CUTMA and Money Lessons

I finally opened up a California Uniform Transfer to Minor account for my son.

My son is 4 years old and I wanted to start teaching him some money basics. He knows that both parents go to "work" and when we take him to the store or a restaurant, he sees that we pay for things with a credit card or with cash money. He has a piggy bank with some money and non-money (but nonetheless valuable to him such as Chuck E Cheese tokens), but no real concept of money.

When he got some money for his birthday, I thought that it was time to start teaching him some basics like saving, spending and investing. It may be a bit early, but I want to start instilling in him the value of money and teach him how one should approach it. Some basic concepts like spending are easy to grasp, but I also want him to learn how to save or to delay instant gratification and save for the things he wants.

He received $50 for his birthday from various aunts, uncles and grandparents. I showed it to him in bills (two twenties and one ten), and told him that we could go to whatever store he wanted the next day and spend $10, the rest would have to be "saved." His eyes lit up when I said toy store and I think that I lost him then. I explained that we would go to the bank to open up a savings account so that he could also save his money.

When we went to the toy store, I kept repeating that he had only $10 to spend. He got cheeky and said that he thought that he had $50. Good memory, but I stood firm and said he only had $10 to spend. He took some time looking at different toys in the store and after a while finally decided on a small toy that cost only $3. I handed him $10 so that he could hand it over to the cashier. He got $6 in bills and some change. If the cashier had handed him a million dollars, I don't think he would have cared, he was just staring at his brand new toy.

I started to wonder if anything was sinking in, but I think that I just have to be persistent and impress upon him that money is a finite resource and once it's gone it's gone and that we should allocate it according to our needs and then balance it against our wants. Also, I thought about what values I wanted him to have. That the "joy" we get from new "things" is only transitory until we get the next "thing" and that one should build a life around other things that are of more value, like family and friendship and experience. Maybe I was expecting too much, after all he is only 4.

The next day, we stopped by the bank and opened up a California Uniform Transfer to Minor account. I had brought his piggy bank and the extra birthday money. It was a relative easy process and in the end he got a booklet that showed how much money was deposited. Once his piggy bank was returned to him and after we left the bank, he kept asking where his money was. I said "at the bank", and then he followed up with, "why is it there?" I told him it was where we save money. I guess it's a hard concept to grasp, that money is held at a bank far away from you, where you can't touch, hold or look at it anymore.

I think that I'll continue to use his piggy bank and we'll make periodic visits to the bank. I may have to get two piggy banks, one for savings (which will be deposited in the bank) and another for spending. Every time he gets money, we'll put maybe half into savings and the other half into spending. I'll save the concepts of investing and charity for later, maybe when he's 5 or 6, when he starts to get an allowance. I found a pretty neat piggy bank that has four different compartments, one each for savings, spending, investing and charity (the Money Savvy Piggy Bank). I may have to get that so that I don't have to juggle so many jars/piggy banks.

Kids get the idea of money really quickly, especially how to spend it, but I don't want him to grow up expecting money, to think that it comes easily and that the only thing he can do with money is to spend it. He needs to understand that it really is a finite resource and should be used carefully.

Don't know if I'll always be able to compete with the glitz of a toy store and its allure, but maybe with constant repetition and by setting an example, he'll get it.