First Person: Transitioning Kids From Piggy Banks to Bank Accounts

When I was small I had a piggy bank - and not just any run-of-the-mill piggy bank. It was actually a cat, not a pig, with a slot in its back that took both coins and bills. On both sides of the cat's body were clear plastic windows that allowed me to see how much money I was saving inside. That was my favorite part- watching my tiny savings literally grow. It gave me a sense that I was accomplishing something and I ended up saving a substantial part of the money that flowed through my hands from birthdays and my allowance.

It's never too young to get your kids started with saving money. It helps them to learn its value and how to spend appropriately. Younger children often have difficulty at first understanding the concept of money. After all, it is nothing but pieces of metal and paper. It only has value because we say it does.

Allowing kids to touch and feel money helps. As soon as they are old enough to count, have them count out their money. Discuss how a dollar is worth four times more than a quarter. It's not necessary to wait until they learn about fractions in school. Kids can learn about money long before then.

Many banks and other financial institutions allow children to open bank accounts and you may be tempted to do so for your child. However, once money stops being a tactile and physical experience and instead is nothing more than numbers on a bank statement, kids can lose their understanding of the value of money. The connection between money and spending it is an important one. The lack of it is responsible for most of the overspending on credit cards in this country. When money stops being a physical possession and is instead nothing more than an abstract concept, it is easier to throw it away.

By the time kids are 10-12 years old, they should have a solid enough grasp of finances that they can graduate to a bank account. However, if they are starting late with experience handling money, let them keep the piggy bank (or jar) longer.

Once kids do graduate to a bank account, make it their job to manage the balance. Although debit cards are an option on many accounts, allow your children a few years of physically withdrawing money from their accounts to make purchases. A piece of plastic that represents a bank statement that represents money takes kids one step farther away from the concept of financial wealth.

When you help your kids accumulate, save and spend money responsibly, they learn lessons that will last them a lifetime and put them on the path to financial security.

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