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The First National Bank of Dad: The Best Way to Teach Kids About Money

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Most parents do more harm than good when they try to teach their children about money. They make saving seem like a punishment, and force their children to view reckless spending as their only rational choice. To most kids, a savings account is just a black hole that swallows birthday checks.

David Owen, a New Yorker staff writer and the father of two children, has devised a revolutionary new way to teach kids about money. In The First National Bank of Dad, he explains how he helped his own son and daughter become eager savers and rational spenders. He started by setting up a bank of his own at home and offering his young children an attractively high rate of return on any amount they chose to save. "If you hang on to some of your wealth instead of spending it immediately," he told them, "in a little while, you'll be able to double or even triple your allowance." A few years later, he started his own stock market and money-market fund for them.

Most children already have a pretty good idea of how money works, Owen believes; that's why they are seldom interested in punitive savings schemes mandated by their parents. The first step in making children financially responsible, he writes, is to take advantage of human nature rather than ignoring it or futilely trying to change it.

"My children are often quite irresponsible with my money, and why shouldn't they be?" he writes. "But they are extremely careful with their own." The First National Bank of Dad also explains how to give children real experience with all kinds of investments, how to foster their charitable instincts, how to make them more helpful around the house, how to set their allowances, and how to help them acquire a sense of value that goes far beyond money. He also describes at length what he feels is the best investment any parent can make for a child -- an idea that will surprise most readers.

208 pages, Hardcover

First published January 7, 2003

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David Owen

30 books85 followers

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Displaying 1 - 29 of 46 reviews
37 reviews1 follower
January 20, 2012
This is so far the best resource I've read about helping kids learn how to manage money. By "best" I means that it matches my parenting philosophy of letting the kids experience control and responsibility as much as possible. This includes giving them the chance to make mistakes and learn from them.

Owen's approach is different from the Spend/Save/Gift (tithe) allowance model many parents use. His take is that it's better that saving and gifting comes from the child (they should learn the later partially from parental example!) rather than being forced on them.

It's a very quick and amusing read and a highly recommend it to parents who're willing to let their kids be responsible for their financial decision.

Owen approaches money from a kid's point of view. So a 2% savings account is meaningless to a 6yo because the benefits are too little and too far away. Putting money into a college fund might as well be putting them in a black hole, as far as they're concerned. However, a 5%/month savings account makes a noticeable difference within a 6yo's financial horizon.

Owen taught his kids about money and the benefits of saving by setting up a "virtual bank" for them with a high interest rate into which he'd automatically "deposit" their allowance every week. Any money gifts they'd receive they could "deposit" into the bank too, and they'd be accruing interest along with their allowance. The kids were completely in control of their money (well, there is the parental info for truly unacceptable expenses). That control, and the interest rate, made them aware of the trade-offs between instant gratification and long-term savings.

The second part of the book goes beyond savings and explains how the stock market works and how you might have older kids participate. It's a bit more complex and not necessarily something a parent without Owen's financial background might want to do, but it's still helps the less savvy parent understand and explain the concept to their kids.

In the final part of the book, Owen talks a bit about "values" other than money and exhorts parents to read with their kids. The reading part (though I agree 100%) feels a bit added on and disconnected from the rest of the book.

