When you're teaching children about money, they need time to grasp the concept of where money comes from and how it's used to purchase things - not to mention how it can be used to make more money. For those advanced lessons, like teaching them how CDs work, let your parental instincts guide you into knowing when the time is right. On the other hand, if you're parenting the next Warren Buffet, there's a strong possibility advanced topics will come up on their own.
Either way, teaching children about money using a CD as an example might start out well before they actually open an account. Making it fun means you'll have their attention for longer, too.
Play "Time to Save!"
All you'll need to play is a small sum of money (for your "CD") and a timer.
Sit down with your child an hour or two before going on a shopping trip (perhaps to the grocery store) and count out the money for your "CD." Having different denominations and even some coins helps kids' better grasp the concepts, and it drives home another valuable part of teaching children about money: how to count it.
Now, explain to your child that this "CD" is his or hers, but only if it doesn't get spent today at the store. In the meantime, you explain, it will stay with Mom or Dad.
Next, explain that you're going to set the timer, and when it goes off, you'll add some money (interest) to the pile. But, they'll have a choice to make at that point, too.
Beep! Time to Choose!
"When we get to the store and the timer goes off," you might say, "you have to decide whether to let Mom add some money or just take the money and spend it. If you decide to spend it, Mom is going to take 50 cents out of the pile, so you'll have less to spend." That 50 cents, or another amount you choose, is the "early withdrawal penalty" on this "CD."
Finally, add that, "If we make it to the store and back without spending your money, you get to keep all of it and get [some other reward your child really likes]."
Set the timer according to the child's age. The younger he or she is, the more often the timer should go off because young attention spans are shorter. If the child is a bit older, say, between nine and 12, you can also increase the time intervals as the game continues (to simulate rolling over the "CD" into longer terms).
Now, do a few practice runs to help them understand.
"Okay, we're pretending we're in the store now," you could say. "And right over there is your favorite treat ... when the timer goes off!"
Now, walk your child through the decision process so it's clear to him or her how the game works, including a couple practice runs where you take an "early withdrawal penalty." After you play the game, you can have a conversation about how CDs work.
Give it Time. Be Flexible. Know Yourself (and Your Kids).
CDs can be a complicated subject for adults, so if your child doesn't catch on in the first attempt at "Time to Save," don't sweat it. Put the idea away for a couple months and try again later. Remember, too, that the game doesn't have to be rigidly defined, and you can change the rules to suit your own family's values and the child's personality.
When teaching children about money, remember that fun - for kids - is more important than learning something. Don't force it, and be ready to adapt to the way your child learns.
Of course, we hope that eventually you and your child will be ready to open a CD with Ally Bank. With a full line of CD accounts for different needs and rates that are consistently among the most competitive available published by RateCatcher, it's always a good "time to save" with Ally Bank. Learn more at AllyBank.com or call live customer care at 877-247-ALLY (2559) today.