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So Matchy Matchy

Week of February 25, 2019

So Matchy Matchy

Stuck in commuting traffic you hear the NPR’s General Manager declare, "A generous donor has agreed to match all donations given during today’s drive time." Ever wonder why these pledge drives so often include a match? Because nonprofits know it works. Philanthropy research shows that outreaches which include a matching component drive 19% higher donation levels and individuals are 22% more likely to give when there is a match on offer.

Parents have taken note. At Till, families tell us that matching is an effective household strategy to encourage children to save more. More so, matching helps children to adopt good habits, nudge them towards better decisions, and has a long-term impact on a child’s financial behaviors.

Did you know...

Children start to understand the concept of money at 3 years-old.

NBC News

Making matching work for kids

There are many ways to match the financial activities of your kids. Our suggestion is that you keep it simple. Be clear about the goals and start with a matching percentage that is meaningful and easy to compute. Matching teaches foundational habits like planning for the future and delayed gratification. Matching can also teach the idea of compound interest where the family bank can provide “interest” that is much more interesting than the 1% or 2% available at the local bank.

1. Savings Matching

The most popular match we have heard in our conversations with parents is matching savings. With a savings match, parents match dollars saved by the child in two ways: (1) goal-based matches for major purchases like a bike or car or (2) time-based matches where the savings are made available to spend based on an age or accomplishment -- usually going to college. We recommend matches of 50% to 100% of each dollar put into a savings bucket.

2. Philanthropy Matching

Lots of our parents want to instill a spirit of charity in their children. The popular Three Jar method -- save, spend, give -- has been a big influence on this thinking. (Check out Ron Lieber’s book The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money for a good overview on this method). In this type of match, each dollar the child sets aside for a charity is matched. We have found that relatives are particularly interested in getting involved with this type of match. Our recommendation is to set up a matching program with grandparents, aunts or uncles and your children. Together have them decide on the structure of the match and the lucky recipient charity. By the way, we have seen philanthropy match work better than diverting a birthday gift to a charitable donation.

3. Rollover Matching

The rollover match is one of our favorites as it conveys three core lessons: savings, frugality and patience. A rollover match is similar to a savings match, except that it rewards redirecting funds that were initially targeted for spending. Two areas where parents can incorporate a rollover match include existing allowance or directed spending. For allowance, set up a program that matches every dollar the child does not spend by the end of the week. With directing spending, or giving funds to the child for the purchase of a specific item, incentivize her to buy a discounted or less expensive item and match the saved funds. Take a look at Union Square Ventures’ partner Nick Grossman’s approach with this own children.

How do I start?

The Till platform lets you quickly setup matching programs with your child with built-in visibility and progress to drive engagement and follow through.

What we found interesting

Books on Books on Books

Ron Lieber (who wrote The Opposite of Spoiled mentioned above) has a good read in last Sunday’s New York Times. Ron interviewed three women aged 30, 48, and 72 who each have written a book about their personal trials and tribulations with money. Sharing their tears and laughs is so rewarding.

IRA's for kids?

In the "it is never too early to start saving for retirement" is advice for kids to open up a Roth IRA. We do not expect this to become a mainstream practice, but paired with matching there will be some takers.

More help with Student Loans

We recently learned from our friends at Gratifi about proposed legislation to help employers help their staff with student loans. We are hopeful that more pre-tax opportunities become available across all aspects of financial wellness.