Update (11/19/2011): Since reading the book over a year ago, I've discovered FirstKidBank.com, a free online virtual allowance bank that makes it exceedingly easy to keep track of your kids' allowance (and chores) and accruing interest. I've set up "direct deposit" for my daughter's allowance, she earns 1% weekly and when she wants to buy something at a store, I can pay for it an immediately deduct her allowance account using my iPhone. http://firstkidbank.com/
Profile Image for K Titus Rodriguez.
4 reviews1 follower
September 4, 2009
First of all my wife checked this book out of the library for herself. Somehow however, one afternoon it ended up in my hands and the first three chapters went by in what seemed like seconds. I don't normally read this type of book but found in the author David Owen, a friend. He made me laugh and carefully consider the way I deal with my children and the influence upon them of money and many other things. Lastly, and most unexpectedly was the surprise ending. This is a very good read.
Profile Image for Daniel Sousa.
6 reviews
December 7, 2022
Um excelente livro, com quase 20 anos, mas ainda muito actual. Escrito numa linguagem muito acessível dá uma visão muito interessante e fácil de adotar e adaptar sobre como passar aos nossos filhos conhecimentos sobre o dinheiro. Se calhar ainda mais importante, para além do seu preço, ajuda a reflectir com as crianças sobre o valor das coisas.
Recomendo facilmente a qualquer pessoa, mesmo que não tenha filhos.
Profile Image for Remo.
2,279 reviews128 followers
October 22, 2019
Fantástico libro que nos cuenta, entre otras muchas cosas, cómo un padre decidió montar un "banco de papá" para incentivar el ahorro y la responsabilidad financiera de sus hijos. Así, al principio con papeles y luego completamente informatizado en un Excel, el autror creó cuentas para los hijos quye les rendían un 5% mensual. Sí, quién lo pillara, en efecto. Los hijos podían elegir qué hacer con la paga: gastársela, ingresarla en el banco o una combinación de ambas. A lo largo de varios años (hasta que los hijos llegan a la universidad) el autor nos cuenta llas ventajas que le vio al métoido y los ajustes que hubo que ir haciendo por el camino.

Pero este libro trata de muchas cosas más. Con muy buen criterio, en mi opinión, el autor nos habla de la paga semanal, de las tareas domésticas, de si deben tener un trabajo a tiempo parcial los niños para pagarse "sus cosas", de quién debe compara y elegir la ropa...

Y no acaba ahí. Años después de iniciar el Bank of Dad, el autor puso en marcha la Bolsa de Papá, en la que las acciones del mercado financiero cotizaban igual que en tiempo real pero con valores divididos por cien. Una acción de Micrososft de 95$ se podía comprar en la Bolsa de Papá por 95 centavos de dólar. Así los niños podr´ia empezar a observar la mecánica del mercado de valores (y bonos) si n necesidad de sufrir quebrantos en caso de que alguna de las empresas en las que invertían se fuera al garete.

El autror, tras dedicar las primeras cien páginas del libro a la parte relacionada con el banco, divaga un poco y nos habla de muchas cosas mas, todas ellas interesantes. Una lectura entretenida y de la que estoy sacando muchas ideas.
Profile Image for Zack.
Author 12 books25 followers
October 9, 2010
My only regret is that as a parent, I hadn't read this book earlier. Owen's book is deceptively easy and enjoyable -- it's a must-read for parents determined to help their children (and themselves) understand money, personal finance, and saving.

Have you ever debated whether to pay a child an allowance?
How much to give?
Should the payment of allowance be tied to chores the child must complete first?

Whether you agree with Owen's dogma, he lays out a framework to discuss, plan, and implement a money system within a family through incentives.
Profile Image for Kevin Hanks.
369 reviews7 followers
April 18, 2017
This was a great book filled with really actionable advice. I actually done reading it thinking about several ideas I could implement immediately.

The premise is important: even if we don't consciously do it, parents teach their kids about money be it for good or ill. He presents some suggestions about how to teach kids the importance of money and the value of saving, weighing important spending decisions, and taking ownership if their decisions/purchases.

It was humorous and easy to read. I enjoyed it.
Profile Image for Rob.
460 reviews21 followers
June 18, 2017
I picked this up after hearing Owen's interview on Econtalk.

The genius of the First National Bank concept is that it is truly empathetic to how a child experiences time and agency. I found Owen's understanding of kids (and adults!) to be quite sophisticated, which enabled him to build a banking idea that, in itself, is quite simple actually.

