Three jars to help kids save

I’m a BIG proponent of the jar system.

When I wrote The Money Tree Myth a million years ago (now out of print), I introduced the jar system as a way to help children visualize how much money they had and how their spending was depleting their resources. When we started shooting Til Debt Do Us Part, we introduced the jars as a visual reference on TV. Little did I know that The Magic Jars would become one of the most popular financial lessons for adults. Seems we could all use some schoolin’ in the idea that money is an exhaustible resource.

Now from the U.S. comes ThreeJars.com. Virtual jars are substituted for the physical jars and kids learn to save with a click. Here’s how it works:

When you sign up for the service, you decide how much you will give your child as an IOU allowance … so no money actually changes hands. You divvy up the money between three jars: saving, spending and sharing. If kids want to spend some of the money they send you an online request, which you can approve or deny with a click. If you approve, you hand over the cash and the IOU balance is reduced.

ThreeJars.com charges a fee of $30 a year – a small cost for teaching kids to save. And the site encourages parents to pay interest on their children’s savings balances. To quote the site, “While the interest is not a lot to you, it is to them. Your child sees interest accumulate daily and the trade off between saving and spending is made apparent.”

In addition to their allowance, the site gives parents the facility to encourage kids to earn extra IOU bucks by requesting paid work around the house. If you like your kid’s pitch, you approve the project, set the price and when the job’s done, you add extra IOU bucks to the virtual jars.

It’s a nifty idea, and certainly one that will appeal to parents who are reluctant to give their children responsibility for making their own spending decisions. But it has some drawbacks.

Since kids are using virtual money for the process, they’re never actually dealing with the paper and coin that make money management very real for children. Kids are a concrete bunch, especially in the early years.

Another potential glitch: if you always assume responsibility for approving or denying children’s requests to spend, when do they learn to make those decisions for themselves?

I like the site. It’s clean, easy to use and clearly explains the process they’re advocating. And if your child is tech savvy — and who amongst our progeny isn’t these days — this may have quite a bit of appeal. I would encourage parents to monitor their children so they don’t develop the sense that this is “play money,” which is exactly what plastic has done for so many adults who “play money” themselves into debt.