Welcome to the Bank of Mom. We Pay 3% Interest. A Week.

We started a bold experiment recently in our house: paying our children interest on their savings accounts at the astronomical rate of 3% a week.

Why would any parent want to do such a thing? My argument is that it was the best way to teach our children about what should happen to money when you save it. I also saw it as a good opportunity to build their skills for evaluating how to spend accumulating cash.

It all started when my Paypal began to show signs of life, thanks to the freelance world of writing. Soon my account had grown enough that I began to wonder how I could put this new stream of income to good use.

I talked to the hubby who agreed that more money management skills would be beneficial for our two daughters, ages 9 and 15. But he had reservations about the 3% a week plan. “That’s an exorbitant interest rate to be paying,” he said. “They’re never going to get that again anywhere.”

I wasn’t too worried about that. We had never paid our children an allowance, and the amount that they would be earning with 3% on their Paypal balances would be what some kids get in allowance. I liked the idea of speeding up the process of money accumulation for them with interest, as a powerful lesson about the value of saving.

It was a lesson I remember distinctly from my own childhood: Going to the Savings Bank of Manchester branch in my hometown of Bolton, Connecticut, and handing in my passbook along with a deposit of money, and getting another small amount of money for free (back then, a regular savings account was paying about 3% annually). Even as a 9 or 10 year old, the math wheels in my head were churning, thinking of how much money I could make in that free money, if only I had more in my account. There was only one answer: save more money.

I want my daughters to incorporate a similar lesson into their lives, but unfortunately, there are no banks that pay 3% interest on savings at this time. So I decided to open the Bank of Mom.

The rules were thus: interest at a rate of 3% would be paid on daughters’ weekly Paypal balance. Application for interest needed to be submitted in the form of an invoice on the weekend.

At first, my older daughter seemed not to care. I chalk this up to her having too cushy of a life that she does not think of money enough. My bad. Also, she’s 15 and makes her own money in theater and babysitting, so doesn’t really need to depend on Mom’s wild ideas for income.

My younger daughter was much more on task with requesting and receiving her earnings, and was enjoying the way her $212.50 had ballooned to $225.43 in a mere two weeks, when older daughter caught on that this was a free ride she couldn’t turn down.

Younger daughter began submitting her invoices religiously, but older daughter would require reminders (which I reminded her were not part of the Standard Operating Procedure) and even with reminders, she did not start submitting on time until I put a deadline on the window for when submissions would be received (Saturday, 9 am to Sunday 9 pm.).

Everyone was on board with this plan for a few months, and I watched my meager earnings as a writer dwindle down in weekly payments of $12 and $15 and then $14 and $17 a week. The daughters began to accumulate. Their account balances surpassed mine.

The younger daughter seemed to learn some important lessons. “Camp costs $375 a week!” she exclaimed at one point, “That’s almost all of the money in my account.”  Gets you thinking, doesn’t it?

The summer came and requests for weekly payments of interest slowed down. I wasn’t going to remind anyone, because my account balance needed to regain some steam.

“I think maybe we should do once a month for interest,” I told my savers. “The Bank of Mom is a little low.”

“Really?” said younger daughter. “We don’t have enough money?”

“Well, you know how much I make as a writer,” I reminded them.

“That’s fine, let’s go to once a month,” said younger daughter, who we decided to give all decision-making power in this instance. “You need it more than I do.”

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