Piggy banks only use cash while 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.

Yet 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.

Here are five reasons why piggy banks don’t teach money management

Piggy Banks Are Cash Only!
Piggy Banks Can’t Teach About Real Banks
Piggy Banks Ignore Checks
Piggy Banks Are Not Keeping Track of Money Like ATMs
Piggy Banks Detest Debit Cards

When parents start thinking outside the constraints of a piggy bank, they can find  many ways to help kids learn to manage money in a real-world setting. That’s where a guide like The No-Cash Allowance helps parents give their children a hands-on money management experience that starts 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.

Order your copy today!

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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.

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Piggy banks don’t print receipts.

Does your child’s piggy bank print out a receipt? Then how does your child now how much money is left? This brings us to another problem with a piggy bank, keeping track of money.

The traditional piggy bank counting method is to dump out the money and count it. Some piggy banks have counters for money going in but don’t subtract money going out.  At some point a kid will just have to get his hands on the cash to count it. Unfortunately, instead of sticking to counting, something about touching and counting money makes kids want to spend, right now!

With all this counting and touching a child is not learning anything about how to understand a bank account balance like you do. When your ATM prints a receipt do your kids know that the receipt tells you how much money you have left in that account?  Do you ever physically count the money in your bank account?

When you swipe your ATM card you are withdrawing money that you previously deposited. This is not new money. Most of these deposits were electronic transfers or automated deposits from other accounts such as your employment. Like so many of our financial transactions these deposits are money that we usually never see or touch. Does your child ever see you put money into the ATM?

So, what’s the difference between an ATM and a piggy bank? It is accountability. The bank dispensing your cash keeps up-to-date records of your balance. A piggy bank, even one with a counter, can’t subtract withdrawals and adjust the total.

Part of the money management experience for your kids is learning to keep track of their money like they will have to as adults. By having to record each transaction in a home account, your child learns that money is a number that either makes the balance bigger or makes it smaller. A child learns through repetition.

The No-Cash Allowance Tip #4

Give your kids the responsibility of keeping track of their balance like a bank does with an entry for each transaction.

Your kids can accept the reality that their money is a number. That’s how they will manage their financial resources as adults. Piggy banks can’t show them their balance, but a money management system like The No-Cash Allowance can.

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Piggy banks can’t cash checks.

A piggy bank only recognizes cash and doesn’t know what to do with a check. Your child can’t spend a check. This creates another problem with piggy banks. What to do when your child receives a check?

Because piggy banks ignore checks, you, as a parent you have to convert the check into cash. You can:

1. Take the check to the bank, cash it, then give the money to the child.
2. Deposit the check in your account, in person at the bank, at the drive-through ATM or using your smart phone. Now you can give the cash to your child, either from your pocket or by withdrawing it from your bank account.

Only after you have processed the check does your child have the cash to put in a piggy bank. In this respect, you are acting as a banker on your child’s behalf.

Throughout this experience, your child sees the process of converting the paper check into cash. Notice that the piggy bank has absolutely no role in this process.

Your children are growing up in a world where money takes many different forms. We now comfortably use e-checks, or electronic checks, to perform the same function as conventional paper checks. We can deposit paper checks using  smart phones without ever going to the bank. Today if you are using mobile depositing what new technology will your children be using in the future?

The No-Cash Allowance Tip #3

Act as your child’s banker. Cash checks written to your child. Direct deposit the amount into their written account in writing.

To help prepare your children for the future, you can set up a system as explained in The No-Cash Allowance. By using a written account-based system (on paper or on a computer) your kids can have hands-on practice managing money they can’t see or touch.

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Piggy banks can’t teach kids about real banks.

Does your child’s piggy bank teach your children about real banks? Today’s versions provide new features claiming to make them more educational, but they remain storage containers in a cute disguise. A piggy banks teaches kids how to put cash in and take cash out.

Adults don’t manage money using piggy banks

Variations add new wrinkles to the money storage capability. How do any of these help a child learn the skills necessary to manage money as an adult?

The chambered piggy bank offers four choices for adding money, namely save, spend, invest, or donate. Do you divide all your money this way as an adult?

The money counter piggy bank counts coins but not paper money. Most require the child to manually lower the counter to show the new balance after money is taken out. Do you have to physically change the balance of your banking account?

