All posts by Lynne L. Finch

“It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children to manage money as a number starting with kids as young as pre-school and continuing through high school.

Piggy Banks Do Not Teach Money Management to Kids

Piggy banks don't teach money management to kids
This piggy bank is unhappy when kids get a no-cash allowance.

We love piggy banks. Our kids love piggy banks. But piggy banks do not understand today’s almost-cashless society. As a result they do teach money management to kids.

Piggy banks only use cash. Yet our kids are growing up in a world that uses increasing amounts of money that we can’t see or touch. We spend and receive money every day that never exists in the form of cash.

However, we continue to give our kids cash and piggy banks, neither of which prepare out kids to manage money that does not exist as cash.

How to teach money management to kids

Parents need to think outside the constraints of a piggy bank.  In doing so they can find  many ways to help kids learn to manage money in a real-world setting.  Therefore, a guide like The No-Cash Allowance can help parents. As a result,  their children can have a hands-on money management experience at home.

Benefits of a no-cash allowance for a child

  • Ownership Children want to have the power to control money just like they see adults doing. “This is my money.”
  • Responsibility “I have to pay my phone bill this week and remember that my school activity fees are due next week.”
  • Decision-making “If I don’t buy that game today I will have enough next week to buy that jacket I want.”

Benefits of a no-cash allowance for a parent

  • No more begging for money Your child will know when, what for and how much money he will have.
  • No misunderstanding “Yes, Suzy, you did get paid for mowing the lawn. It’s in your account.”
  • Money becomes neutral topic When you child has ownership of his funds it becomes easier to talk about money as a separate entity.
  • Expenses become real Something as simple as buying school supplies takes on real meaning. When the money comes out of your child’s account, she makes the decision about what to purchase, based on her available resources (account balance).

Parents can help children understand that each money decision affects their total money resource. Kids need to see that there is a bottom line. By setting up a system as explained in my book, The No-Cash Allowance, your kids will learn that managing money is all about making decisions.

 

Piggy Banks Detest Debit Cards

Piggy banks detest debit cards
Debit cards are the new cash.

Piggy banks do not help our kids understand how to spend money they can’t see or touch. Debit card spending occurs without using any cash. Your kids see you using a debit card at the store, but do they know that you are spending money from your bank account?

There is no visible money when you use a debit card. Even though debit cards don’t look or feel like cash a debit card works just like cash at a store. Piggy banks detest debit cards. Debit cards are the new cash.

If you are using debit cards today, what advanced form of cashless spending will your kids be using as adults. Sure, they will still use some cash, but if they grow up mostly using cash how will they be prepared to manage a debit card?

Debit cards are the new cash with a few twists. Spending with a debit card is the similar to taking money from a piggy bank. Once the money is gone there is less money left. A debit card does this in cyberspace and instantly changes the bottom line in one’s account.

When my kids were young we discovered our own debit card spending. Our kids had no-cash allowance accounts for tracking their inflows and outflows. They saw their money as a number and knew their balance to the penny. When we went shopping I paid for all our purchases together; they subtracted their total purchases from their accounts when we got home.

What surprised me is that my children didn’t care if they had cash or not when we went shopping. All they wanted was to use their money to get what they wanted. What they learned from their experience was that every decision to spend made their account balance smaller.

The No-Cash Allowance Tip #5

Give your kids experience with debit card spending by paying for their
purchases and having them subtract from their account.

Learning to manage money that can’t be seen or touched is an essential survival skill for our kids. As parents we can help our children prepare for their adult future by helping them understand what we are doing when we use a debit card.