The First National Bank of Dad. Book Summary
The Best Way to Teach Kids About Money
David Owen
Simon & Schuster (7 Jan. 2003)
About David Owen
David Owen has been a staff writer for The New Yorker since 1991. Before joining The New Yorker, he was a contributing editor at The Atlantic Monthly and, prior to that, a senior writer at Harper’s. He is also a contributing editor at both Golf Digest and Popular Mechanics, and is one of The Fifty Funniest American Writers. He is the author of more than a dozen books. He lives in Washington, Connecticut, with his wife, the writer Ann Hodgman. They have two grown children, both of whom are also writers.
About The Book
“Of course, the notion of setting out to teach children about money is nutty, in a sense, because all of us parents have been teaching our children about money on a daily basis ever since they became old enough to notice the difference between them and us. We teach them about money every time we make a wise or foolish purchase, brag or weep about a recent experience in the stock market, appear happy or sad when we return home from work, capitulate or fail to capitulate when they focus their energies on persuading us to buy them something idiotic, and either pay off our credit cards or run up our debts to the point where we prefer to let an answering machine handle our incoming calls. Over the course of an entire childhood, these mostly unconscious lessons make a deeper impression on our kids than anything we might think to tell them. The best way to teach a child about money, therefore, is to live a life in which money plays just the right role, whatever that is, and to set nothing but good examples, whatever those are.
Holy cow, though, that’s a depressing thought. For one thing, setting good examples is exhausting. For another thing, I, like most parents, want to shape my children directly, through the application of powerful child-rearing techniques. I don’t want to sit back and let nature take its dreary course; I want to use scientific methods to program my offspring to surpass my own meager accomplishments in life and to build large personal fortunes with which they will be able to sustain my wife and me in our old age. And I want to do it quickly and easily, without having to turn myself into a better person.
Shortcuts, then. As luck would have it, there are some good ones.”
We’ve been thinking about how to teach our boys about money ever since we read The Secrets of Happy Families by Bruce Feiler (check out our notes), where some of the smartest bankers and wealthiest people share their insights. Turns out, teaching kids about money is less about lecturing and more about giving them real experience.
Then a friend recommended The First National Bank of Dad and said, “If you want practical strategies for teaching kids about money, read this book.”
So I did. And my friend was right—this book is GOOD. Packed with practical ideas, it’s written by New Yorker staff writer David Owen, who shares how he helped his two kids (now adults) become smart savers and rational spenders. His approach? Give kids hands-on opportunities to save, invest, and spend wisely, so by the time they start earning real money, they already know what they’re doing.
I especially loved the personal stories about The First National Bank of Dad—the family “bank” Owen ran for six years—and the lessons he learned along the way. Plus, he’s funny, which makes the book an easy, enjoyable read.
Alright, let’s get into my favourite insights.
P.S. To dive deeper into building a solid financial foundation, I strongly recommend checking out our notes on Rich Dad, Poor Dad. Robert Kiyosaki offers a compelling case for saving and breaks down the critical concepts of assets and liabilities—ideas that are foundational to understanding financial literacy.
Key Insights
Make Saving Worth It
“Your children already have a pretty good idea of how money works. That’s why they’ve never been excited about your compulsory savings-account schemes.
To turn them into savers, you don’t need to change the way they think about money; you just need to offer them a truly attractive option that lets their money work for them in the same way your money works for you. […]
The lesson to be drawn from my kids’ experience is that children will save all by themselves— without coercion or tedious moralizing from adults – as long as their money is allowed to grow fast enough for them to notice the effect. All we have to do to turn our children into savers is to give them an incentive that seems like an incentive to them.
The meager returns that satisfy beaten-down, mortality-fearing adults won’t do, because at those rates money accumulates far too slowly to dent their awareness.”
If we want kids to save money, we need to give them a real incentive—meaning, better returns than the sad little interest rates banks offer. Once they see their money working for them, they become more careful spenders and smarter savers.
Since no bank was offering kid-friendly interest rates, David Owen did the next best thing: he started his own. Using Quicken on his computer, he launched The First National Bank of Dad. Here’s how it worked:
- Automatic Allowances: Each child had an “account” that got topped up every month from Dad’s real account.
- Sky-High Interest: He offered a 5% monthly return (a whopping 70% annually—if only real banks were this generous). He also explained compound effect: the more you save, the more you earn, and the longer you wait, the bigger the reward. A hands-on lesson in delayed gratification and self-control.