The cough-it-up piggy bank requires the child to press the pig’s snout and tip it forward to release money from the mouth. Do you have to do tricks to get your money from your bank?

Regardless of what the piggy bank looks like or its features, a piggy bank is a storage container for cash.

How does a piggy bank compare to your bank?

If you asked how much money you have, the teller pulls up your account on a computer screen and shows you a number that represents your money. If you log in to your online bank account you see the number that shows your balance.

Your bank processes your money as a number. Your money exists in the bank as number such as $1,234.56 or $63.15 or -$25.33. Only when you make a cash deposit or withdrawal do you actually touch money that is not a number

As parents, we live in a world of virtual money where many transactions in our accounts never exist in the form of physical cash. What we see is money in and money out, number in and number out.

What if, instead of using a piggy bank, you taught your child to keep a written record of his money on paper or on a computer spreadsheet?

With such an approach the very act of spending money requires a child to think through the process of subtracting from the balance thus making the number smaller. When depositing money a child has to think through the process of adding to the balance making the number bigger. With these types of hands-on experiences a child learning by seeing how his choices change the amount of money in the account.

The No-Cash Allowance Tip #2

Record every transaction as a number.

Isn’t this what happens with your bank account? Would not this practice with virtual money be good training for the adult world where your child will have to manage money as a number. Maybe it’s time to realize that piggy banks can’t teach about real banks.

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Piggy banks don’t teach money management.

Why are we using cash and piggy banks to teach our children how to manage money? If the answer is,

“So they will be able to manage money as adults,” then why do we give them something they won’t use as adults?

Piggy banks are cash only.

In a world where cash is diminishing in importance we restrict our children’s money management experience by instructing them to store cash in a container. When we divide the piggy bank into chambers labeled: save, invest, donate, spend, we think we are encouraging sound financial habits in our children.

Do you know of any adult who receives money divides all of it into different categories? By training our children to divide money arbitrarily according to our expectations we are not helping them transition to the adult world of money management where most of their money is used to pay the bills.

Not only will our children have to pay their bills as adults, they will not be paying with cash. This cash-only approach to money management in a cashless society is like giving children a Model T and a road map from 1920 to learn how to drive a car.

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

Money can be coin and paper currency, money can be a plastic card, money can be simply a number on your computer screen that can be transmitted anywhere in the world. In fact, all these forms of virtual money are the type of money that your children will manage as adults, as well as any new money wrinkles that show up in the future.

According to research by TowerGroup, a subsidiary of MasterCard Worldwide, debit cards are taking the place of pocket cash. Already 72 percent of salaried workers have their pay sent directly to bank accounts making debit cards a convenient way to spend without having to withdraw cash from an ATM

In dollar terms, debit cards are used for more than 50 percent of all non-cash sales. Many of these are small purchases typically paid for 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.

• ATM–When you access an ATM you are transferring a number into cash.

• Check–When you write a check you are giving your bank written notice to transfer a number from your account to another.

• Debit Card–You use a debit card spending at point of purchase like cash but by swiping your card to transfer the money as a number from your account to the store.

• Electronic Deposits–When you set up automatic payments you are instructing your bank to transfer money to another account as a number

• Electronic Withdrawals–When you receive automatic deposits you give permission to another account to transfer money to you as a number.

The No-Cash Allowance Tip #1

Explain to your children how you spend and receive money without using cash.

As parents we use an increasing amount of cashless transactions. As parents we can help our kids learn the new rules of the money game. When we start thinking outside the contraint of a cash-only piggy bank we can better prepare our kids to manage money that is not cash.

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When kids get Halloween candy they “own” it and want to make their own decisions. Tough choices such as, “Eat the candy corn or the lollipop?” are important for a kid. Being able to make choices helps a kid develop confidence in their ability to do so.

After eating all the candy corn, the child may decide that a lollipop might have hit the spot instead.

When a kid is told to eat candy corn, they may obey but they weren’t part of the decision-making process. The same is true for sharing or giving to others. If someone takes their candy they don’t like it. If someone tells them they have to give their candy away, they don’t like that either. However, if the child comes up with the idea, they have ownership and pride in the result.

So it is with money. Kids like to “own” their money just like they enjoy owing their candy.

Ownership Children want to have the power to control money just like they see adults doing. “This is my money.”

