Daddy's Bank

This month's post expands on the delayed gratification concept from last month. We've recently started introducing the concept of banks. If you are going to be "The Investing Kids", it would be prudent to learn banking. How do you do this with a four and two year old?

We've constantly been telling them that if they put whatever money they have in the bank today, come back home, sleep at night, wake up the next day and go get it from the bank, they will receive more than what they deposited. We've explained this using $1 dollar bills, jenga blocks, lego pieces, crayons and anything else you can think of.

With Aarav, who is our two year old, we show him one jenga block — tell him it's going to the bank today. Then we act out going to the bank, giving it to the banker, coming home and going to sleep and waking up the next day and driving back to the bank. And what do we get? We get two jenga blocks. It has taken some effort and time, but it seems they have finally understood it. At least we think they have. All it's taken is a whopping 100% daily interest rate!

First, we had her put it in the bank for a day and get $10 back the next day. It's easier for them to grasp if you double the number of bills (give two $5 bills rather than a $10 bill). Once she had this $10 she kept it in her room in her piggy bank for a few weeks and forgot about it.

So, we had to remind her how her $5 had grown into $10. It took a few days but she came up one day and asked if she were to put the $10 in bank, how much would she get. We told her it would be $20 and she immediately wanted to do it. So we drove to the bank at 7pm and used the drive through ATM. I did not want to squash the enthusiasm and excitement and have her wait until the bank is open.

We went the next day and she got her $20. She again brought it home and kept it for a week. Then she remembered and wanted to do it again. Doing this a few more times, she grew her "portfolio" to $80.

Then, one day, she started asking questions of how much she would get if she left it in the bank for 5 days, 6 days, 10 days, etc. She somehow settled on 7 days. Not sure how and why but I didn't question it. So we went and deposited the $80.

She forgot about it for several weeks and when she remembered several weeks later one afternoon — she wanted to get her money right away. So we went and I took out $320 for her. The 100% daily interest did go down a bit since I don't know how long I can sustain the 100% but she was satisfied with her $320. I call it a win-win.

She has worked her way to about a little less than $1,000 as of now. Sometimes she deposits some of it, sometimes she only wants to deposit $20.

Aarav who sometimes tags along for the ride to the bank always is excited about depositing a $1 bill and then getting two bills the next day. All he wants to do then is put one in each of his pant pockets. He gets a thrill out of folding the bill, putting it in his pockets, taking it out and showing people. 100% daily interest at Daddy's Bank is all it takes.

But this afternoon during lunch, Aarav mentioned he wanted to go to Disneyworld (probably because of something he saw during his daily iPad time). Then Arya said she wanted to go as well. Instead of telling them it's expensive and creating limiting beliefs, I decided to test how much she really wanted it.

I told her we would go, but it would take all the money that she has in her piggy bank upstairs. She flat out told me that I should pay for it from my wallet. I replied that if they really wanted to go, we totally could, but she would have to give me all the money in her piggy bank to help pay for it. She kept telling me that I should pay so I figured she wants her money more than she wants Disneyworld. So I let go of the conversation.