Yesterday, a FamZoo parent inquired:
“Hello — is it possible to apply the interest rate to all accounts and not just the savings account? I like the idea of dividing deposits into different accounts with different goals, but I don’t want to ‘penalize’ my kids for setting aside money for charitable donations.”
You offer your kids an awesome Bank of Mom/Dad interest rate on savings accounts because you want to encourage the patient accumulation of funds for long term goals — that first used car, college, a Roth IRA contribution.
Saving is a critical life skill. Motivating it with interest makes sense.
But what about giving? Why not offer that same encouragement for accumulating charitable funds? Encourage your kid to take the time to make a well-considered donation. Send the message that giving is just as important as saving. It turns out philanthropy is a critical life skill too.
OK, then what about spending? Does it make sense to offer an interest rate on your kid’s spending account too? Crazy talk? Not necessarily. Paying interest on a spending account rewards NOT spending. It also rewards maintaining a cushion — a nice little buffer that acts as a mini-emergency fund for that forgotten recurring charge or unanticipated expense. That’s an important life skill too. Stuff happens.
If you’re only rewarding saving, you might be sending the wrong message about giving and NOT spending. Offering interest on all three types of accounts might just make a lot of sense.
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