07 February 2018

Learning the value of money in the digital age

The rise of contactless and other digital payment methods have made spending quicker and more convenient. But do children growing up with in-app purchases, Apple Pay and digital pocket money run the risk of failing to grasp the value of money?

Until recently, teaching children about the value of money was fairly simple.

Pocket money was given in coins, which were diligently deposited into a piggy banks or – more likely – stuffed into pockets and carried to the sweet shop to spend on carefully selected confectionery. Older kids might stash their weekly allowance under the mattress until there was enough to buy the latest gadget or concert ticket.

Fast forward a few years and the sight of us handing over cash at the supermarket or counting out change for a bus ticket is becoming increasingly rare for our children. Money is seen as a number on a mobile phone screen, while the swipe of a card or tap of a watch can pay for everything from the tube ticket, to trainers and even the new family car.

So should we be changing the way that we teach children about money to ensure they are prepared to manage their money in the digital age?

The power of pocket money

The growing number of digital transactions means that children are less likely to see parents handling money these days. But, as Claudia Hammond, author of the explorative Mind over Money, says "The use of physical cash continues to play an important role in establishing healthy money habits".

“The whole concept of money is a profoundly psychological one, which makes it hard for young children to grasp,” she says. “The advantage of cash is that it’s very concrete and children can count and see exactly how much they have. When they are small, they have no idea what £5 will buy them, but they will consider a pile of pound coins to be treasure and will begin to value it.”

"Money in an account online, represented by digital numbers, rarely has the same impact" she explains.

Build the basics

Regardless of developments in technology, the best way to educate children about the value of money is to start out by getting them used to managing their own – rather than buying them what they ask for.

Saving up pocket money every week for that sought-after toy or gadget gives children a thrill and sense of achievement, but it is also teaching them to engage with what the money in their pocket equates to – and how they will have to plan ahead for larger purchases.

"This applies whether parents hand over the weekly total in cash, or transfer pocket money to a child’s online bank or gaming account. Whether using clicks or cash, the crucial thing is that children have a structure in place and get used to the idea that money soon runs out and has to be used wisely", stresses Hammond.

Connect cash and digital

Even as an adult it’s very easy to feel detached from money spent digitally, especially now that contactless has removed the need to enter your PIN, so involve your child in day-to-day activities that will help them to understand that cashless payments are also reliant on ‘real’ money that has been earned and saved.

Ask them to help you check your balance online before and after going shopping, for example. If taking cash out of an ATM, show them that has an impact on the digital numbers.

Apps like RoosterMoney are also available to help children as young as four make this link and get into good financial habits. By signing up to the digital Tracker, kids can – with the help of Mum and Dad – keep track of money, watch how their savings grow towards a goal and even earn rewards.

A virtual reality

To encourage children to save money and help strengthen the connection between the cash in their hand and virtual money in an account, it’s a great idea to open a savings or current account for them. Take your child along too if you can, so that they are a part of the whole process.

For Tom, age 11, opening his first bank account was exciting, but it also helped clear up a few important misconceptions about money.

“I imagined a bank account would have infinite amounts of money and I could buy everything with it. I now realise that’s not the case, but I like planning how to spend my money!”

Along with his older brother Josh, Tom set up a straightforward FlexOne current account with Nationwide, which is available to children and teenagers from 11-17, and linked it to a FlexOne Regular Saver account*. Having a current account makes him think about the money that he actually has – and how he can use it best. “To get my trampoline I sold my old computer for £180 and used £140 to buy the trampoline and put the rest in my savings account,” he explains.

To help cement the link, help your child pay their pocket money in at the local branch and check their account online back home to see how the cash they have saved affects their balance.

Older children can use their current accounts to make their own special purchases, which helps foster a sense of financial independence and the finite nature of money.

Whether they’re still mastering the basics, or are starting to ask trickier questions, there are plenty of  (This link will open in a new window)resources online where you can find out a little more.

But, for the moment, helping your child to learn important skills that will help them to thrive in the digital age is a great start.

*To open a FlexOne Regular Saver account you must hold a FlexOne current account and be 11 - 17 years of age. On your 23rd birthday your FlexOne Regular Saver account will be closed and any balance transferred to a Instant Access savings account or nearest equivalent. You can only hold one FlexOne Regular Saver account.

Apple Pay is a trademark of Apple Inc., registered in the US and other countries.

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