How Do We Like This Idea for Teaching People to Save Money?

A reader named Philip Serghini writes in:

Great podcast about financial literacy and clean hands.   I’ll try to refrain from sending hate mail to the attorney who espoused not teaching kids about it.   

It would be an interesting experiment if (in, say, Buffalo) every kid entering the first grade were given a $100 savings deposit (paid for by a private foundation). They wouldn’t be allowed to withdraw the money at any time up until they graduate, but they’d be able to add if they wanted.  Each grade they ascended, another $100 would be added.  If you dropped out or failed out, you’d forfeit everything (except anything you’d voluntarily put in). By the time they graduated from high school, each student would have saved a nice tidy sum to spend as they please: college, car, suit.   

Who knows, the kids might even garner a better appreciation for math because of its direct applicability to their savings account. Some kids might be incentivized not to drop out.   Others may have learned such an important lesson about savings, interest, and the value of starting to save early they they just keep their savings account open and active after they graduate.

Okay, assuming you can find a willing “private foundation” to put up the dough, what’s to not like about this proposal? I do feel I’ve heard of similar experiments — and of course we’ve all heard about those free-college-tuition plans for kids who graduate high school — but I don’t know if something this simple has ever been tried with an eye toward linking financial literacy and education. Thoughts?

Aleix Pedragosa

It would be far more interesting if:

a) From the second grade, instead of giving the kids $100, they were given the same amount kept in the savings account (or a %).

b) To collect the full amount they should graduate.

I will try it with my kids!


Isn't the problem here that the results will be down to the incentive and not applicable on a larger scale. Children would take an interest in anything if they were incentivised to do so. Promise a teenage boy a car on his 18th birthday if he learns mechanics, and the chances are, he would learn mechanics. I think that how people deal with money is already set in childhood due to personality types.

What I would like to see is children being given an amount like that and told to do what they want with it, with a few leading suggestions. These could be "spend it on what you want", "save it to keep it safe for a later date" or "invest it with the risk or making more money or losing it". I imagine that the percentage of children who choose each one would match the choices that an adult would choose, due to personality types. That being said, my opinions are totally unsubstantiated!


It's an interesting idea, but keep in mind that the prefrontal cortexes of children -- the area that deals with long-term planning and consequences -- isn't fully developed until their 20s. I doubt that a 9-year-old will be motivated by the idea that he'll get some money when he's 18 -- that's his entire lifetime away! And a struggling 16-year-old *may* hold out another two years for that extra money, but it's probably not what they're thinking about when they chose to engage in risky sex or drug habits.

I like the idea of teaching kids financial literacy, and I think this is an interesting idea. I'm just not certain it's going to have quite the huge benefits laid out by Serghini.


While their brains are not fully developed there are many youngsters capable of long term planning. Such a program coupled with other shorter term motivators would have excellent results. There is a reason why the human brain takes so long to be "fully developed"....Plasticity is beneficial. Take advantage of the more moldable brain while you can rather than not trying at ages where there is the greatest potential.

Enter your name...

This doesn't really seem to be the kind of financial literacy that most people need. It's not even the kind of delayed-gratification skills that people need to develop. For the majority of students, this is "I don't have to do anything different at all, and then they give me a huge, free prize."

If you want to teach kids to save their money, then they have to actually make the choice to save money that they don't have to save. They have to make the choice to put the $10 in the bank and leave it there instead of taking the $10 to the store and buying candy.


Exactly. This just encourages kids to stay in school. Giving them money doesn't teach them anything about how to save it on their own or the power of interest.

I think a much better effort would be to focus on increasing usage rates of checking accounts. In lower income areas, they are still surprisingly underused. People without checking accounts are already paying a check cashing fee, and then they have all their money sitting around in cash, which is much harder to save.

Give kids (starting at age 16-18) a checking account with $25 in it, and continue to place a small amount of money in it every year as long as the account is saved.


This is a good idea and most of the points raised are valid. But the kids aren't really "saving" since it isn't their money to start. Maybe a better way to do this would be to offer high schoolers huge interest rates on a special savings accounts, say 20% (funded through private donations). That way the kids would be old enough to save their own money and the value of saving/compound interest would be tied to their effort personal. This would also be a lot cheaper and therefore, feasible.


I live in Wake County, NC, which has a very large enrollment - almost 150,000 students. This proposal would cost $15 million per year. That would be one mighty nice private foundation that would give away $15mm...

I like the idea, and it would be a wonderful learning opportunity for the students. But I keep going back to the $15mm...

Wes H.

How much is your total Public Education budget per year? What % of that total is $15M?


they could just turn savings into a game, the way foursquare turned 'checking in' into a game. maybe students could earn badges for good grades, and they could either redeem badges for right to withdraw x-amount of money or maybe extra money deposited into the account.

they could do car sales tricks like "for saving x-amount you get y-amount cash back!"

the problem really is who is going to pony up this kind of money to kids? someone page Roland Fryer already.

Jack Skellington, ESQ

Hi, Ally,

----If you want to teach kids to save their money, then they have to actually make the choice to save money that they don’t have to save. They have to make the choice to put the $10 in the bank and leave it there instead of taking the $10 to the store and buying candy.----

Interesting point. It does sort of immediately beg the question, though, doesn't it? The way to teach kids to save money instead of spending it is by giving them the option so spend and then rewarding the children who save? Doesn't seem to teach the children who spend and don't receive the reward very much, does it?

Beyond that, allowing children to access the funds prior to graduation asks them to make complicated decisions, they aren't capable of making. There are valid biological reasons we don't allow people younger than a certain age to enter into contracts or to consent to certain activities, etc. Asking a 6 year old not to buy a toy now because they'll have more money in 12 years is silly and ludicrously weighted towards them failing. Most of them can't wait 15 minutes for the extra marshmallow.

