How do you teach kids about money in a cashless world?

Digital banking expert Heather McGovern shares five tips for teaching children the value of money in any form.

As we head towards an increasingly digital world, many Australian parents are concerned about the impact a cashless society will have on their children, with 67% believing the shift will leave their kids financially worse off, according to recent research from MyState Bank.

In addition, Australia is now one of the world's most indebted nations, with the second-highest household debt-to-GDP ratio in the OECD at around 120%. Data from ASIC also shows 18.5% of consumers have struggled with persistent or delinquent credit card debt.

So how can we help our children avoid these kinds of issues with their own money? Good financial habits start at home, and there are plenty of ways to teach your kids about money and set them up for a bright future. Starting early is the key to success, so here are my top tips to help you get the conversation going.

1. Explain where money comes from

As many parents know, younger children often don't understand that money is a finite resource and instead see it as something that just pops out of your wallet or the ATM whenever you need some.

Explain to younger children that you need to work to get paid and that money can run out if you are not careful about how you spend it.

There are plenty of places to have these conversations both around and outside the house. In our household, we get our kids involved in the family budget and at the supermarket, explaining how items are priced and encouraging them to help us choose the best-value products.

2. Teach them to budget

Self-control is key to good money management, but today, there are so many ways to purchase things when we want them, rather than when we can afford them – from credit cards to buy now pay later schemes.

Encourage your children to set financial goals, such as saving for a big-ticket item, then encourage them to contribute money regularly to achieve it. Whether you choose to use a jar or a bank account, check in with them regularly to talk about their progress and make this as visual as you can.

Many kids today also own a mobile phone, but bills can quickly blow out if you are not careful. So instead of setting up a phone contract, consider using a prepaid plan, which can be a great way to teach them to be responsible with their calls and data.

3. Paying pocket money

Once your children are old enough, this is a good time to establish a link between work and money by paying pocket money in return for doing chores. My youngest is five and already earning her own little bit of pocket money (and can now pay for her own unicorn hairclips, thanks very much!) but it comes down to what works for your family.

As so many of our transactions happen digitally nowadays, when they are tweens, paying their allowance into a bank account with a debit card can help them get to grips with digital payments and balance their budget without the need for cash.

4. Monitor their online activity

According to MyState research, a third of parents say their children have made purchases without permission when using digital services such as apps, eBay, Uber Eats or platforms for downloading music and games. The ACCC has even released guidelines to help prevent unauthorised in-app purchases, including transactions made by children.

Today many games and apps are evolving, with additional premium content that can be downloaded at the click of a button – and language that often doesn't convey that a purchase is taking place.

Thankfully, the majority of gaming and technology providers – including Sony, Apple and Microsoft – have parental controls you can implement, such as adding a password or pin number to authorise purchases. So, get to know the games and apps your kids are using to prevent unwanted bills.

5. Introduce real money into the digital world

In the app world, it is easier to spend game currency because it doesn't resemble real money. Therefore, adopt a strategy where the real world meets the digital world.

For example, if you are using the traditional jar system where your children's allowance is split between "Spend", "Save" and "Donate" jars, only allow your children to use whatever is in their "Spend" jar to buy as many big dragons or fancy castles as they can afford.

That way, they will have to hand over real, physical, tangible money to make an online purchase, and will realise the trade-off, as this money could have been used for other purchases such as toys or games.

As money becomes less tangible, there is a need to help children understand its value and spend responsibly. And, while financial literacy programs at school can help, we as parents have a key role to play in familiarising our children with core money concepts such as saving, spending and investing.

Heather McGovern is General Manager of Digital and Marketing at MyState Bank. She has over 20 years of experience within the financial services sector having worked with American Express, the Royal Bank of Canada, National Australia Bank and AIA Australia.

Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.

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