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The right age for a piggy bank

Kelly Dilworth

Toy stores are full of specially designed piggy banks promising to teach kids how to save. According to a new study published in the Journal of Consumer Affairs, however, parents may want to hold off on purchasing a brand-new piggy bank — or opening a savings account in their child’s name — until their kids are old enough to benefit.

“As children grow, they make cognitive, social and linguistic developmental gains that may be essential for using savings accounts and performing savings behaviors,” writes study author Terri Friedline in the report.

Kids as young as 5 or 6 may be developmentally ready for simple money lessons, such as how to make deposits and set short-term savings goals. But it’s not until they reach the ages of 8 and 9 that they really begin to understand how saving works.

“Children at age 5 or 6 may conceptualize banks mostly as a place for storage, or may even consider saving in a bank as synonymous with losing money,” writes Friedline. Because they don’t have the cognitive ability to think abstractly about their savings, 5- and 6-year-olds might even protest against letting go of their cash because they aren’t old enough to realize they’ll eventually get it back.

Older children, by contrast, are more likely to understand that depositing money helps protect it so that they can grow their savings over time. By the time they reach 8 and 9, they are also more likely to prefer saving their money rather than spending it, says Friedline, and are capable of coming up with effective strategies for setting aside enough cash to meet their goals. Once they reach 11 or 12, they can also do more complex calculations, such as figuring out how much money they’ll need over time.

Older kids are also more likely to grasp the importance of saving their money for far-off expenses, such as summer camp or college. For example, 8- and 9-year-olds are capable of saving for events that are weeks or months away, says Friedline, while 11- and 12-year-olds can wait for years before accessing their money.

Kindergarteners, by contrast, are more likely to understand shorter term savings goals, such as saving money for a weekend trip to the toy store. But they might not have the patience for goals that require them to part with their money for longer than a few days.

Your bottom line
Wait until your children are developmentally ready before you try to teach them how to save. Your kindergartener might benefit from using a simple piggy bank to save for near-term purchases. But you’ll want to hold off on more complex savings lessons until he or she is a few years older.

For help coming up with age-appropriate saving activities, check out the Council for Economic Education’s free Financial Fitness for Life parent guides and the President’s Advisory Council on Financial Capability’s financial literacy website, Money as You Grow.

You may also want to tap your local community for experts who can help teach your kids age-appropriate principles. The FDIC recently put out a call for banks to partner with area schools on a Youth Savings Pilot Program that links financial education with low-cost savings accounts for kids.

To encourage your local bank to participate, ask them to send an email expressing interest to YouthSavingsPilot@FDIC.gov. Applications for the program are due June 18.

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