The "time" element is key to the workings of the bank. Simply put: to a kid, saving must have relatively short term benefit, or it's not worth doing. Everyone has received a savings bond of some kind from a grandparent, and every kid knows that it's not real money; it's actually understood more as a punishment than a gift because they can't use the money right now. So the interest rates for a kids' bank have to be REALLY high to make it interesting.

I had also forgotten that, to a kid, “long term” does not mean “long term”—it means “never.”

However, the mechanics of the bank aside and acknowledgement that kids have shorter term outlooks than adults do, by far the most interesting parts of the book are his discussions about how to teach financial responsibility in kids. To Owen (and I completely agree with this), responsibility can only be truly learned if one is allowed to make mistakes, and has full agency in his/her choices.

Here are some quotes illustrating this (and there are many others that I highlighted when reading):

Most children immediately realize that banking plans implemented by their parents are actually punitive in intent: their true purpose is not to promote saving but to prevent consumption.


Most important of all, I realized that up until that moment almost all of my efforts to teach my daughter financial responsibility had consisted of reducing or eliminating what few financial responsibilities she had. How could she possibly learn anything about handling money if I was just going to keep dreaming up new excuses for taking money out of her hands? Don’t we learn about money the way we learn about anything else—by making a series of gradually less horrible mistakes and living with the consequences?


The mistake most parents make, I think, is to blur the boundary between their own money and that of their children, to the point where the children can only be irresponsible and annoying. If your own income consisted solely of what you were able to beg from a fickle and inscrutable boss, then you would wheedle, too. Children who have no control over their own funds have no incentive not to plead for money and then to squander every dollar that comes into their hands.


Having real control of their own money forces children to confront and weigh their actual desires. It also frees parents from having to play an invariably judgmental and adversarial role in the family economy.

Anyway, I found this stuff really compelling. Fundamentally, by allowing children access to their own pools of capital, money becomes not a means by which parents control their children (which inevitably leads to frustrating conflict), but instead becomes a way for children to confront their own needs and wants without the parent-as-cop. There is a lot to love about this idea, and Owen's understanding of human nature really comes through throughout this discussion.

There are two other things I really enjoyed about the book.

The first is that when the kids got too old for the bank (around 12 or 13 or so), he switched to running a stock market, which is pretty brilliant.

The second is his philosophy that the kids should have enough money that they don't feel like they need to spend money as soon as they get their hands on it, but not enough to be able to spend profligately. This concept is pretty brilliant to me; it means that spending requires thinking about tradeoffs, but also means that the $20 you get right now isn't going to be spent in the next hour, living hand-to-mouth style. There's a lot of discussion as to why this is important, so you should read the book, but suffice to say that this resonated with me.

Overall, great read. I'm looking forward to implementing it with my daughter when she's a little older.
Profile Image for Holly.
329 reviews4 followers
June 13, 2020
Great book for parents that hits the highlights of teaching your children larger financial lessons including money management, supply and demand, and investing in very accessible terms. Owen then wraps up the book by projecting you into the future when your children may have to take over your finances for you. Great way to think about teaching not just in terms of wanting your children to be self sufficient adults but also to have the skills and responsibility to take care of you when the time comes.
Profile Image for Shiv.
135 reviews2 followers
January 13, 2020
Great practical advice for giving children real experience with all of the basic skills they might need as an adult presented in a way that allows them to learn (and make mistakes) in a low-stakes environment.
15 reviews
May 4, 2019
Great ideas, but I find it difficult to determine how much to budget for the kids to use (as Owen suggests). I do appreciate how thoughtful the author was in thinking out his program.
Profile Image for Dolly.
Author 1 book643 followers
November 19, 2011
This is a very interesting, and often humorous book on parenting and teaching our children about money. It's a quick read and with lots of anecdotes from his own life, I felt like I was sharing in his experiences more so than reading a self-help or how-to book.

