How Do You Teach a 4-Year Old About Growth?

This week in my Principles of Macro class, my students are examining the coordination of savings and investment. This weekend I gave my four-year old son, Alex, three quarters to put in his piggy bank. He, being of independent mind and spirit, announces that he only wanted to put one of the quarters into the piggy bank. He wanted to take one of the other quarters to daycare to show to his friends - and then put it into the piggy bank. Good enough. Two quarters will eventually make it in the piggy bank.

The third quarter was another matter. He wanted to give it to Santa Claus so that he would have enough money to make toys. So I did what any geeky economist-father would do - I tried to explain why he should put the quarter in the bank. What if Santa didn't need the quarter? If Alex puts his quarter into the bank, then that quarter will be available for somebody who wants it even if Santa doesn't want it. I told him that if Santa wanted it, he would borrow it from the bank.

And then I got devilish. Knowing my son wouldn't know WTH I was talking about, I told him that's how he could provide jobs, income, Berenstain Bears books, and Thomas engines for people in the future.

His response?

"But but but but *I* want to give it to *Santa*."

Will that quarter be tax decuctible?