- Easy Withdrawals: If the kids needed cash, they’d take it, and parents would simply note the withdrawal. They even had a kitchen cash machine—a box with $5 and $10 bills. The rule? Take money, leave a slip with your name, date, and amount.
Key takeaway: Keep it simple.
Of course, after a couple of years, Owen’s kids had stacked up some serious savings. To prevent things from spiraling out of control (and Dad from going broke), he lowered the interest rate to 3%.
The bank ran successfully for six years until his kids were old enough for their own bank cards. At that point, The First National Bank of Dad shut down—and evolved into Dad’s Stock Exchange (more on that later).
Honestly, I love this idea. Setting up a virtual family bank is officially on my agenda for our next Family Meeting. We’ve been searching for a better way to manage allowances and savings, because with three kids, the household coin supply is a constant battle!
P.S.: I personally love the good old book by Robert Kiyosaki Rich Dad, Poor Dad
Let Kids Own Their Money (And Their Financial Mistakes)
“Why do kids need to control money of their own? Because if the money they spend isn’t truly theirs, they have no compelling reason to pay attention to how they spend it. My children are often quite irresponsible with my money, and why shouldn’t they be? But they are extremely careful with their own. […]
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.”
If you give your kids money, let them own it—completely. If they want to blow it on some cheap plastic junk, let them. If they make bad money decisions, don’t swoop in to save them—let them learn.
As Warren Buffett’s banker, Byron Trott, wisely put it:
“It’s a really good idea to bike into the ditch with a $6 allowance instead of a $60,000 salary or a $6 million inheritance.”
David Owen adds:
“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.”
And I couldn’t agree more.
Not long ago, my almost 7-year-old came home from school obsessed with a particular book. He had to own it. He had to have it now. So when we passed a bookstore, he begged me to go in. He found the book. Price tag? £7.
Perfect opportunity for a money lesson.
I pulled up Amazon—same book, £5. I showed him and said, “It’s your money, your choice. Do you want to pay £7 now or wait until tomorrow and get it for £5?”
You should have seen his face. Five full minutes of intense decision-making later, he confidently chose to wait and order from Amazon. If I had been the one paying, I guarantee you there would have been a full meltdown in the store about needing the book right this second.
Another lesson we practice at home: if you deliberately break something that isn’t yours, you help pay for it. Simple. Nothing makes kids think twice about being reckless with other people’s things like knowing it’ll cost them.
Alright, now let’s tackle one of the biggest parenting questions—how much money should you actually give your kids?
How Much Allowance to Give
Ah, the classic question—how much pocket money should kids get?
David Owen’s take on this is refreshingly practical. He acknowledges that the right amount depends on a bunch of factors: family income, the child’s age and maturity, their other sources of money (birthday gifts, babysitting, etc.), and what their friends are getting. But his general rule of thumb is simple:
“A child’s total financial resources should feel like “more than enough”—enough to allow for some fun spending and saving—but not so much that it feels endless or unrealistic.”
I love this approach. He also puts it this way:
“Ideally, children should probably feel neither rich nor poor compared to their peers, but vaguely ‘comfortable’ (assuming their parents are in a position to let them feel that way).”
So, the answer? It depends. But it’s a solid guideline.
In our family, our boys get different amounts based on their age. So far, it’s working well.
Speaking of money expectations, I’ll never forget the time a parent in my middle son’s class asked in our WhatsApp group, “What’s the going rate for the Tooth Fairy?”
Curious, I asked my 7-year-old. Without hesitation, he said, “£1 for a small gap, £2 for a big one.” Seemed reasonable. And just like that, our family’s Tooth Fairy economy was established.
That is, until he found out his cousin got a tenner for a tooth… and suddenly, he started questioning everything 🙂
Don’t Pay Kids For Chores (Or Grades)
“I believe that children should be given allowances, and I believe that children should do household chores, but I don’t believe the two activities should be linked. […]
Linking a chore to an allowance turns the chore into a job, and that creates the possibility that the worker might someday decide to retire.”
I’m 100% with David on this one: allowance and chores should not be linked.
Every able-bodied family member should pitch in—no payment required. Making your bed, clearing the table, or taking out the trash isn’t a “job.” It’s just part of being in a family. If you start paying kids to do basic household tasks, you risk them deciding one day that they’d rather just… quit.