----It’s an interesting idea, but keep in mind that the prefrontal cortexes of children — the area that deals with long-term planning and consequences — isn’t fully developed until their 20s. I doubt that a 9-year-old will be motivated by the idea that he’ll get some money when he’s 18 — that’s his entire lifetime away! And a struggling 16-year-old *may* hold out another two years for that extra money, but it’s probably not what they’re thinking about when they chose to engage in risky sex or drug habits.----

Hi, Julie.

I think you're right about the biological aspect. I also think you're missing the point of the cumulative deposits. Since the children can't access the "seed" money until they graduate, and since 7 year olds rarely drop out of school, the cumulative increase "scales" appropriately with the child's reasoning ability, being the most potent when they are most able to understand the impact. Also could prevent "carpetbagging" by parents moving 16 year olds to a school where there's a "graduation" bonus, etc.




"Doesn’t seem to teach the children who spend and don’t receive the reward very much, does it?". That's the way real life works though. Adults are free to spend, save or burn their money. Also, it ignores the benefit in kind that the child who spends will receive from spending. After all, children rarely buy anything that they won't get pleasure from, in some form or another. This surely needs to be weighed against any future benefit of saving. I'm not saying that children should be taught to spend, just that there any benefits to saving need to be balanced with the benefit of spending.

Stephanie Halligan

You'd be surprised how many willing foundations are out there who would like to support this idea!

Our work at CFED ( focuses on providing incented and seeded college savings accounts for children across the coutnry. We've help launch several demonstration projects, including an initiative with the San Francisco public schools called Kindergarten to College. Every kindergartner receives an account, a $50 deposit, and other incentives ( More of our projects can be found here:

Even though many kids can't actively contribute to these accounts at an early age, savings accounts for children can be used as a tool for increasing college-going aspirations. Recent research shows that a child with a savings account in his name is six times more likely to go to college.(


It's been my experience that most people who are given money their entire lives never learn how to manage it well. They may have a lot for a long time, but that doesn't mean they know what they're doing with it. If the problem is people not knowing how to budget and save, this is not a good solution because it doesn't address either. It teaches kids the same thing the NFL teaches players. "Money is easy to come by and will be for the indefinite future." It's not really a message that teaches fiscal literacy.

Bill Harshaw

It may be my imagination, because I'm trying to remember some 60+ years ago, but I think a local savings bank came to my school and signed up primary level students to savings accounts.


Why Buffalo?

Wes H

Does it need to be privately funded? Our federal or state education system(s) can spare $100 per child entering the school year (yes, they can). It's a small number compared to the total expense per child and wouldn't break the budget of the schools. As an education on money management, I wager it would be well-worth the investment of $1,200 over a 12-year period.

Also, I believe that there should be a match (similar to a 401K) but - the account would not be fully vested until graduation. No graduation, no dollars, and if the student matches throughout the term of the account, their dollars are lost as well. Consider it a cost of dropping out or failing to complete high school. If it was a bad investment, the foundation/school system should get its money back in addition to whatever the student invested.

Eric M. Jones.


Bad idea all the way around.

The amount of money kids can save is trivial. My own experience is that I saved all I could, and wish I hadn't. The savings vanished when I got my first real bill. Young adults probably can't save money until they are thirty. I couldn't.

Better that I should have spent money, when young, on anything that might have shaped my future and piqued my interests when my young brain was absorbing learning like a sponge.

Most kids don't have enough money. That's the real problem. Telling them to save it is wildly wrong.

My later life has been severely crippled by this "save all you can" advice. When I just should have thrown out things, I wound up hanging onto them because "poverty" was in my blood. When I should have asked for more, I did with less. I worked too cheaply.

Teaching kids to save money might work for you and yours, but I think it is generally a misguided notion.

Teach kids the VALUE of things. This doesn't require saving money.

The best advice I ever heard...."I only regret my economies"--Reynolds Price


Ken Arromdee

Not only will kids not be able to save enough money to make a difference when the first real bill comes along, the whole idea of kids saving ignores something else: money is much harder for kids to get than adults.

For instance, the expenditure an adult makes to buy a candy bar is much less than what a kid makes, either as a percentage of income or in terms of how hard it is to get the income. It makes no sense for the kid to do an hour of chores, or use a once-a-year birthday gift, to save the price of a candy bar for adulthood when his adult self could get a candy bar by working for five minutes. He'd be better off buying and eating the candy bar now.

It's like a poor person trying to save money which he doesn't plan to use until he's rich. If he becomes rich he won't need any amount of money that a poor person would be able to save.

And candy bars, at least, can be eaten by both kids and adults. What if it's something time-sensitive, like a movie that's only in theaters this month, or something that only kids use, like a toy? If the kid saves the money he gives up something that is basically irreplaceable after some period of time (sure he can buy the toy tomorrow, but he can't buy it after ten years and get any use from it), in exchange for having a sum of money later which would be trivial to his older self.


Lynne Finch

How does this teach kids to save? It's not their money. It was never their money. And it won't be their money until they graduate from high school, a time so far in the future that kids can't even fathom it.

These deposits, how ever well intentioned, are someone else's money. The kid never owned the money, never had to make a decision to not spend the money

In my opinion this is a passive learning experience that is no better than doing another math problem in class. Let's look at the numbers. At current rates of about 1% the interest earned on 18 yearly deposits of $100 would be around $100. At that rate a kid would have maybe $2000 after graduation. The spending power 18 years down the road won't make a dent in paying for college, a car, might pay for part of a suit.

Having a savings account is a good experience in itself for a child. However, by teaching kids to learn how to not spend their money, they can start learning how to make the type of day-to-day decisions that will face them in the future when they are on their own.

For more ideas on kids and saving read my blog,