Thursday, April 2nd, 2020
Raising money-smart kids has never been easy, but it can be particularly challenging in today's digital world. The use of cash is disappearing, spending is frictionless, and fraud and scams are constant threats. As parents, how can you prepare your kids to be good money managers?
Young Children: Start with Play Money
With young children, the best place to start is still with something tactile, engaging and concrete. You can play it safe by using play money. When handling play money, you can talk to your child about what they're worth, teach them how to make change and make pretend transactions with them.
Take advantage of teachable moments to build a money lesson into your daily lives. When paying with your debit or credit card, you can explain to your pre-teen how they work and the ways in which they're different.
Digital Payment and Spending: Challenges and Benefits
As your children become older and more sophisticated, you can talk about other digital spending tools you use, like paying with your phone (Apple Pay or Google Pay), Paypal and Interac e-Transfer. But if our frictionless world makes it easier for your kids to spend and feel disconnected from their money, how can we make "tapping" and other digital spending feel real (and painful)?
One way is to encourage your older kids (teenagers and up) to use mobile banking and to take advantage of the features built into the app to stay on top of their finances. They can receive real-time alerts every time there's a transaction using their debit or credit card. (This will also alert them to any unauthorized transactions or fraud, should their cards be compromised.) They can also get daily notifications that summarize their spending from the previous day. These digital reminders help them become more aware of their spending, which may lead to more informed spending decisions going forward.
Digital spending also makes it easier for your kids to track their spending so they know where all their money is going. Cash, on the other hand, doesn't leave a digital trail and can be much more work to keep track of. Again, many mobile banking apps will do this, allowing your kids to see spending by category and create budgets. By knowing how their spending to date compares to their budget, they can make adjustments in real time to stay on track.
Switching to an Electronic Allowance
Arguably, one of the best tools to help teach your kids about money is an allowance. But what if you rarely use cash yourself, and never have it on hand on allowance day? Many parents choose to set up an automatic e-Transfer to their kids, directly from one bank account to the other. Jennifer Greenberg, whose kids are 12 and 14, says this is common practice among parents these days.
"This ensures they get their allowance. But I still make time to talk to them about what it's for and how they plan to save, spend or donate it," says Greenberg. Some parents also use apps to manage and pay allowance, some of which also impart age-appropriate money lessons.
Even as we move towards a cash-free world, some lessons remain timeless. For example, talking to your teen or young adult about how many hours of work it takes to save up for something they really want.
Or the importance of saving by paying yourself first (which can be digitally facilitated using an automatic transfer). Or learning about business with an old fashioned lemonade stand.
"Our daughter helped us build and paint her lemonade stand," says Shauna Makk (via Twitter). "We squeeze lemons and bake cookies together. She speaks to the customers and counts out their change. We count her earnings and deposit the cash at the bank together."
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