Saving pennies online

Sunday is payday at our house. Each week, my seven-year-old and five-year-old receive a $2 allowance. At least, that’s the plan. But like many people, I pay for nearly all purchases with plastic. When payday comes for the kiddos, there’s a mad search for small bills. After several weeks in a row of rummaging through my purse for change and coming up empty-handed, I decided to hunt online for a tool that brings allowance payments into the 21st century.
 I settled on 

How it works

You set up an account for each child that tracks how much money they have earned in allowance. This is a virtual account, not an actual account where real money changes hands. 
Kids earn allowance in the form of IOUs they cash in at the bank of Mom and Dad. The IOUs can be split into three jars: one for spending, one for sharing, and one for saving. You choose how each weekly allowance is split to fund each jar. We decided that every time they are paid, $1 goes to “spend,” sixty cents goes to “save,” and forty cents goes to “share.” Our bank pays interest on the save jar at a rate of 10 percent — I figure the more they can see interest compounding, the more they get excited about socking money away — but you can set whichever rate you choose, or none at all. 
It’s easy to make extra deposits when Grandma sends birthday cash, and to make withdrawals when they find something they must have. When my daughter’s school was donating money to charity, both kids gladly emptied their share jar to give to the cause.
 (Three Jars does not profit from donations made.) The program also allows you to tie money to certain chores, a feature we haven’t used. In our household, we look at allowance as a tool for learning to manage money, not an incentive to pitch in with housework.
 You can check account balances, make withdrawals, and add money to jars using a mobile phone as well. 
Once our kids are older, they can use their Three Jars account to send requests via email to us for spending money. All requests require the approval of an adult.
 The cost for the program is $30 per family per year but you can also test it for 15 days, free.
 No more “I’ll pay you next week.” No more fruitless rummaging through the junk drawer for change. 

In hand versus in the jar

There is, however, a big drawback to how I use this system. While there is nothing to stop parents from handing over cash to their kids from the Jar when they request it — I have that cash at the ready problem. Because my kids are young, and I’m typically with them when they want their money, 

I usually explain that a purchase will come from their allowance — and then throw it in the cart to be charged with the rest of my purchases. I worry that because they don’t have a stash of cash in their wallet, the concept of spending and saving money is more abstract. They don’t get the experience of counting and handing over a wad of cash to a salesperson in exchange for a toy, and walking away with an empty wallet. I think it’s probably a lot easier to spend money they don’t touch or see on fleeting desires.

I certainly don’t want to go back to the old system. But I should have cash at the ready on occasion so my kids can experience hearing the clink of a coin in a piggy bank or the feeling of parting with a dollar.

Kara McGuire is a personal finance writer and a St. Paul mother 
of three. Send comments, questions and story ideas to