I received a great question from a parent yesterday about something that has been extra challenging since the start of the pandemic. How do we teach our children about money in a digital world? When so many of our transactions are online, should our kids need to be online to learn about money? This parent brought up the excellent point that during the COVID pandemic, many of us shifted to online purchases. But even before, and definitely after the pandemic, more and more of our buying is going to be online. With so many of our financial transitions being digital, how do we give our children a chance to experience handling money?
If you have read my post on allowances, you will know that I’m a big proponent of avoiding digital options until your child has a firm grasp of saving and spending using cash. So, when the pandemic hit, I decided it was an opportunity to test out some of the options to practice using money in a digital world available to me.
We tried using Rooster Money for my nine-year-old son, who has demonstrated an excellent grasp of money management. I did not and would not make this transition with my seven-year-old daughter since she is still getting a handle on saving, but my son has had three years of practice and is doing well.
I won’t lie; the advantages of using apps to manage an is hard to argue. It automatically credits my son’s account with his allowance every week. It allows him to move money from his accounts as quickly as an online banking account.
The drawback to going digital
But, even with all those convinces, it does raise a few problems.
I require that my son have access to a device. This is not too challenging for me, but it may be for some parents and add to that, I have been battling with the increased screen time due to online learning, so adding another reason for him to be on a device isn’t my favorite.
We have fewer discussions about money. My son can use the app to shift money from his different accounts (spend, save, give), but since it is happening virtually, we have fewer interactions and less dialogue about what he plans to do with his money. This challenge would be a show-stopper for me if my son’s interest in money and money matters were not as deep as they are. So, instead, we find other opportunities to have these discussions. But if he was less interested, I think I would switch back to cash for this reason alone.
When we manage his money via an app and make online purchases, it can feel like I am buying things for him since he does not have his online accounts or credit cards to make purchases. So instead of buying what he wants, he has to use my accounts and credit card and pay me back. This experience is a far cry from when he would go to the store and buy his own stuff. To help overcome this last hurdle, companies are releasing debit cards for kids, and I will dive more into those options in a future article.
So, what is the solution?
I still firmly believe that for younger children to get their first opportunities to interact with money, they should do it at a physical store. There is more to money management than moving money from one account to another. Interacting with service people as they cash you out. The anticipation of a purchase. The feeling of the exchange when you hand over your money to receive your item or service, to name a few.
The sooner we can give our little ones those opportunities to practice those skills, the better. I acknowledge that we are moving to manage more of our money in a digital world. As our kids grow up, they will likely do most of their transactions online, but that doesn’t mean all of their transactions will be online. There is a reason why online stores call it a shopping cart. And have a check-out button. They are a proxy for the real thing. So, let’s give our children a chance to experience the real thing before they move to the virtual.
How does that work in practice?
I know it is not feasible for most people to take their child to a store all the time, but that doesn’t mean you can’t do it once in a while. A solution that worked for my kids was taking them to a physical brick-and-mortar store once a month. That cadence worked for us. They usually needed a few weeks to save up enough money to buy something, and I usually could find time in my schedule to take them to a store once a month. But that may be different for you. I also make sure to switch them back to cash and let them take complete control of the interaction once we are in the store.
In the end, I hope you will do what works best for you. If monthly doesn’t work, maybe you shoot for every two months. The important thing is that you try to give them the opportunity to manage their own money in whatever form works best for you and your family.