The Money Mustache Community
Learning, Sharing, and Teaching => Mini Money Mustaches => Topic started by: whdwight on August 25, 2015, 05:11:10 PM
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In the recent post "What I'm Teaching my Son about Money" (http://www.mrmoneymustache.com/2015/05/20/what-im-teaching-my-son-about-money/ (http://www.mrmoneymustache.com/2015/05/20/what-im-teaching-my-son-about-money/)), MMM describes the spreadsheet he's been using with his son instead of a piggy bank: "To make a deposit, he just hands me some cash. To withdraw, he asks me for cash or has me buy something for him online. But for every dollar that remains in the account, he accrues interest at a 10% annual rate with monthly compounding."
For those who are looking for an easy way to stamp out a Bank of MMM-like "spreadsheet bank account" for your kid - or multiple ones for multiple accounts (like spend/save/give) and/or multiple kids - I've put together a public sheet in Google Docs that can be copied and customized to suit your needs. It also has some embedded script that creates a special "Bank" menu that can be used to automatically insert new transactions for allowance, interest, etc with fields filled in based on your allowance formula, interest rate, etc.
I've tried to put enough comments in the sheet to make it self-explanatory, but let me know if you don't understand something, see problems, or have suggestions. It's just a little side-project, so I can't guarantee I'll address all requests, but I'll certainly consider each. Of course, you're welcome to copy it and tweak it yourself, but it'd be nice to share those tweaks back with the community.
Here's a quick "Getting Started" guide:
- Make your own copy of the spreadsheet by clicking here: https://docs.google.com/spreadsheets/d/1VAuagUZ4B1lc91sDHDDorguVXmRF7ri1x--SlYfL_yQ/copy?usp=sharing (https://docs.google.com/spreadsheets/d/1VAuagUZ4B1lc91sDHDDorguVXmRF7ri1x--SlYfL_yQ/copy?usp=sharing). You’ll land on a Google page asking if you’d like to make a copy of the “Bank of YOURFAMILY’ spreadsheet in your Google Drive. Click the button to do so.
- Rename the spreadsheet from “Copy of Bank of YOURFAMILY” to something suitable (like “Bank of Smith”) by clicking on the spreadsheet name in the upper left.
- Make a copy of the account template sheet for each account in your family bank by right clicking on the “Account Template” tab at the bottom of the document and selecting Duplicate from the menu. Rename the tab by double clicking on its label. For example, if you have one child named Billy, you might stamp out three copies of the account template tab and name them “Billy - Spending”, “Billy - Saving”, and “Billy - Giving”.
- Fill in the green cells in the upper section of each of your account sheets. There are obvious fields for the account owner (your kid’s name) and the account name (like “Spending”). The birthday field is handy for those who calculate allowance based on age, and it drives the value of the named cell “AgeInYears” in the field beneath it. The total amount field in the Allowance section defines your child’s allowance. By default, the formula is set to “=1*AgeInYears” which happens to be the most popular allowance formula in the US as far as I can tell. If you’re splitting allowance between multiple accounts, use the next field to fill in the percentage of the total amount that should flow into this account; otherwise, set it to 100%. At this point, the calculated cell labeled Next Allowance will always show the calculated amount of allowance that should be delivered to this account (assuming the current day is the delivery date). If you want to reward your kid with parent-paid interest in this account, set the savings rate to the desired percentage. If you want to charge your kid interest on a negative account balance in this account, fill in the loan rate. Accounts go negative when there’s an unplanned “overdraft” from an expense transaction or if you’re using this account to model a loan.
- Fill in Transactions in the bottom section of the sheet for this account as they occur. Start by filling in the date and the amount cells for the existing Initial Deposit transaction. You can enter a new transaction with a manual copy/insert/paste/edit of an old transaction. Edit the green cells in the new row to fill in the appropriate transaction date, description, memo, type, and amount. Alternatively, you can insert new transactions of various types with one click by using the special Bank menu (rightmost entry in the document’s menu bar). Note: the first time you select a menu item, a dialog will appear alerting you that authorization is required. Continue and select Accept on the next screen use the custom Bank menu functions in your spreadsheet.
- Fill in a goal amount just to the right of the Current Balance cell if this account is tracking a specific financial goal like saving for a special purchase or a donation. The next cell over will show current progress toward the goal.
Your family bank spreadsheet is now open for business. Let me know what you think. (Sample screenshot attached.)
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This is neat; thanks!
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Great resource, pinning :)
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Thanks/for the work! Downloaded it onto my phone. Psyched to give it the full appraisal when I get to a computer. :)
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Love this idea, and the template. I noticed that the interest rates are annual and the calculation would probably be monthly so the formula for calculating interest should probably be adjusted.
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Hi Lizarro, thanks for the kind words and I hope you find it useful.
Is there somewhere on the template or instructions that I'm indicating the interest rate is annual? If so, I didn't mean too and I can update. To keep things super simple, the template just does a straight application of the rate to the current balance at the time you choose to log an interest payment. Computing equivalents between various compounding periods actually gets pretty hairy to wrap your head around. E.g., => http://www.calculatorsoup.com/calculators/financial/equivalent-interest-rate-calculator.php So I leave that as an exercise to the parent :-) For the kids, I'm just trying to send the general message that you can put money to work for you if you set it aside, invest it, and leave it alone.
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That would explain the 1% amount. 12% annual. Yep, that was me making an assumption. Thanks for the correction.