The principles he teaches are well within our reach, although I'm not sure how far we'll take it in our own family. Setting up a small scale real-money version of the stock exchange might even be beyond my abilities or interest (especially since we have the majority of our funds in index funds, since I decided long ago that I didn't have the time or inclination to track individual stocks.) I certainly wasn't surprised to learn that his father was a stockbroker, which I'm sure contributed to his own financial literacy and ability to recreate the stock market on a micro scale.

Some of the anecdotes he shares shows how old his experiences are - the book may have been published in 2003, but when he mentions renting videos at Blockbuster, Sony Walkmans, Beanie Babies, and the internet stock bubble of the 1990s, it gives me a perspective of the time in which he raised his own children. And while the recommendations he offers are still relevant and feasible today, somehow it makes me think if there are other options that we could pursue in today's technological age.

I get the feeling that this book is designed for parents, like myself, who are already making strides toward teaching our children to be financially responsible and savvy. This book helps show the fallicy of some common practices and offers ways to amp up our children's learning while still in the comfort and security of our homes.

But it's not likely to help those who are of limited financial resources. It describes giving substantial allowances and setting up a literal "Bank of Dad" that offers an interest rate that even the most spendthrift child will realize that it would be foolish to pass up saving some of her money. Not everyone has the time, ability and financial resources to make this kind of lesson a reality. But, I suppose, the book is more likely to be read by those of us who do.

Overall, it's an insightful book, written by a parent who has made the mistakes and has discovered more effective ways of teaching children about fiscal responsibility. I enjoyed reading it and will certainly bring at least some of his ideas into our own household. I liked his discussion about True Net Worth (chapter 7), that really emphasizes that true happiness in life is not derived solely from our bottom line. And I appreciate his candid anecdotes of finally taking over his father's finances when his father became no longer able to do so himself. Finally, I love that he extols the virtues of reading to children and borrowing books from the library (though slightly off topic.) It's a simple way to bond with our children in a low-cost activity that will help them become more literate and successful in school and, hopefully, also smarter about finances and money in the process.

interesting quotes:

"One of the most useful services that we can perform as parents is to provide our kids with opportunities to screw up in interesting ways that make lasting impressions but do no genuine harm." (p. 119)

"Given the overall condition of the civilized world, you would think that simply not having bubonic plague would be enough to put most of us in cheerful moods--but, no, we want a hot tub, too." (p. 164)

"Here's my best advice: Read to them even more than you already do." (p. 167)

"And there, if you need one, is an elegantly selfish reason for helping your kids learn to feel comfortable with money. We are our children's financial guardians today, but they will be our financial guardians tomorrow, assuming that we are sufficiently lucky to live long enough to need their help. We therefore have a direct, personal, long-term interest in doing everything we can to prepare them for the moment when our actions will compel them to shoulder our problems for us." (p. 189)
Profile Image for Janie.
542 reviews12 followers
June 15, 2017
A few years ago, I got a lot out of the book Green Metropolis. When I discovered that its author had written a book about teaching kids about money, well, I wanted to read it! I wanted to read it so much that I put out a request for an ILL [inter-library loan]. I'm glad I did. J&I read it out loud to one another, contributing to my enjoyment.

I recommend it to parents who are considering whether or not to give money to their children, or wondering how to manage allowances. In my experience, readjusting my view based on what I learned from the book, most parents are Doing It Wrong don't know better. Yet.

The allowance chapter was the best and worst. I got good, new perspectives on what and what not to do with allowance, and why, but some of the ideas were rubbish. The most rubbish ideas were related to needless goods or schooling, like how if you can afford it you should never let your child in high school have an after-school job. Much of such particulars don't apply to me, since I fancy myself a radical and a prosumer, and the author and the most likely audience are liberals-or-conservatives and consumers. There's assumed buy-in to industrial values.

