Jun 13 2012

Do you use cash, or plastic when teaching children about money?

My friend Ashley sent me an email wondering about teaching your children about personal finance.

She received a promotional email from ING Direct, touting their savings accounts for children: Open an account for your kid, get a $10 bonus. Woo. (I’d hold out for more. $10 is puny, and since you have to use their social security number, they wouldn’t be able to get more bonuses from that bank probably ever).

Ashley wondered if it would be good for kids to have a checking or savings account, and if so, at what age? Or, what about using cash instead of electronic money?

I don’t know. My kids are so little, that my lessons about money are “do not put it in your mouth.”

Johnny vaguely seems to understand that things cost money, some things are “expensive” and some things “aren’t on our shopping list,” and that Daddy goes to work to earn money to pay our bills and to buy us things. He brings up the money topic from time to time, and we discuss things on his level. At least, that’s my intent.

I plan to use real and play money as the kids get older, so they can learn the basics. I haven’t decided on whether we’ll do an allowance, but I do plan to give them plenty of opportunities to work with developing money skills.

As far as checking or savings accounts go, I think we’ll do a savings account when they are in their tweens, maybe a tad sooner. I think I’d want them to get used to using cash, but being the debit-card lover that I am, I’ll probably also introduce them to a checking account so they can make debit transactions.

When they’re teenagers, I’d expect they have some sort of job, whether it’s babysitting, mowing grass, flipping burgers, working retail, etc. You learn quite a lot about money and life in those starter jobs!

At home, we can also play games that have money lessons. Things like Monopoly (but not the electronic version!), the Game of Life, Payday, etc.

Mostly, though, I think I want to keep the conversation open and flowing about how money works, and how to make money work for my kids. I don’t want them to go down a bad financial path when they’re adults. I’d like to equip them with the information they need on the basics and let them make small mistakes if needed so they can learn.

Accidentally overdraw your account? Oh darn. Here’s a lesson in paying overdraft fees. Maybe you’ll remember for next time. Or maybe you’ll learn how to negotaiate that fee away.

Have an expensive item on your wish list? Ok! Now let’s figure out how you can save up for it and earn money to pay for it.

My overall purpose would be to help them independently make good money decisions. I think having their own bank accounts can be a part of that.



6 Responses to “Do you use cash, or plastic when teaching children about money?”

  1. Our little boy is only 1, but I’m already thinking ahead to those things as well. I’m not sure about allowance. It’s a good way to teach about money, but I need to determine a good system. That’s years away, though. I agree that having an open dialogue about money, why we need it, and how to use it is essential for leading kids down the right path.
    Justin @ The Family Finances´s last post ..You Don’t Have to Impress People

  2. Cash. When they’re little, they get cash and money because they can see it, hold it, and put it in some piggy bank. Teach them that way.

    But when they hit about 5th or 6th grade, they seem (at least our girls) to understand numbers on a screen better, and that those mean something. So we opened little savings accounts for our daughters. They can watch their money grow, and undersatnd that when they want that new Barbie doll, the number in the account gets smaller.

  3. Honestly, the best lessons I received in money management came in college. I had no idea what I was doing before that. I worked in high school, but I literally cashed my paychecks and spent every dime before the next pay day. Doh. DUMB.

    My sisters who lived at home while they were in school ended up being totally clueless about money management when they finally moved out, and both ended up in big financial trouble before they were 25. The great thing about college was that I was writing checks and paying the bills, but I still had a safety net.

    Since my parents supported my sisters through college, they wrote the checks for them (car insurance, phone bill, etc.), and there were no rent checks, because they lived at home. My parents definitely helped me through college, but all the bill paying was on me, and if I needed money, I had to come to them and ask. They were willing to help me, but I think it was so valuable to have the experience of writing the checks and balancing the budget myself, and it was a lot harder for me to come to them for money because it felt more like a “loan.” So I tended to treat it as a last resort instead of acting like I was just making a withdrawal from the Bank of Mom and Dad.

    I dunno. I’m sure part of it is that my sisters and I have very different personalities, and it’s possible they would have had a hard time with that kind of responsibility in college, too. But I’ve always just thought of college as a time when I had financial training wheels. I’m not saying I didn’t make dumb mistakes, but at least I learned some good money management skills.

    As far as young kids? I like the idea of playing store with itty bitties, and giving a small allowance for extra chores for bigger kids. I think we’ll have a few chores that they’re required to do just because they live here (things like dishes, cleaning their room, etc.) But there will also be extra things they can do to earn an allowance. I’ve got such a long time before that, though. Sheesh.

  4. One of the ways we are teaching my oldest son (14) to budget is to make him responsible for his clothes. I give him a set amount each time my husband gets paid and he has to buy his own clothing – socks, underwear, coats, shoes, – everything! At first it was $20 every 2 weeks, but that seemed too much after awhile. Now it is $10 every 2 weeks and I don’t know if that will work, as I am anticipating the teenage boy growth spurt to start any time now. it is a work in progress I guess.

    He has had to learn and decide what is important to him. If he wants Puma shoes he has to scrimp in other areas and then shop when they are on sale and he has a coupon. Last week he found out how expensive underwear and socks were.

    Right now he has everything he could need until he grows a bit. So he is holding onto his money and saving up for that growth spurt that we have been waiting on for a year now. I am hopeful that being in control of this small part of life and having to budget for it will teach him all sorts of life lessons.

  5. Something my parents did for me was make a savings account in my name practically at birth. I never really had any control over it or awareness of it until I was much older, but my mom deposited gifts into it my entire childhood. I had grandparents that preferred to give dead presidents or write checks, and my mom decided that when you’re 4, you don’t need any dead presidents, so she put every cash or check birthday or holiday gift into this savings account until I was old enough to complain about it.

    By the time I was a teen, we would have a discussion about what to do with the money. Sometimes if there was something I had wanted or been saving up for, we would split birthday money in half to save and spend. When I turned 18 and left for college, my mom gave me access to the account. I barely used it throughout undergrad, and occasionally still deposited gifts and extra cash in, or used it as insurance when I was still learning to keep my checking account spending under control on my own. By the time I graduated, the account paid for one year of in-state tuition at law school!

    Depending on savings account interest rates now (I know they’re crummy) and how generous your kid’s relatives are, it might be a good idea!

  6. Our first money lesson with our kids was teaching them that when leaving a store, you had to give your item to the cashier to “pay” for it and she would give it back. Two funny moments… our 2 year old son had picked out a toy at Big Lots, and we told him to give it to the lady. During the transaction, I realized he had disappeared. Not for long, he came back with another one for himself since he had to give HIS to the lady! Our niece years ago wanted a book; my brother told her it was too expensive. She told him they could just put in their bag and no one would know!

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

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