The growing virtual piggybank market could be a smart way for parents to teach kids about real-world money matters.
Parents can tweak settings to mimic (or even beat) the returns on real accounts, picking a high yield so that interest accrues, and setting up "direct deposits" and "bill payments" for repeat transactions of, say, allowances and cell-phone app purchases, respectively.
It might be a good idea for a virtual piggybank to allow a parent to make up an interest rate. With today's extremely low rates, it's going to be difficult to teach the benefits of interest and compounding. For example, with ING DIRECT's Kids Savings Account
, if the kid has a $100 balance, the kid will only earn 75 cents of interest after one year (assuming the rate doesn't change). Five years of compounding will only result in $3.81 of interest compared to $3.75 of interest without compounding.