Back in the days when Bankcard (remember them?) and store cards were about as “plastastic” as electronic payments got, it seemed somehow easier to teach children about the value of money.
Every five-year old was given a piggy bank by a grandparent and would subsequently take great delight in dropping coins through the slit at the top, listening to sound of ringing metal as the 5¢ and 10¢ pieces fell to the bottom. The deeper the sound, the closer the prize – in my case usually a trip to the bank.
But how to instil messages about the value of money in a cashless society? Somehow teaching kids about virtual money doesn't seem as easy or as real. Virtual money as a concept just doesn’t seem as accessible.
But (in case you hadn't noticed) we live in different times. Even many school canteens are cashless.
Mima Rahaman, founder of ThinkWealth Management, argues that teaching kids about virtual money is not that hard.
“Nowadays, kids are all about a virtual world,” she says. “They don’t need the touch of cash.”
Indeed it is becoming increasingly important to understand virtual money, given the need to gain and maintain a sound credit rating.
This, of course, is due to a series of changes to Australia’s credit reporting system that will make it easier for lenders to develop a comprehensive assessment of an individual’s credit history – and apply interest rates accordingly.
Rahaman suggests giving children a notional budget, such as $2500 a year for a teenager.
All expenses, such as presents for friends, clothing and jewellery are deducted from the budget, while money earned from chores is added. Any money left over at the end of the year is doubled and given to the child as a Christmas present.
In Rahaman's case, the result of giving her two teenage daughters their own budgets is that from a young age they started recording their income and expenditure.
“It creates awareness and forces them to make choices,” says Rahaman. “They learn to buy one top, rather than two,” she adds.
Adele Martin, managing director and senior wealth adviser at Firefly Wealth, runs a 52-week money challenge for children.
The kids save an increasing amount of money each week, starting with 10¢ and rising in increments of 10¢. The money is divided into three buckets: spending, saving, and sharing or charity. At the end of the year the kids have $137.80 – and the whole thing can be done either in cash or online.
The children decide how the money should be split between the three buckets.
“Neither should parents try to influence what to do with the money inside each category,” Martin says.
Patrick Canion, managing director of ipac Western Australia, encourages parents to introduce the concept of credit to older children
“People should understand credit,” he says. “When our kids were old enough we helped them get a credit card. It gave them the emotional aspect of just having bought something for free and then the realisation they have got to pay it back.”
Teaching the Petersen kids about money
Mum-of-two Penina Petersen (pictured above with her family) still believes that cash is king when it comes to teaching young children about personal finances.
Penina and her husband started educating their children early, and are encouraging their 11-year-old son Saxon to hone his entrepreneurial skills.
A keen skateboarder, Saxon has dreams of turning professional and being sponsored by a clothing label.
“After recognising this passion we made a few suggestions,” says Penina, who writes about money via her blog, Savings Room. “Perhaps he could visit a website like Teespring.com and design some t-shirts, sell them online or to his friends?”
Penina says the little venture is helping Saxon realise that passion and money can go hand-in-hand. It will also help him learn about receiving money online, keeping it and reinvesting it, she says.
The mum from Frankston, in outer Melbourne, says she believes that “little lessons” are the way to go.
Both her children get weekly pocket money that's equivalent to their age. So Saxon gets $11 for chores that include taking the rubbish out and feeding the dog.
Meanwhile, younger sister Coco receives $5 if she ticks off chores such as setting the table and putting her toys away.
Petersen also encourages her kids to save half their pocket money, which they keep in a piggy bank.
“When the piggy is full we go to the bank and deposit the money,” she says. “They need to physically know what money is and what it can buy and what it can do, not just seeing it at an ATM.”