Still there's plenty here I can make good of.
One of the most useful services that we can provide as parents is to provide our kids with opportunities to screw up in interesting ways that make lasting impressions but do no genuine harm.
If you want to let your child learn about money with the money you give them, you should let them have meaningful control over it. You don't "strongly suggest" that they save; you don't prate about how fulfilling it is to give to charity; you let them buy whatever they want [parental permission is sought or applies only to purchases that significantly trespass upon house/safety rules] — as a bonus, that means you don't have to waste energy every time they want to make a purchase.

So, you know, you give them the same control over their money that you have over your money. You treat your child like a person [except when, for example, they're in compulsory school and want to work a job :P]. That's radical enough.

Anyway, it has its share of nuggets, chicken and gold.

Try it; you'll like it.
Profile Image for Chelsea.
833 reviews1 follower
February 7, 2014
He had a great writing style and his ideas are sound, just nothing that ground-breaking here. I personally am just a little too financially unsavvy as well as lazy to incorporate his whole Bank of Dad, let alone making my own stock market brokerage for my kids...but the principles are sound. I do like the idea of having a cash box where they make deposits and withdrawals and keep track of it on their own with minimal interference from the parents...teaches them how banks really work. The whole point is to give your kids money and let them be in charge of it, taking responsibility, etc. He had some good chapters about transitioning to the teen years and how there's no 1 formula to use, but it's all about negotiation with your teens to mutual benefit. I also liked his take on using rewards instead of punishments to promote behaviors you want along with not tying chores to money. Chores are something we all do to contribute to home life, allowance is to teach you about money and help you take responsibility for some of the things you want. He also talked a lot about how kids need incentives to save...incentives that mean something to them. Just taking their money and depositing it into a savings account does nothing to a small child. All you did was take away their money, despite trying to explain where it went and why it's there. Which then only encourages them to go spend their next amount of money they get before the parents snatches it away to "save" for them. Isabel is a saver already so I don't need to worry too much about her, but I can see using some more incentives to teach Elliot the benefits for saving instead of blowing cash on random small stuff as soon as he gets it. I guess I had a lot to say about this book, so maybe it deserved more than 3 stars. I guess I'll change it to 4.
Profile Image for Brian.
Author 3 books27 followers
August 16, 2012
A combination parenting/personal finance book that is heavy on practical advice. The vast majority of the book rang true for me, both in terms of personal experience (as an adult and as a kid) and as a student of behavioral economics.
The thesis of the book is pretty simple:
- Kids act perfectly rational about money. Banks and interest rates (especially now) make no sense for kids for whom 12 months (at .05%) is an eternity.
- Parents a hypocritical when giving kids money. They either get a small amount, not worth enough to be meaningful to the kid, or they get a large amount for a birthday or something, and the parents take it away and put it into a bank account where they don't feel like it's really theirs. No wonder they try and turn cash into good that are harder for parents to appropriate as soon as they're near a cash register.

There's a lot of practical advice in here about how to set up a family bank and accounts for the kids that make sense and allow kids the chance to make all the necessary mistakes with money that we all eventually make, and learn from.

Highly recommended to all parents.
Profile Image for Kerry.
132 reviews
April 1, 2015
Very quick read. We've been using a spend/save/give plan and using iAllowance to manage it, but we've outgrown chore chart based allowances and needed to figure out how to do something else. This gave me a lot of good ideas- and some different perspectives to consider, like dumping the spend/save/give model and some areas to think through when dividing up financial responsibilities. I'm not sure I agree with some of information geared for older kids - no part time jobs during the school year, etc - but he makes some good points, and I've never had kids that age, so what do I know? The Dad stock market is brilliant - but I don't think I could manage a project like that long term. Good idea for a summer activity though to see how it goes.
2 reviews
April 5, 2008
This an absolutely great book that delves into some successful methods the author has used to teach his children about money - specifically the saving of it. i had a lot of trouble saving money as a kid which endures even now - the author suggests establishing a "bank of dad" which resides on the parents' computer and pays out a higher and more frequent interest to make it more understanble for kids. I highly recommend this book to anyone who has children who will or could one day receive an allowance or who are or could be recieving an allowance right now.
Profile Image for Tiffany.
173 reviews8 followers
June 5, 2012
I thought the financial portion of the book was excellent. I'm totally on the same page as the author. The reason I didn't give the book 5 stars is because it seemed like he added a bunch of unrelated parenting advice at the end just to make the book long enough. For example he talked about the importance of reading to your children, which is great advice - but not for a book about teaching kids about money. Overall though, I definitely DO recommend this book. I'm even keeping my copy to refer back to as my child grows older and is ready for different stages of financial learning.
Profile Image for Jeremy Zilkie.
71 reviews2 followers
June 21, 2015
While I give this book 3 stars overall, I highly recommend the first couple of chapters on finances & allowance, the bank of dad, and the instruction on how to teach children the importance of interest, compound interest, and investing. Our family has been using this method for several years and it has been a GREAT system. I am thrilled to have found it.

