Many parents pay their children money for the chores they’ve completed around the house.
Instead of giving them cash for their piggy banks, however, parents keep running spreadsheets of how much their children have earned. Once a month, parents transfer money from their checking account to their children’s saving accounts.
They never see the physical cash, but they see the increase on their next bank statement. Society is becoming, in essence, cashless, and parents think it’s important for their children to understand that, just because they don’t see money going away or coming in, it’s still being transferred.
While virtual currency is arguably becoming more convenient (and secure) than paper, it does make it harder to teach young children about the value of money and how it works, since they often never see cash exchanging hands. As mobile payments become more common, today’s young people may never see their parents do anything but tap their phone or smart watch a few times to make a purchase.
Here are some suggestions to teach your kids about money:
For very young children, the ability to see and feel money—and watch a jar full of it accumulate (or diminish) is still a good starting place for understanding how money works. Make a point of bringing your child with you to the ATM, explain that you’re withdrawing money, and then spend it in front of them.
Once your child’s piggy bank or allowance jar fills up and they have a basic understanding of math, it’s time to open a joint savings account. This is part of understanding that they can possess a specific amount of money without physically having it.
Once the account is set up, show your child how to go online to check the balance at any time.
When your child is ready to start carrying around spending money, start with a debit card. Load it with a specific amount and let them use that to make purchases. Register the card online so that you and your child can log on to keep track of how the balance changes based on their spending habits. Kids really benefit from seeing the numbers and what happens to the balance every time they make a decision about whether to spend or not.
The old rules of money security for children involved always keeping your wallet in sight and never displaying large amounts of cash in public. In a world of virtual money, the focus needs to shift to best practices around cyber security.