I’ve heard plenty of folks use the term ‘bank of Dad’ or ‘bank of Mom’ to describe the scenario of a child begging for money out of their parent’s wallet. But I’ve never seen a parent take it this seriously.
My favorite personal finance guru, Mr. Money Mustache, created a ‘Bank of Mr. Money Mustache’ spreadsheet to help his son save and spend with mindfulness.
Instead of a physical piggy bank, my boy prefers to keep his money in the Bank of Mr. Money Mustache, a spreadsheet that contains every transaction he makes with money. To make a deposit, he just hands me some cash. To withdraw, he asks me for cash or has me buy something for him online.
But for every dollar that remains in the account, he accrues interest at a 10% annual rate with monthly compounding. I’m excited about the teaching value of this, because it shows him that
- his money is finite (not just an limitless pool that you tap by nagging parents to buy you stuff)
- keeping the money invested is profitable (his $600 account is now bringing in a very tangible $5 per month in interest)
- new windfalls can be added, interest compounds exponentially, and an account like this of sufficient size means lifelong financial freedom
I’ve never seen a more amazing idea, and I intend to steal it one day.