Conversely, the rest of the book, on discipline and other parenting advice was not so "great" in my opinion. Owen's best work is his advice and experience with finances and that is the portion that I recommend.
Profile Image for Arjun Narayan.
44 reviews220 followers
September 7, 2015
Great book, very quick read. Full of good reasoning, and actionable advice. Make sure to listen to the EconTalk interview with the author along with this book, as that is fantastic too.

One thing I would have added is to make clear the relationship between interest rates and discount rates. This makes it much clearer what's actually going on (that children have much higher discount rates given that their relative experience of time is far "slower" than adults). This was intuitive and clear to me having had an economics training, but should have been stated up front.
Profile Image for Suzanne.
219 reviews35.9k followers
July 12, 2011
This really helped my husband and I as we revamped our approach to allowances. Even better, the kids have responded well to it. The key take away is that you need to give kids control of their allowance and not force them to divide it into Spend-Save-Share. It's interesting watching the lessons they are learning along the way. I share more about this in my blog post here: http://www.growingrichkids.com/the-5-...

23 reviews8 followers
September 2, 2014
Very easy to follow, common sense advice. If it was written today it probably could have been done in 3 blog posts but we got it from the library and read it through in a couple of days. We've just implemented some of the recommendations about allowances and encouraging saving. We'll see how it works long term but I'm hopeful.
Profile Image for Ian.
223 reviews1 follower
June 30, 2015
First 6 chapters are great thoughts on how to teach good financial responsibility to kids through the use of an allowance, power of compound interest (give them 5% per month) and giving them the right to decide for themselves how to spend it. Final 3 chapters were more preachy on how to be a good parent in general.
23 reviews7 followers
July 19, 2007
I really like how the author is clear, concise, and funny. You read this book and it makes total sense, and then you realize how hard it is to put into practice. I am glad to be reading it now and not when my kids are in college!
167 reviews
July 20, 2010
Gives some really interesting ideas on teaching kids about money. Just didn't agree with everything he had to say, esp when he gets opinionated on certain things. I did get some ideas though, so it makes it a worthwhile read (plus it was an easy and quick read).
Profile Image for Jo Gilley.
292 reviews2 followers
July 24, 2012
Highly recommend this book, and his approach. It makes so much more sense than giving kids an allowance and making them put it in the bank, never to be seen again. Well-written, witty and easy to read.
Profile Image for Mikedariano.
153 reviews23 followers
August 8, 2012
Written from what sounded like a very upper middle class voice. There are a few nice tips that might work but also might be anecdotal evidence in the most extreme sense. certainly not a definitive guide though the author doesn't claim it as so, though other reviewers may.
Profile Image for Cameron.
37 reviews1 follower
September 25, 2012
What's great about this book is its simplicity. It's an easy read, and it doesn't complicate things. The innovate part is in the author's focus on the basic economic principle of incentives. He created a system that incentivized his kids towards saving and investing rather than spending and credit.
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