Lynn O'Shaughnessy

If he were starting today, Owen said he'd place money in a cardboard box and require his kids to write down their withdrawals and deposits. Obviously, this arrangement would only work if the young bank customers were honest. If you're interested in setting up your own family bank, you don't need software to pull it off. You can keep a paper ledger of deposits and withdrawals and figure out the accrued interest with a calculator.

The First National Bank of Dad became so popular that Owen had to make the terms less lucrative. When each of the children had amassed several hundred dollars, Owen lowered the interest rate to 3 percent, which he announced at a family meeting.

What Owen cleverly created was a system that allowed his kids to succeed financially. Within a couple of years, Owen's son and daughter had built up their balances so that their income - allowances, gifts and interest - exceeded what they spent by a comfortable margin. They also spent their money more wisely.

"They treated their money the way sensible grown-ups have always claimed that money ought to be treated," Owen wrote. "And they did it without my haranguing them about the virtues of restraint. As soon as their savings began to grow at a rate that was meaningful to them, they realized that frenzied spending was not in their best interest."

When Owen's kids became teenagers, the First National Bank of Dad was replaced by the Dad & Co. investment firm. The kids were given a chance to abandon their sure thing and put their money into stocks or mutual funds. To get them started, Owen developed a list of six stocks they could choose from. His daughter, to her credit, eventually switched all her money to mutual funds. The kids could buy and sell stocks and mutual funds at one-one-hundredth of their actual price. So a stock trading for $80 a share would be bought through Dad & Co. for 80 cents a share.

Ultimately, his children moved on to their own checking accounts, debit cards and credit cards. But Owen gave them valuable lessons in managing their money. And he could benefit from his days as a faux bank president.

"The better we teach our children now, the more likely they'll be to do a good job when the time comes for them to gently lift our hands from the steering wheel," he writes. "That's the potential payback, if you feel you need one. Do your best to help your kids today; someday, your own security and happiness may depend on their ability to return the favor."


Lynn O'Shaughnessy

Lynn O'Shaughnessy is the author of Retirement Bible.

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