Mom Can I Have That?

"If I put my $20 bill into the bank, will I be able to get it out again?"

You're tempted to say:
"Of course you will."

Dr. T's Rx:

Before you're too quick to answer, make sure you understand the question, which may in fact be a two-parter: First, will I be able to get my $20 back, and second, will I be able to get the same $20 back. The answers, of course, are "yes" and "no," which may be obvious to you but not to your children.

Even kids who have the money and the savvy to open an account of their own aren't always clear on what happens to their money once it goes in. They're shocked to find that their crumpled bills and painstakingly rolled coins aren't being kept on a shelf for them until they want the money back.

A brief explanation of how a bank works may be in order. Tell your kids that the bank uses their money to make loans to other people, but that they can always withdraw an amount equal to their account balance. In return for letting the bank use their money, the bank will pay them interest, which is figured as a percentage of their balance and added to their account periodically. They'll most likely get a regular statement in the mail that shows their balance and the interest earned.

Note: When you open an account with your kids, be sure to ask whether they can make withdrawals on their own or will need your signature to take money out.

Dr. Tightwad Explains...