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Bill Virgin: Teaching responsible saving tends not to be a lasting lesson for kids

We haven’t played “Spot the Generational Differences” in a while, so a news story from the past week gives us a perfect opportunity for another round.

Item: The Federal Deposit Insurance Corp. has announced a pilot program in which banks will work with schools to provide savings accounts for children combined with financial education, the goal being “helping children better learn to manage their money and realize the benefits of an insured savings account.”

Your response:

a) Good. Frugality and thrift are long-neglected virtues that need to be taught for the betterment of individuals, families and the nation.

b) Geez Louise, aren’t the schools overloaded already with causes and agendas they’re supposed to be promoting, never mind actually teaching the basics? Isn’t the school calendar chopped up enough already without adding one more diversion?

c) You want us to save more? Give us a reason to. Pay us more. A few tenths of a percentage points in interest isn’t much of an incentive.

d) Given recent history, are banks really the people who should be teaching financial responsibility?

e) This is just reinventing the wheel. Banks did this years ago. In fact this region had a successful program of just that sort.

f) What’s a savings account? What’s a bank?

Admittedly that’s a lot of options for one multiple-choice question, but there’s a good reason for that – there’s an element of truth in every one of those responses. If we’d added “g) All of the above,” that would be the most accurate selection, regardless of the generational and demographic slice inhabited by the respondent.

Lamenting Americans’ propensity to spend more than they earn and to rack up debt is by now such a constant and familiar complaint, about individuals, business and government, that it tends to fade into the background as so much white noise, easily ignored. Even the recent great calamity, in which people needed financial reserves to get them through layoffs and pay cuts, may not have much staying power as a teachable moment for the importance of savings.

The counter argument to lectures about Americans and their woeful savings habits is that the amount of national savings is improperly calculated, failing to take into account the financial reserves represented in their homes. But that’s only true if people actually put money down, if they have sufficient income to make the payments, if they didn’t borrow against what little equity they had and if market prices stayed ahead of the original purchase price should a sale be necessary. In far too many cases during the recession, none of those conditions turned out to be true.

The other counterargument – or excuse – offered by the savings slackers is “what’s the point?” There they’ve got a point. The money rates table in this newspaper a week ago list Washington averages of 0.11 percent on money-market accounts, 0.27 percent on one-year $5,000 certificates of deposit.

Don’t those just make you want to race to the bank with your money – or that of your kids? But we’ve still got the issue of trying to instill some sense of money management in those tykes, to teach the concept of saving for some distant, large purchase or purpose instead of blowing it all on immediate gratification.

Banks and credit unions do often offer special savings accounts for kids. But there was a time when financial institutions went into the schools to give students their own savings account.

One Seattle financial institution started its school savings program in 1923. In a book chronicling that company’s history, historian Murray Morgan quotes a bank executive of the time: “The installation of the school savings bank system in the public schools of Seattle is one of the most powerful agencies for the future success of the community that has ever been established in this city. When we once get the children in the habit of saving their pennies, nickels and dimes regularly, we have solved the problem of thriftlessness in the United States and within two generations the American people will not be pointing the finger of scorn at our own country as the most thriftless in the world.

“The most important feature of the system is that it teaches the child the regular habit of thrift at a time when he is most easily molded. His own pride in coming to the teacher’s desk with his savings, even though they amount to a few cents, and presenting his passbook just as his father does at the bank downtown, will create a lasting impression on his mind that will stay with him all through life.”

That passage comes from Morgan’s history of the sponsoring institution of the school savings program – Washington Mutual.

Perhaps if WaMu had retained and heeded the lessons of thrift supposedly taught by the program it might still be around. But there are other anachronisms, aside from the non-gender-neutral language, within that quote that suggest school savings programs may need considerable revamping to have any applicability in this century.

Who among you still carries paper money, or coins, or has a savings account or has been in a bank branch in the last 10 years? If the banking practices of 1923 or 1993 seem archaic to you, imagine how they look to your kids. To them, money isn’t physically represented by paper and pieces of metal, it comes in the form of plastic rectangles. Increasingly, it won’t even be that.

So if we’re going to teach the next generation how to be smarter about money than we were (which appears to have been a generational problem in 1923 as well), we’re going to need to do something other than what we’ve been doing. Maybe it’s through the schools, maybe that should be taught in the home (that was an objection raised to school savings programs 90 years ago, according to Morgan), maybe social media can make itself useful for a change, but the kids do need to learn it.

It’s for their own good, and society’s, and ours as well. How else are we going to afford our retirement years without their savings?

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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