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 Don’t Teach Money Management Skills

Piggy banks don’t teach money management skills.

Piggy banks don’t teach money management skills. One could say that piggy banks encourage spending.

After all, they are the cutest storage containers, but no better than a paper bag or mayonnaise jar for storing money.

Piggy banks encourage what I call the “cash in hand” syndrome. Without tracking the amount of money in a piggy bank, a kid has no way of knowing how much there is without counting. This puts the cash in the kids hand, triggering a strong desire to spend!

Now there are the new breed of piggy banks with new wrinkles that claim to make them more useful or more “educational.”

Meet the multi-chamber piggy bank.  How does a kid know how much is in each chamber? Without recording the numbers somewhere?

Then there is the counting piggy bank. Good for coins, not so good for counting paper currency, without writing the numbers down?

Add some mechanical gizmos. Press the pig’s snout and tip it forward to release money from the mouth. Remove a piece at the back to remove money or insert dollars. Manually lower the counter to show the new balance.

While these piggy banks do a great job holding money, do they teach money management skills?  Do they do help kids  learn to manage money as a number?

The money in an adult bank is always a number;  $300.15 or $1,234.56 or $65.21 or -$25.33. The balance goes up or down depending on deposits and spending choices.

What if your child  kept a written record of money in a notebook or a computer spreadsheet? What if your child sees the number showing that the balance was $10.32?

Spending money now becomes an exercise in subtraction, making the balance smaller.

Depositing allowance makes the number bigger through the magic of addition.

Piggy banks don’t show kids that there is a bottom line. By setting up a system as explained in The No-Cash Allowance, your kids start to see the big picture of their money.

Paper and pencil can be the  most effective tools to teach money management skills. Managing money as a number is one of the best lessons that your children can learn before they leave home.

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. 

Could cash make your child less generous?

The age-old debate of giving kids cash continues with a new twist, possibly affecting their generosity. New research that suggests that handling money as cash  makes a child less generous

Yet many allowance experts content that  kids should use cash so they feel the pain of spending when they see the cash disappear.

As  the author of The No-Cash Allowance,  I recommend that parents never pay their kids with cash. This allows them to avoid both of these potential issues. To learn more about a no-cash allowance click here. Having said that here is my analysis of this cash spending and generosity dilemma.

The study, published Psychological Science, is based on experiments with children ages four to six. They compared behavior of kids who sorted coins with those who sorted buttons

In one experiment, the kids were asked to help collect crayons. Cash handlers collected fewer crayons than button handlers. Other experiments produced similar differences in behavior.

Less generous?

The conclusion appears to be that if you want you kids to have generosity of spirit, don’t give them cash.

Another finding showed that the cash kids were more industrious and worked harder on something like a puzzle. This demonstrates that even young kids understand a relationship between effort and monetary reward.

However, this suggests that if you want your kids to work hard, do give them cash.

More industrious?

Hence the dilemma: cash decreases generosity vs. cash increases industriousness. What’s a parent to do?

So ask yourself why you want your kids to have money? Do you want them to feel pain when they hand over the cash? Or do you risk letting them be less generous?  Do you want them to be industrious? Then how do you solve the apparent dilemna created by the handling of cash?

My approach is to teach your kids how to manage money as a number, not as cash. Your kids are growing up in an almost-cash free society where money exists primarily as a number. You manage most of your money as a number. Imagine what the reality will be when your kids are adults.

Here are the benefits of a cashless allowance system, one that will teach your kids to manage money without handling cash.

What can kids learn by keeping track of their money as a number?

  • Numbers show how much money one has (balance).
  • Depositing (earning) money makes the number get larger (addition).
  • Withdrawing (spending) money makes the number get smaller (subtraction).
  • Money can be spent as withdrawn cash or check or credit card or debit card when received–reflecting adult behavior.
  • Each spending transaction is subtracted from the total.
  • Managing money as a number requires thinking and decision-making.

No-cash allowance in action

One daughter adds her weekly allowance and records the new balance. She announces that there’s enough to buy some new clothes. Her sister updates her own balance and asks me if we could stop at the bookstore.

I take the girls shopping and pay for their purchases using my credit card. When we get home they subtract their shopping expenses and update the balances in their accounts.

As a result,  no cash has exchanged hands yet everyone knows exactly what happened. Money (as a number) is deposited, account balances grow, purchases are made and account balances get smaller.

Cash is cash, but most of today’s money is a number. We’ll never eliminate cash but cashless transactions will increase. If your kids are getting a cash allowance they are not learning the basics of managing money in a cashless society.

In conclusion: Go cashless. Give your kids money as number using these simple guidelines.

  • Provide money regularly to child, with opportunities to earn more.
  • Allow child to have complete decision-making ability with own money.
  • Assign spending responsibilities for child to manage.

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.