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How the ‘Bank of Dad’ helps teach children how to save

The Bermuda National Library is hosting a series of lunchtime talks about money this week, and it began with Nathan Kowalski, chief financial officer for Anchor investment Management and a father, who gave a lecture entitled ‘Teaching Your Children To Save.’

Head librarian Joanne Brangman said the American Library Association run a similar programme. “I thought it was something we could do,” she said.

A small but enthusiastic audience attended the Money Smart Week talk, which was held in the library building on Queen Street.

He advised that paying children pocket money: “Should be linked to some sort of effort, like chores — and there should be some sort of penalty if they don’t do it, so if they get $10, then they will get $2 off of they don’t make their bed, for example.

“My daughter Kennedy is trying to figure out ways to do more for more money,” he said, explaining the 6-year-old proposed washing the dishes twice.

Typically, when parents are opening their children’s first bank account, they will take them to the bank and open an actual account. “But you can do it in your home — the National Bank of Dad — ‘ he said. The correct age for this is about six-years-old, he said, and explained they need to have covered some of the basic maths at school.

The pocket money the children earn is accounted for on a spreadsheet, and dad can print out bank statements. “My interest rate is very attractive — at five percent it can compound quite quickly.” He said it is important to offer a high rate because it needs to be attractive to the child. “The money has to be working for her — she needs to see it go up and down. Kennedy now calls it ‘charging up’ her bank account.”

Mr Kowalski said he recommends a book called ‘The First National Bank of Dad’ by David Owen to parents who want to teach their children good money management.

“The concept is that you shouldn’t put reservations on what you can use their money for — except for your house rules. Outside of that, let them make mistakes — so they can experience that they have wasted money.” It means they can say: ‘I didn’t really need that item I wasted my money on,’ he explained.

Mr Kowalski said that at the beginning of family vacations, one father gives his children all their pocket money at the beginning. “So instead of constantly going back to their parents for money to buy things with, they know they have $20 to spend, for example.” This can teach strong negotiating skills, the CFO reported. At Disney World, this father was able to observe his 12-year-old son negotiating with a shop assistant to purchase a single sparkling rock out of a three rock pack. “He realised he only needed one rock, so then he could buy something else,’’ he said. “They are getting the concept of value for dollar, and getting value for dollar is very important.”

However, there is more to life than accumulating money. “You need to instil more than savings. When I was 10 or 12 years old, I sat down with my dad to play monopoly. He wiped me out! So I played with my brother and my friends all summer.” After mastering the game, he took on his father again. “I wouldn’t let him stop playing until I wiped him out. I said: ‘Now you’re done — you have nothing!

“And he said: ‘That’s great — but now what are you going to do?’ So, it’s not just about accumulating savings — at the end of the day you have to ask, ‘What is it for?’

He advised the audience to teach their children about charitable giving as well as saving their money.

Today Leslie Robinson, the assistant director, licencing and authorisation at the BMA is giving a talk on The Role of the Bermuda Monetary Authority for the Layperson, and on Thursday, Zuri Darrell, the relationship manager at Butterfield Asset Management will speak on the Investment Toolkit. All talks begin at 12.30pm and are free. Water is provided and audience members should deal free to bring their lunch.

Kennedy Kowalski, six, has been learning the value of saving thanks to her dad Nathan.

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Published April 24, 2013 at 9:00 am (Updated April 23, 2013 at 8:58 pm)

How the ‘Bank of Dad’ helps teach children how to save

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