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.

Could Cash Make Your Child Less Generous?

Are cash kids 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

Are cash kids 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 not pay their kids with cash. This allows parents 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.

Does cash affect generosity?

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.

Does cash makes kids 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. 

This Cell Phone Lesson Teaches Teen About Money

A cell phone lesson teaches teens about money
A cell phone lesson teaches teens about money

How can you use money to teach a teenager a lesson that sticks longer than a nanosecond? One reader of my book did just that with his teenage daughter.  He used a cell phone lesson to teach about money responsibility.

When his daughter’s cell phone broke (oh, the horror) she told him about her dilemna. She begged her dad to buy her a new phone.

In response, he looked at her and calmly said, “Remember, we agreed that you pay for your cell phone expenses. Use your own money to buy a new phone.”

“My own money!” exclaimed the daughter. “But I don’t have enough. Can you give me the extra?”

“Sure,” said the dad. “If I will lend you money I’ll charge you interest.”

“But you’re my dad,” she said, “How can you do that?”

“Because I am your dad, I can give you some of my money but I going to charge you interest. You get the money now and I earn a little for lending it to you,” he told her.

“But that’s not fair,” she said. “You could just give me the money. It’s no big deal to you.”

“The point is that you need to understand how money works in the real world,” he said. “When you borrow from a bank they charge interest. And they charge penalties if you don’t pay it back on time. Here’s your choice. Consequently, you borrow from me and agree to pay the interest. Or you wait until you save enough money to replace your phone.”

How to Create Your Own “Cell Phone Lesson”

  • First of all, provide money regularly to your kids, with opportunities to earn more. Use a cashless payment method to make payday easier for you.
  • Then, let kids have complete decision-making ability their money. Spending mistakes for kids teach big lessons and are not life-changing mistakes.
  • Most importantly, assign spending responsibilities for kids to manage. In the example above the daughter was responsible for her cell phone expenses and needed to accept the consequences.

The cell phone lesson is one way of helping a kid understand how money and reponsibility go together. Require kids to use their own money to cover some of their day-to-day expenses. As a result, you, as a parent, lay the groundwork for them to manage money as an adult.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” she says. Follow Lynne’s common sense approach for teaching children that money is a number.  The No-Cash Allowance provides a guideline for teaching about money to kids from pre-school through high school.