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.
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.