16 Aug 2015

Teaching Children To Save In A 0% World

The Dissident Dad: At the age of 5, I clearly remember walking into my local Bank of America to open up my first savings account. It was almost a thrill, receiving my small, beige deposit book, where my father noted the first entry: $260.
I had found a wallet on the floor of a hotel about 6 months prior to that. After no one claimed it, the hotel mailed me a check. Perhaps it’s because I’ve always had an interest in finance, but opening up that first savings account is one of my earliest memories. It ended up helping me to become a disciplined saver from an early age.
Moving along, in the late 1990s, I remember opening up a 1-year CD at 6% when I was barely an adult. Looking back, depositing money at a bank made sense at the time. Fast forward to today, and I don’t think teaching my children to store their money in a bank is prudent, or even a smart thing to do.

Will they eventually need a checking account for daily purposes? Sure. Nevertheless, I want to teach them the real reasons why saving money in a bank makes sense in a normal world, namely a combination of capital preservation and compound interest. The American status quo has killed the innocence and logic of simply walking into a bank and depositing money by offering a near-zero-percent interest rate return for depositors.
Meanwhile we have seen the precedent for bail-ins set in Cyprus, and even just last month, Greek banks simply shut down, denying access and limiting withdrawals.

In Australia, a deposit tax could be coming in the near future. You’d think the banks and consumers would be raising hell, but ING Direct Treasury Head Michael Witts had this to say about Australia’s deposit tax:

“So I think it’s generally a move in the right direction and so, therefore, I think from a consumer’s viewpoint the additional stability that this potentially will bring I think is very good.”
Notice that this isn’t a tax on bank profits, but a tax on citizens’ money in the banks.
Meanwhile, ZeroHedge cited a leaked EU document last year that showed that the “elites” in control openly consider savings confiscation a legitimate option for all 500 million citizens:

“The savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis.”
I think teaching my children to save presents an opportunity to help them learn financial prudence, and recognize that saving does not necessarily mean having a bank account with the word “savings” in front of it. While we can’t completely detach ourselves from the reach of financial oligarchs, we can make it as inconvenient as possible for them to outright steal from us.
As such, I’d like to introduce three fun, child-friendly strategies I have used to help my children understand the value of saving some of their earnings from lemonade/coffee stands, birthday gifts, and the occasional neighborly dog-sitting services.
Physical Money – Holding a silver coin can be special, which is why my children and I often look forward to heading down to the local coin shop to exchange our currency for a physical asset.
In my own life, I’ve found it easy to spend digital numbers sitting in a bank account, but man, I just can’t bring myself to sell a silver bar.
Coin/Cash Jars – Our family has found that lableing coin jars with the words “save,” “spend,” “invest,” and “give” are exciting ways for the kids to learn to save as well as allocate resources.
Public Business Ownership – I know a lot of readers will have the same concerns about the stock market as I noted about the banks, but in my opinion, stocks are different since they are a legal ownership in a business.
My children own shares in some Disney, Intel, General Mills, and Costco, four businesses the children positively interact with. They have fractional ownership with shares. Though I don’t request physical delivery, I have printed out some pretend certificates that we have posted up in my office.
I’ve also tried to enhance this experience by requesting dividend checks be mailed to the house, so the kids can truly understand the root of stock ownership: a share in company profits.
Other Options: I’m sure that as digital currencies become more mainstream and less speculative, this too will become a great way to help our kids save their money and see that savings can be more than just having a bank account.
I’ve also set all three of my children up with their own dividend-paying whole life insurance policies, where they will have access to compounded savings one day (cash value). I like this option because it represents two private parties making a contractual agreement, and unlike the banks, mutual insurance companies don’t engage in fractional reserve lending. Perhaps I can expand on this idea in a future essay.
To summarize, what oligarchs have done in Cyprus, they could do all over the world. I understand the need in our current system for a checking account, and I have several, but when it comes to savings, I do not consider a bank to be a safe or worthwhile option for storing my family’s money. 
– Daniel Ameduri aka The Dissident Dad


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