You can set up a savings account instead of jars for the kids’ longer-term goals, and they will learn about the power of compounding interest – which looks like magic to them!
I started Lydia, my oldest daughter, on a 25-cent allowance. When her long-term jar got full, we set up her savings account. When her first statement arrived, showing she had earned 21 cents interest, her eyes lit up.
“How did that happen?” she wanted to know.
“Isn’t it amazing?” I asked. “All this time while you have been sleeping and eating and playing, your money has been just sitting there growing. And they gave you almost a whole quarter for it.” My daughter couldn’t believe it. Now every month, she can’t wait until the bank statement comes. She wants to see how much she earned while she was having fun.