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Thanks! This is awesome. On a related note, what age is a good time to start giving allowances? Or in general introduce the concept of money? My kid is two but smart and is already curious about the green papers mom and dad carry in their wallets.
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Thanks! This is awesome. On a related note, what age is a good time to start giving allowances? Or in general introduce the concept of money? My kid is two but smart and is already curious about the green papers mom and dad carry in their wallets.
We have started them at 5 years old, we followed Dave Ramsey's "commission" plan - $1 goes to give, $2 goes to save, $2 goes to spend. Every year we add $1, so now twins are $7, we also added another option, we now have: $1- give, $2-spend, $2-save, $2-invest. The save will be for short term, for any big stuff they like. The invest will never be touched EVER. I have deposited their invest in Betterment and every month we looked at it together, I show them how they're getting free money by just letting their money sit in there.
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Small error. The birthday calculates based off of the year only and discounts what month it is.
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On a related note, what age is a good time to start giving allowances? Or in general introduce the concept of money? My kid is two but smart and is already curious about the green papers mom and dad carry in their wallets.
I always say as soon as your kids ask you for something at the checkout stand, they're ready to start learning how to manage their own money :-)
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Small error. The birthday calculates based off of the year only and discounts what month it is.
@FoundPeace - great catch! I changed the formula in that cell to calculate age in years correctly now. Many thanks! -Bill
For those who have already grabbed the sheet, the proper formula for cell B6 is: =datedif(Birthday,now(),"Y")
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This is a variation of a book First National Bank of Dad that has been around for nearly 20 years. We've used the concept with our kids for nearly that long. We pay 5% interest per month, so a 60% annual rate as otherwise it's not enough to be of interest or tech them anything until they get older and have more patience. We used it from the time they were 2-3. Just used Quicken to track their "bank accounts" and now use YNAB and it works great.
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Yes, +1 for David Owen's excellent book, The First National Bank of Dad which came out in 2003. I highly recommend it for Moms and Dads alike (despite the title). Agree that it's helpful to pay the interest on a pretty high frequency since kids operate on a much faster clock. I use(d) weekly with my kids to drum the message home. BTW, two other excellent books for teaching kids about money are The Opposite of Spoiled by Ron Lieber and, (for Ramsey fans in particular) Smart Money Smart Kids by Dave Ramsey & Rachel Cruze. All 3 books have a variety of great nuggets that you can pick & choose from to suit your families situation/values/etc.
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Thanks.
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Incredible resource. Thanks!
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Oh, superb and thank you very much, WHD!
I just updated the original article to link to your google spreadsheet so main-blog readers will find it too - I hope that is okay!
https://www.mrmoneymustache.com/2015/05/20/what-im-teaching-my-son-about-money/
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Hey @MMM -- the spreadsheet link on main blog appears to be broken FYI
Cheers!
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To provide an update on the topic - there are a few "digital piggy banks" that have interfaces that are more mobile friendly. I've been using an app called Guardian Savings for about a year now, which I've been very happy with. Only drawback is that I can't export all the transactions to create my own custom graphs. Otherwise, it's pretty awesome. It has all the functionality of the spreadsheet (goals setting, interest, etc.) and then some more with automatic allowance and some basic analysis of spending trends. Would highly recommend!
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We've never paid an allowance per se but for years our kids have earned 5% interest per week for the money they save. For a long time they had clear plastic jars (old gummy vitamin containers) they would keep their money in and it was a weekly ritual on Sunday evening to count out their money and pay them their interest. As our older kids learned multiplication I would make them calculate the interest. If they were low I'd ask them "are you sure that's all you're supposed to get?" and they'd rework it until they got the right answer. At times they've had as much as $60-70 after getting birthday money or saving for a while. We'd also give them a couple of pieces of special money like a $0.50 piece or a $2 bill that they couldn't spend so they would always have a little something to earn interest on, even if it was only $0.10 that week.
Now that our oldest is 12 they're pretty cognizant of the relationship between saving their money and building it up to be able to buy a larger LEGO set or special LEGO mini figure. Between that and Pokemon cards it's about all they spend their money on. Our second oldest is generally "Mr. Money Bags" and will rarely spend more than $10 at a time, even if he's saved up $50+. He recognizes that he can essentially buy what he wants off the interest alone every few weeks. The other kids are more likely to spend $8 when they only have $10 saved up.
We've also paid them for specific extra work - like picking weeds. For a long time it was a penny per weed and they would go out in the backyard for 20-30 minutes and make a few dollars picking weeds. We tried to switch to them keeping a designated portion of the yard generally free of weeds for $5 per week but that's been less successful. The immediate link of picking 100 weeds equals a dollar was definitely more effective. They still have daily/weekly chores but they're not paid for those, it's just expected that they'll do their part to take care of the household.
Finally, I think the physical money helps, especially at a younger age. When our 6-year old hands over carefully saved dollars and coins to the cashier (pre-COVID-19) to buy a small toy, there is the very clear realization that there is now a lot less in their money jar or wallet. Also, handing them a stack of coins or bills each week is much more meaningful than showing them numbers increasing on a spreadsheet. Plus there's the added side benefit of teaching them how 10 pennies can be traded for a dime, or four quarters for a dollar bill, etc.
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This is AWESOME! Thank you so much. I just sat my 6 year old down and explained to her all about this, and started it up. Her first real talk about money/saving/interest.