Cashless conundrum: teaching kids money doesn’t grow in phones

It’s a notion many parents wouldn’t have dreamt of growing up – never seeing cash.

However, as the world goes cashless, the sight of notes and coins changing hands is becoming increasingly rare for children.

Indeed, they’re more likely to see “magic” money as mum and dad tap a card or phone at the checkout when picking up the groceries. At home, parcels arrive at the front door bearing clothes, golf clubs and presents; games appear on a mobile device at the swipe of a thumb; movies appear on the TV at the press of a button.  

The Reserve Bank of Australia’s most recent data shows ATM cash withdrawals have dropped to their lowest levels in 15 years, and consumers now make only 37 per cent of their payments in cash, down from 69 per cent in 2007. Countries, such as India, are withdrawing higher denomination notes amid concerns about counterfeiting and corruption.  

Research by Westpac shows smartphone users predict Australia will be 90 per cent cash-free by 2027.

This puts today’s kids truly at the frontier of a cashless society and it’s a transition making it even trickier to teach children the value of money - and that it doesn’t grow in phones.  

Bronwyn Lawson, director of financial education at Davidson Institute, Westpac’s “school of money”, says parents need to start thinking about new ways of helping kids develop a good relationship with money.

“I often hear mums and dads say lessons about saving and spending were easier ‘back in the day’ when every child had a piggy bank, or when an empty wallet meant nothing could be bought before a trip to the bank,” she says.

“But a few simple things may make the process easier, starting with a slightly different approach to pocket money, including relegating coins, notes and piggy banks to the past.

“Instead, you can consider specially designed online apps, games and kids bank accounts, along with digital-age parental example-setting.”

It’s a concern also worrying regulators. Speaking in May after The Organisation for Economic Co-operation and Development’s report into the financial literacy of 15 year olds, Australian Securities and Investments Commission deputy chairman Peter Kell said “there is more to be done in Australia” to educate young people about finance.

The report found that while Australian 15 year olds performed above the OECD average in financial literacy, ranking equal fifth, 20 per cent of students were “low performers”.

“In an increasingly cashless society, it's more important than ever that Australian students have the capacity to budget and manage their money through key life transitions such as their first job, starting university and moving out of home,” Mr Kell said.

Lawson, however, stresses the fundamentals of good money management – goal setting and budgeting – will never change.

“The best place to start is to sit down with your child and set some savings goals – a new bike, book or game? Help them weigh up the benefits by asking themselves questions like:  Why do I want this? Do I really need this? What am I missing out on if I choose this? And help them understand budgets: What chores can I do and how much will each earn me from ‘the bank of mum and dad’? How long will it take to save?”

With mobile phones increasingly replacing desktops, there’s plenty of family-friendly mobile apps to bring some fun to the budgeting process, without using cash. Spriggy, ChoreMonster and Westpac’s Pay Pig are popular with families.

Budgeting concepts can also be underpinned by using examples from your child’s own digital worlds. For instance, some digital games require the accumulation and use of credits, ingraining in children that they earn money by working and that enables you to spend.  

Another option is opening a child savings account, directly depositing pocket money and gifts.  Look for an account that the child can view online so they can see their savings grow, which also teaches them about interest and the value of compound interest! Explain the difference between account types, such as how savings accounts and term deposits pay more interest than every day transaction accounts.

For older children, parental controls may be available on your child’s account, providing them the independence to manage their account up to a certain amount while giving you the added comfort that they can’t blow it all.  

Lawson also points out the importance of example-setting, as all parents know how much children love to mimic mum and dad. When your child sees you paying with your “magic” card or other device, you can let them know you aren’t spending money you don’t have, but that you’re paying with what you earned and saved in your account. Every day moments, such as supermarket shopping – real world or online - can become virtual money learning moments.

Little by little, these conversations and experiences will help to create life-long lessons for children even if cash disappears.