When I was a child, I loved to hoard money. I didn’t usually have an allowance, but I’d get money one way or another, here and there, and I was loath to spend it. I didn’t have a bank account, either—I kept my cold-hard cash where I could see and admire it, always. I had a preference for small bills to make my wad of cash thicker and, in my mind, more impressive. But then my cousin told me that by whipping out a $50 or $100 bill, I’d look cooler than having a huge stack of ones, and I listened to him. Besides, by the time I was in the fifth grade in 1990, my wallet was bursting with greenbacks.

My friends were always shocked by my “wealth.” They thought that my parents must be rich—they weren’t—and spoiling me. In truth, the only thing my parents ever did was allow me to do whatever I wanted with the money I earned or received, and as a result, I viewed the money as mine. My peers, by contrast, were typically forced to “save” a portion of any cash windfalls, and thus, the money was never even real to them. What money they did get and were allowed to spend, they blew immediately.

My good money habits stayed with me through the early part of my college years. I was into music, and there were two pieces of musical equipment I had my heart set on. Earning just above minimum wage in a ten-hour per week job, my arch-conservative parsimony allowed me to drop $2,500 in 1998 money—about $3,400 by today’s standards—on these objects of adoration after two years of diligent saving. Sadly, this was among the last of my penny-pinching triumphs.

Adult Realities Make it Hard to Save

What was responsible for my conversion from miser to spendthrift? Well, I’d like to blame it on credit card companies, and they are partly to blame, but mostly it was just the realities of adulthood. For when I was a youngster, my food and clothing and lodging were taken care of, leaving me to use my money for things I wanted rather than needed. But when I got out on my own, hoarding cash became impractical, what with the cable bill, the cell phone charges and whatnot. Saving was not an option because the interest rates paid by banks were, and are, laughable, and instead of delaying gratification as I had as a youngster, credit cards now gave me the ability to have what I wanted now and pay later—if ever.

America’s national prosperity was built on individual savings. But our national savings rate has now turned negative. It seems logical to suggest that children who save—or more accurately, children who decide (as opposed to being forced) to save—are more likely to become adults who save, but what of my story? I was a cheeseparing child but became a credit-cardaholic as a young adult. What went wrong with me?

So then, we have two questions to answer: 1) What can we, as parents, do to inspire our children to become savers, and 2) What can we, as a democratic nation, do to encourage saving by the adult populace? Let’s start with the first.

How to Encourage Your Kids to Be Savers

I grew up in an era where cash was king. The vast majority of purchases were paid for in cash because credit cards had not yet achieved critical mass, debit cards were unheard of and paying for everything with checks earned you cold glares from the people behind you in line. Thus, my parents—like most—had cash in the house. I saw it all the time’ and I knew what it symbolized. I wanted to have it!

Kids today, however, see a lot less of cash. Their parents use plastic to pay for goods and services, and they do, too—just think of all the iTunes downloads, World of Warcraft subscriptions, etc., that kids today purchase. So while I liked to hoard physical cash, there’s no such attraction for kids today. Physical money is so…totally eighties. It’s all about the electronic Benjamins, baby.

The above is my sociological observation and hypothesis. One thing that is more rightly treated as fact, however, is that kids’ perception of time is radically different from that of adults. When you’re eight years old, your living memory might stretch back four years. One year, then, is equivalent to 25% of your living memory. The idea of putting $100 in the bank so that he might earn $3.50 over the course of an entire year is not appealing to an eight-year-old, and thus, he’s extremely unlikely to willingly put money into a savings account. Forced savings undermine his legitimate ownership of the money and, thus, make him more likely to be a spendthrift with whatever money he gets that’s really his—i.e. the money that he can spend if he chooses to do so.

For kids, saving cold-hard cash is unappealing and outdated, earning miniscule annual interest rates over long periods of time is unattractive and being forced into saving is most damaging of all. So how can you encourage kids to save? The answer: bribe them.

Seriously: make saving line up better with their time preference. Instead of having them put their money in a bank that pays 3.5% annual interest, set up your own faux-accounts for them that pay 3.5% monthly interest—or more. Telling a kid that if he saves that $100 birthday present from grandma, he can have $110 in two months sounds a lot better than $103.50 in one year. The lessons you’re teaching them are to delay gratification and to give more careful thought to purchasing decisions.

The Culprit, As Always: The Fed

Now on to the bigger question: what can be done about American adults’ horrible savings behavior? The answer: only radical recomposition of our monetary system is likely to encourage savings. Fractional reserve banking and fiat money discourage saving since banks don’t need your money to lend—they can create it out of thin air. The Federal Reserve System keeps interest rates artificially low, which by definition encourages borrowing and discourages saving. The responsible thing for adults to do, of course, is stay out of debt and accumulate hard assets—such as gold—while maintaining a diversified portfolio of financial instruments designed to outperform inflation and generate a “real” return.

This, of course, is a lot trickier than simply hoarding money, as I did as a child, or buying bonds, like our grandparents did. Is it any wonder, then, that the divide between the rich, who can afford financial advice, and the poor, who cannot, has grown so wide? Teaching your children to be responsible with money is the most important thing you can do to ensure that they’re on the right side of the growing economic gulf.