Mommy, what are cashless transactions? Here’s what to say.

cashless transactions
Cashless transactions are everywhere. What do your kids know about how they work?

Cashless transactions are everywhere. Could you pay all your bills with cash? Buying everything with cash? Probably not.

That’s because you manage money as a number. Maybe it’s time to start explaining to your kids what happens when you use non-cash transfers to pay or receive money..

In a world where cash diminishes  in importance we continue to pay allowances in cash. Consequently, we sidestep the importantce of teaching our kids how to manage money as a number.

Children need to learn through experience that money is not just a physical thing. In the broader sense, money is a medium of exchange and trust that represents an amount of spending power. Money changes form over the centuries and will continue to do so.

Money is coin and paper currency, a plastic card, or simply a number on your computer screen that is transmitted anywhere in the world. Non-cash transfers  can easily and quickly move  money from place to place.

In fact, your kids will manage all forms all forms of virtual money  as adults, along with new money wrinkles that show up in the future. Many of them will be cashless transactions.

For example, according to MoneyTips debit card use is growing significantly in North America, outstripping average credit card use. Debit cards pay for many small purchases previously done with pocket change, such as a cup of coffee, fast food, and gasoline.

Where is the cash? Much of today’s money management is done without using cash at all. Look at your recent bank statement and see how many transactions take place without using any cash at all.

Start talking about cashless transactions

ATM–When you access an ATM you transfer a number into cash. Tell you kids how your money gets into the bank.

Check–When you write a check you give your bank written notice to transfer a number from your account to another. Show your kids a check and explain where your money is going.

Debit Card–These cards are replacing pocket cash. Tell your kids how the money get transferred from your bank account to the store.

Electronic Deposits–When you set up automatic payments you instruct  your bank to transfer money to another account as a number. Tell your kids which payments you are making through EFT (electronic funds transfer) without using cash or checks.

Electronic Withdrawals–When you receive automatic deposits you give permission to another account to transfer money to you as a number. Explain which funds are being deposited into your account through EFT.

As parents we use an increasing amount of cashless transactions. Consequently, we can help our kids learn the new rules of the money game by telling them what we are doing.

 

 

 

 

Where can kids learn money management skills?

A mom helps her daughter add her allowance to her account.

Teaching children financial literacy is important, yet it is not the complete solution. Children need to learn money management skills as well. What’s the difference between literacy and competency?

Literacy is knowledge. Yet, knowing about financial matters will not help children manage money. Simply knowing about saving, borrowing, insurance, compound interest, investing, is only one aspect.

Competency is skill. Competency with requires practice making decisions and learning from mistakes. Consequently, learning to money management skills requires hands-on practice using real money.

This hands-on practice does not happen in the classroom, because schools can’t provide real money. Schools can offer simulations, exercises, games and discussions, but not real money.

As a result, parents are the only ones who can provide the one tool required for learning financial skill, namely money. Parents can help their children gain money management skills by giving them hands-on practice at home with their own money.

Reinforce financial knowledge at home

Financial knowledge can be learned at school. Then it can be reviewed at home. Family discussions about financial topics helps kids become comfortable with money management.

Money topics to talk about as a family include:

  • Using different types of money such as cash, checks, credit, debit,
  • Accessing money from financial institutions using checks, ATM and electronic fund transfers (ETF).
  • Knowing basic financial terms including credit, debit, overdraft, interest, deposit, and withdrawal.
  • Financial documents: checking account, savings account, loans, credit card statements, bank statements, tax returns and other financial documents you use in your family.

Develop money management skills at home

A child can have many years of financial hands-on experience with parental guidance at home. When a child is responsible managing his or her own money the following skills take on greater importance.

  • Addition and subtraction. Managing money is all about numbers.
  • Record keeping. Knowing how much is available and when money is needed requires keeping track of money flow.
  • Decision making. Deciding how to use money is an exercise in making choices.

As a result, children who learn to manage money will be more confident and capable to manage finances as adults.

Furthermore, parents who raise financially competent kids will not need to bailout their adult children. Hence, parents can protect their own savings and retirement funds.

Managing money is a combination of knowledge and practice. One without the other is ineffective. The ability to control one’s money provides the power to make choices.

In conclusion, when we help our children develop financial competency through hands-on practice, they will be better prepared to navigate economic challenges as adults.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. Buy The No-Cash Allowance today and follow Lynne’s common sense approach for teaching children that money is a number. 

 

 

 

Helping parents teach their kids how to manage money as a number.