Invisible Money – How to teach kids about money in a cashless society

Think for a moment about how many of your day to day transactions are made with actual notes and coins. In a world without cash, what are the implications for teaching children about money?

The Global Issue of Invisible Money

In 2014, the US Parents, Kids and Money Survey suggested 73% of parents agree that because of digital transactions, kids think of money differently than they did when they were growing up. An Australian survey revealed that over one in three (35%) children simply don’t know how digital purchases are paid for. Whilst in the UK consumers recently passed an important milestone on the path to a cashless society, with cash now used for less than half of all payments. These statistics highlight the influence digital technologies can have on how children understand money.

Not seeing physical money exchanged for purchases makes it harder for kids to get their heads around what things cost and how money works. They might not easily see the link between the ‘invisible money’ of online payments or contactless purchases with real money eventually coming in and out of their own bank account.

invisible money how to teach kids about money in a cashless society

Where Money Comes From

It’s not difficult to see how in an age where we can slot a plastic card into a ‘hole in the wall’ and obtain physical currency, or where you can ‘tap and go’ to pay, how our children might not fully understand where the money used to pay for things comes from. One method of explaining this is to describe to your kids the purchase path or the flow of money; from earning it, to depositing into the bank and ultimately the final purchase and receipt.

Making the point of using cash occasionally, rather than electronic funds can also help to provide younger children with a visual representation of how currency works. Once they understand physical money you could slowly introduce them to the idea of online and credit purchases.

 

Pocket Money and Chores

Many parents recognise the value of using pocket money, or an allowance, to teach children about budgeting. Giving your children pocket money in return for jobs around the house can help them understand the connection between time spent doing work and money. A weekly pocket money allowance can also help to develop your kids’ budgeting skills. If you give them a weekly sum which includes both an element for daily routine activities plus some personal discretionary money, it can teach them to prioritise between needs and wants and make choices around spending and saving.

Understanding the True Cost

Mobile phones and tablets make it easier for your children to spend money online sometimes without even knowing it. Another example of invisible money is where many games and apps are now ‘freemium’ – meaning that whilst the app was initially free to download, it will proceed to ask users to purchase special features or content for a fee. If making app purchases is not prevented by a password prompt, then a couple of accidental taps in a game could cause your children to make real-money purchases.

Figures show that 61% of kids are buying apps or making in-app purchases every month, it’s important therefore as parents to establish some ground rules to ensure your child is conscious and aware of the money he or she may spend and its consequences. One useful tip is to ask for the money from your child before they make the purchase to establish the connection that it is still real money.

Setting up a bank account.

Once they are old enough and especially when your child has a job or gets an allowance, having a bank account and watching the balance grow (or shrink) is important. By downloading the bank’s app they can easily monitor and track his or her spending. Another important habit for later in life.

If you can’t beat them join them

The ease and convenience of cashless transactions puts us on an irresistible march towards a cashless society perhaps in your child’s lifetime. Get them prepared early by giving them a prepaid card with a weekly or monthly allowance. These cards can be monitored online and teach the principle that money, whether invisible or not, can only be spent once.

 

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