Ingo Fast

My colleague Ron Lieber recently wrote about new ways to track your child’s allowance online. He did have some reservations: he prefers children’s early experiences with money to be more tangible so they can see the piggy bank or jar filling up with coins.

He’s got a good point. But after a couple of years of watching my children mishandle their cash in various odd ways, I’ve decided that actual bank accounts are in order. One child kept a roll of bills wadded up with an elastic in her sock drawer, and it eventually went through the washing machine. Her sister kept hers in a blue plastic bucket labeled “Money,” which she and her friends doled out to one another during play dates. We did try actual piggy banks, but the stoppers kept falling out.

So one of my New Year’s resolutions is to create online bank accounts for them. It was so simple that I’ve already done it — and wondered why I didn’t do it a lot sooner.

I opted against taking them to a local bank, as my mother did with me, and opening a passbook account. For starters, some banks don’t offer passbooks anymore. And even if they did, it wouldn’t be convenient for me, and that’s crucial if this is going to work in practice. I do nearly all of my banking online, and I didn’t foresee any extra time in my schedule for driving them to the bank each week to make deposits. Some parents transfer allowances onto reloadable debit cards for their children, but mine aren’t old enough to keep track of plastic.

I already had an online savings account through ING Direct (soon to become Capital One 360.) The direct bank makes it easy to open “sub accounts” for a designated purpose, so I created one for each of my daughters. (You can, if you want, open entirely separate “kids savings accounts,” but that’s more time consuming and isn’t necessary to do what I wanted to do.)

To open the “sub accounts,” you log onto your account. Don’t look for any heading that says “sub account,” though because there isn’t one. Instead, click “open account” and choose “savings account,” rather than “kids account.” You give your new “sub account” a nickname. (I chose “allowance.” Very creative)

With another click or two,  you can set up an automatic savings plan, which will transfer whatever amount you want from your main savings account — it can be an ING account, or an external account that you’re already using to cover your ING account — into the allowance account. (I chose $5 a week, to start.) You click that you’ve read the proper disclosures, and you’re done. Now, when I go to “My Accounts,” I see my savings account and the new ones, with their nicknames and balances.

My plan is to sit down with my daughters each week and show them the money transferred into their accounts, so they can watch the balance grow. Any extra funds they get for birthday or holiday gifts can be deposited as well. We can discuss goals they want to save for, whether for a personal item or a charitable donation. And before any cash withdrawals are made, we can discuss what it’s going to be used for, and whether it’s a good use of their funds.

It’s not perfect, I know. But I think it beats the sock drawer.

How do you handle your children’s allowance?

Article source: http://bucks.blogs.nytimes.com/2013/01/02/my-resolution-online-accounts-for-allowances/?partner=rss&emc=rss