By Michelle Rowcliff, General Manager, Zenith Payments
For many of us, it’s hard to remember a time when cash was the primary payment method. But the reality is, it wasn’t long ago that managing your entire family’s finances was done with no access to internet banking, savings trackers or money management apps. When I was a kid, my parents had money stored under the bed, and taught me how to manage my money with coins, a piggy bank and an old school pocket money system.
For children growing up today, they have the benefit of being raised alongside technology that helps them track and visualise the way they spend money. This new era of payments will give the children of the next generation a better understanding of financial literacy, the value of money, how to save and how to invest.
However, for parents to teach these values in 2019 and beyond 2020, they can’t easily use the same teaching methods that their parents did with them. Similarly, the classroom will also need to adapt to cater to a digital world, with a payment landscape that is constantly diversifying.
By 2020, less than 2% of payment transactions in Australia will be cash, which proposes the question – are we being forced into an age of digital money, where we are no longer able to teach financial literacy with physical cash? Sweden is on the move to go cashless, and if Australia follows in their footsteps, how can we get the next generation ready for it? I’ve got some tips.
Mastering home life
Kids learn a lot at home during their day-to-day life. From an early age, kids pick up the habits they are exposed to from their parents, and this is the same when it comes to money habits. Often, conversations around money can seem taboo, but for kids to properly understand financial literacy, parents need to be confident with teaching it.
Here are some tips on teaching your kids money management in a digital age.
- Digital pocket money
As a concept, pocket money
or the allowance is not dead. However, as we fast track to a cashless society,
parents will need to build on a digital approach to complement their child’s
experience. An interesting research report from the Westpac, 2019 Money
Management Survey showed that 76 per cent of Australian parents are still giving
physical cash and coins to kids as pocket money. 1This
is interesting when only 19% of retail payments were processed with cash in
2017, according to the Retail Global Payments Report from WorldPay2.
For kids to learn today, parents should consider both physical and digital money as part of the process. Introducing kids to digital savings tools encourages them to deposit their physical money and have conversations around how much of it they have, what they’ve spent it on and what they are saving. Today, money management apps provide us with insights, graphs and breakdowns of exactly where our money goes. For parents trying to demonstrate the value of money to their young children, understanding and utilising this technology alongside the support of actual cash, may prove easier and more effective than the traditional pocket money scenarios of their youth. Personally, I have opted for a digital education platform as I simply never have cash on me.
I even set up an iPad in the household, so the kids can access these apps to monitor and assess their spending, creating positive discussions amongst the whole family.
- Starting young
Kids learn by what experiences surround them. This may be a scary thought, but children are constantly picking up their parent’s behaviors, even though they may not properly understand why. This is the same with financial habits. The lessons kids learn should start from a young age, from their parents, who they trust. In today’s digital age where money can seem invisible, this early education process is needed more than ever. Incorporating money conversations into everyday situations can help; for example, when grocery shopping, challenge your kids to pick which items are on sale.
There are a variety of platforms today that help aggregate options and provide individuals with the cheapest one. HotelsCombined or Skyscanner are good examples of these. Making kids aware of these platforms and why they are important, can help to support their money journey.
- Money is real
Kids are interacting with money from a young age, and sometimes it can be hard for them to understand the value of it, especially if given as a gift. Ensure the pocket money given is earned, as children can start understanding the concept of receiving dollars as an exchange for work done.
Also, consider setting a limit to children’s expenses, which can be done on financial management apps like ZAAP. When using in unison with parent’s conversations, they visually start to teach children the idea that, if they spend more than they have, their bank account doesn’t fill back up. This is the same concept with kids physical ‘piggy banks.’
As we progress to a society heavily dominated by digital spending, parents should be teaching their children the concept of money limits, which will help engrain saving values. Once this is established, kids will understand how important it is to always have money in the bank, in case they run out.
