Piggy Banks Can’t Process a Debit Card

Reason Number 4: Why Piggy Banks Don’t Teach Your Kids Money Management

When we let our kids play with toy cars, or toy stoves, we know they are playing with a kid’s version of the real thing. We also know that as parents we want to help them master the skills they need to actually drive a car or cook dinner. Learning to master adults skills means that kids eventually need to move beyond toys.

The same is true with learning about money and debit cards. While our kids may be masters of a piggy bank, such a childhood toy does not help our kids understand how to spend money they can’t see or touch. Your kids see you using a debit card at the store, but do they have any idea what you are doing?

Debit card allows spending without using cash. Unlike seeing you get cash from an ATM, there is no visible money when you use a debit card. Do your kids know that you are spending money from your bank account? Do they know what that transaction does to your bank balance?

As consumers we are increasing our use of debit cards. Total payment volume for debit cards surpassed credit-card volume for the first time in 2009 and will continue to eclipse it in 2010, according to a report released in September.

Let’s face it. Debit cards are the new cash.

Today’s kids will be using a more advanced form of debit card spending as adults. Sure, they will still use some cash, but if they grow up using cash how will they be prepared to manage a debit card? Even though debit cards don’t look or feel like cash the result is the same. You make a purchase and have less money.

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.

However, a debit card and cash have different spending powers. When you stand in a checkout line with $50 in cash you are limited to $50 in purchases. When you pull out your debit card the limit rises to the total money in your account. You can easily deplete your account in one swipe.

With a debit card you need some mental discipline at the checkout. Do you know what this purchase does to your balance? Does your child have any idea what you are thinking when you swipe that card?

To spend money you can’t see, you have to know how much money you have. Good money management using a debit card requires some planning in order to maintain your balance for future expenses.

Parents can help their kids learn that debit card spending is only one way to spend money. With all the other tools available for making purchases (check, cash, credit card) it is possible to spend a dollar in more than one way. This lesson doesn’t happen when only using cash.

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 our purchases together; they subtracted their 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. They also learned that when they deferred spending their account balance got larger.

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. We can also give them some real-world hands-on experience with “debit card” spending by using an allowance system as explained in my book, The No-Cash Allowance.

Follow me on social media: