IN FOCUS6-8 min read

From grains of rice to rewarding chores - how I'm teaching my kids about compound interest


I often get asked what got me interested in money and who first taught me about finance. It was my dad. He did one simple thing; he opened a bank account for me.

He took me to the local high street and asked me to choose a bank to put my savings in. Every bank seemed to have free gifts on kids’ accounts and to be honest, it’s all I was interested in at the time. So, I ended up choosing the one offering a free dictionary (I know, such a geek!).

Anyway, we opened an account, the assistant behind the counter printed a ‘passbook’ – the little book which told me how much money I had in there, and we went home with my dictionary (which I still have, by the way).

That’s where the journey started. Every time I received some money, I’d ask my dad to take me to the bank to put it into my account. I felt excited when I handed it over and my passbook was updated to show that the figures were going up, especially with added interest. I had caught the savings bug and I loved watching my money grow.

This was a simple, but smart move on my dad’s part. Although he didn’t teach me about mortgages, pensions, investing and so on, he definitely triggered something within me.

The rice and the chessboard story

I have two young boys and wanted to do for them what my dad did for me. Most kids today haven’t even been inside a bank, and although mine have, I could tell it wasn’t with the same level of excitement that I felt as a kid.

There was no passbook to take home, because instead they had to go home and log in to an online account. With nothing tangible in their hands, they lost interest the minute they walked out. And, as we live in an increasingly cashless society, I realised coins were also becoming less relevant and almost meaningless to them. I’ve discovered that I’m going to have to work a lot harder to teach them about money.

So, what am I doing? Well, for my older son who is nine, I’m simply trying to teach him about compounding.

He loves playing chess and has proudly come home with a trophy a few times. So, I took his chess board and told him the rice and the chessboard story. 

This is the story of when a sage becomes the wealthiest person in the world after being challenged to a game of chess by a king. Asked to name a reward, the sage asks the king for one grain of rice on the first square, two on the second, four on the next, and so on, doubling the number of grains on each square for all 64 squares.

A grain of rice may seem like a small reward, but in this way it amounts to a phenomenal amount. The king realised he could not pay because on the 64th square he would have had to put 18,000,000,000,000,000,000 grains of rice!

Compound interest (interest on interest) works in a similar way.

For my younger son, who is six, the analogy of grains of rice on a chessboard wouldn’t work, and so I tend to reward him for chores. I double his money if he opts not to spend it. He likes that I give him double, and so it stays in his robot money box and every now and then we visit the bank to pay the money in.

Why you don’t need to be an expert to teach your children about money

Parents often tell me they find it difficult to teach their children about money because they are not good with money themselves, but you don’t have to be an expert.

Just talking about it and being open about money is a good start.

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