Responsibility Children can accept responsibility for some of their own expenses. “I have to pay my phone bill this week and remember that my school activity fees are due next week.”

Decision-making Children can make choices when they can see the end result. “If I don’t buy that CD today I will have enough next week to buy that jacket I want.”

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. This is one of the best lessons that your children can learn before they leave home and outgrow trick-or-treat fun.

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Let’s start by looking at some of today’s numbers, some very scary numbers.

As I’m write this blog our national debt is more than $16,204,611,000,000. I can’t even type fast enough to get the whole number at one time! Check it out and see for yourself.

$141,000 The share of national debt for each American taxpayer.
This is almost three times the $50,054 median salary in 2011 when the national debt at the beginning of the year was under $14 billion.

This income downturn continues a trend that started in 2007 when the median salary was $54,489. Meanwhile the national debt has increased from $9 trillion in 2007 to over $16 trillion today.

$7,600  The amount your household owes to China.
Forget cheap Chinese imports. What happens when they send us the bill?

$51,501 Amount of national debt owned by today’s newborn baby.
That’s about the price of two years of college!

$1.5 million  Lifetime share of national debt for a baby born in 2012.
Now, wouldn’t that be a nice nest egg for that baby’s retirement?

Fortunately, the taxman is not at the door demanding payment today, but future effects can put the squeeze on everyone, especially your children and their children.

As that red number grows so do the possibilities of frightening financial outcomes..

Less available tax revenue
Because more tax revenue has to be paid as interest on the national debt less is available for the services for our government to provide.  Over time, this shift in expenditures will cause people to experience a lower standard of living.

Rising prices of products and services
Eventually, companies will raise prices, causing people to pay more for goods and services. Inflation results with your dollar worth less while prices go up

Increased cost of borrowing money
Higher borrowing costs will also increase the cost of borrowing money to purchase a home. With more downward pressure on the value of homes, the net worth of home owners will be reduced.

Loss of our country’s social, economic and political power
This in turn makes the national debt level a national security issue.

What can you do?

1. Vote
Voting makes your opinion heard and counted

2. Contact elected officials
Let your local, state, and federal government officials know what you think. Show up at local government and school board budget hearings to show your interest.

3. Show your opinion
Organize like-minded people and politely write or visit your elected representatives to voice your support, suggestions, or criticism of spending decisions

4. Evaluate your saving and spending
When the amount of American savings and investing goes up, it helps in the long run. Involve your kids in your spending decisions and explain your rationale.

5. Eliminate personal debt
Household debt leads to poor financial status and increases financial costs for you. Be aware of your personal debt and makes choices to reduce it

6. Teach your kids to manage money starting today.
With my book, The No-Cash Allowance, parents can set up an easy to use money management system to help kids learn how to manage money. With this approach kids are responsible for keeping a written or digital record of all transactions. This teaches them how the manage money as number.

As we can see with the national debt, numbers can get big and scary if we don’t pay attention. Children who learn to manage money early will be better prepared to survive in an uncertain financial future. Parents who help their children learn money management through hands-on practice at home provide kids an essential life skill.

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When we think about money, what are we really talking about? We know that money is more than dollars and cents. Money is an amount of buying power, a measure of work value, as well as a means of reward (and punishment.)  In the end, money decisions can ultimately shape one’s life and most likely the lives of others.

Parents know that kids need to make mistakes while learning to walk or read or ride a bicycle, yet they don’t want their kids to make mistakes with money. This results in telling and directing children on how to spend money, thereby depriving them of the opportunity to make a decision and to learn from the result.

One reason for this is that parents still think of the money as theirs and don’t want their kids to make mistakes spending it. Parents are reluctant to give up control, yet need to understand that a kid has to “own” money in order to learn how to make choices. Remember how talking about auto insurance became more meaningful once you owned your own car?

Ownership makes discussions about money more meaningful. It is also important to give kids responsibility for real expenses, such as school supplies or clothes, along with money to spend for enjoyment, and to allow them the learning experience of making mistakes.

Helping kids understand the consequences of all their money decisions gives them confidence to manage money as they get older. By setting up a system as explained in my book, “The No-Cash Allowance,” kids will have ownership and control of their own money. Parents can then start meaningful dialogue about money that will help their kids develop money management skills for life.

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