The same goes for paying for grades. As David puts it:
“The practice insidiously shifts the responsibility for doing well in school from the (working) student to the (paying) parent, and it opens sweeping new battlegrounds for psychological warfare. The last thing in the world you should do is create the possibility that your child might decide one morning that she is going to stop listening carefully in English this semester because she no longer needs the cash. Nor do you want your son to develop a take-this-job-and-shove-it attitude about passing algebra.”
Exactly. If you want to motivate kids to help out at home, give them meaningful tasks so they feel like they’re making a real contribution (and don’t underestimate the power of positive reinforcement).
Money should be a tool for learning financial responsibility—not a bribe for basic life skills.
The Dad Stock Exchange
If you’re looking for a practical (and fun) way to teach your kids about investing, this might be one of the best ideas out there.
After running The First National Bank of Dad for years, David Owen launched The Dad Stock Exchange—a virtual stock market where his kids could invest real money in real stocks, but with a kid-friendly twist.
Here’s how it worked:
- The exchange operated entirely on David’s computer, using Quicken to track transactions.
- Stocks were “real” in that their prices moved exactly like actual stocks, but they were denominated in pennies instead of dollars (so a $95 stock would cost 95 cents on the Dad Exchange).
- His kids paid real money to buy stocks and got real money when they sold.
- If they bought low and sold high, they made a profit. If they made poor investment choices, they took a loss—just like in the real world.
- To keep things simple, David didn’t charge brokerage fees or tax capital gains, making it a stress-free learning experience.
He also avoided the classic adult mistake of turning a fun learning opportunity into a pile of boring, bureaucratic rules. The goal was to teach kids how investing works—not to overwhelm them with commissions, fees, and tax laws before they even got started.
Honestly, this is a brilliant way to introduce kids to investing. It makes the stock market tangible without the risk of losing huge sums of money. Once my kids get a little older, I’m definitely trying this!
Also, if you want to brush up on your own investing knowledge, David’s explanations of stocks, mutual funds, and bonds are some of the clearest I’ve seen. Another reason to check out the book!
True Net Worth
In the book, David introduces the concept of True Net Worth—a way of thinking about wealth that goes beyond money.
Instead of just looking at financial assets (which can be misleading), he encourages us to consider the things in life that are invaluable but not necessarily expensive—family photo albums, a painting by your great-grandfather, birthday cards from your kids. These things may not have a high market value, but their true worth is immeasurable.
To illustrate this, David suggests a simple but powerful True Net Worth Exercise:
Ask yourself:
“What is your most valuable possession—the thing you’d never want to lose?”
You might not have an immediate answer, but just thinking about it can shift the way you see value in your life.
And it’s a great lesson for kids, too!
For younger children, their most treasured possession is often obvious—that beloved stuffed animal or blanket you’d drive 100 miles back for if you accidentally left it behind.
For older kids, you can take it a step further. Ask them:
“If you had to get rid of everything in your room except what you could fit in a medium-sized box, what would you keep?”
You could even hand them an actual box and let them try it. This simple activity can lead to meaningful conversations about what truly matters—not just in their room, but in life.
I love this idea. It’s a great reminder that what we cherish most is rarely what costs the most.
Action Steps For You
- Give Your Kids an Allowance: Let kids own their money and make their own spending decisions (including mistakes!). This helps them learn financial responsibility early on.
- Set Up a Family Bank: Encourage saving by offering better interest rates than traditional banks. This makes saving more rewarding and teaches kids the power of compound growth.
- Teach Them How the Stock Market Works: Create a mock stock exchange where kids can buy and sell stocks at scaled-down prices. Let them experience real market fluctuations with their own money, helping them grasp investing concepts in a hands-on way.
Quotes From The Book
“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.”
“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. We all learn mainly by trial and error, and our most important insights often arise from our biggest mistakes.”
“The lesson to be drawn from my kids’ experience is that children will save all by themselves— without coercion or tedious moralizing from adults-as long as their money is allowed to grow fast enough for them to notice the effect. All we have to do to turn our children into savers is to give them an incentive that seems like an incentive to them.”
“Parents who push their children toward goals that mean nothing to the children—rather than helping their children learn to make thoughtful decisions about how to conduct their own lives both now and in the future— are depriving them of many of life’s most important potential sources of happiness and satisfaction. They are squandering their children’s True Net Worth.”
“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.”
“Do your best to help your kids today; someday, your own security and happiness may depend on their ability to return the favor.”
