5% per month? Where is this crazy money generator? Assume you meant per year here!

It's not zero risk:

- Your currency may collapse, see Germany 1930s, Argentina, Zimbabwe, Venezula, etc.

- Only a certain figure is protected in savings, though governments will act aggressively to protect that (see 2008 + the Icelandic/UK/Dutch palava)

Yes, it's 5% per month. You wouldn't be able to explain the concept of a yearly compound interest rate to such young children. One year is an eternity in their life. I also don't give them too much pocket money to encourage them to save. They would spend it on junk food if they had too much cash.

A agree, that the currency is not a 100% safe investment. Inflation especially makes it bad for long-term savings. Indeed, money in any savings account is insured only up to a certain amount. However, that's not something you can explain to kids with a "virtual account." I suppose the idea that Daddy's bank will go bankrupt is probably not an ideal way to teach kids financial literacy.