money right back into your checking or savings account.

It’s really very smart. In setting up the goal for Alexander I started rethinking my own personal savings, and Smarty Pig is a good option for amounts up to $50,000. At $50,001 they stop paying any real interest, but that’s probably not cash that belongs in an account like this one anyhow.

Although SmartyPig is pioneering a new savings model for today’s connected family, what they’ve created is quite conservative. Bankers should love this, educators and parents should love this.

Oh, and my husband’s going to love this too, because I’ve gone ahead and created an account for us to take a tropical vacation.

This post is sponsored by SmartyPig. They know my readers are smart and fun, this is the perfect match.