At a very young age, I would accompany my mother to the bank with the crazy parking lot. I would watch my mom hand over two pieces of paper (paycheques) to the bank teller. I was always in awe of how important those two pieces of paper were to our family. The teller would then transfer money to a savings account for insurances at my mother’s request. After that the teller would then count out a large stack of money back to my mom. Now we were off! Our first stop was to the Hydro building were we waited in line again, and my mom took out several of the colourful bills and handed them to the clerk who took her money and gave her a piece of paper with a big blue stamp on it in exchange.
After that there were many other stops to go to pay our bills, and then finally grocery shopping. By the end of the day the large colourful pile of paper money was almost gone. Yes, those trips were full of running errands and paying bills and very little fun for me as a young child, but those days taught me an important lesson on the value of money. I would see how hard both my parents worked, shift work, early mornings and I would witness cash being exchanged back and forth in everyday transactions. Credit cards were not even heard of, if you needed extra money you went to apply for a loan at the bank in hopes that you might be approved.
Fast forward thirty years…
Any parent in today’s society can tell the one large draw-back to using their debit or credit card is the total disconnect for children when it comes to the concept of from where does money come. It’s not their fault! Most children do not see money on a daily basis. They are not witnessing the regular use of paper money. It is rare to go into a bank and see a teller, and in any store it is rare for them to see the clerk count back change and if they do it is with the use of the cash register calculating the transaction for them. Gone are the days of a cash only society. Now we can transfer money from one bank to another, pay bills on line, send E-transfers and shop on-line for everything imaginable all before our morning cup of coffee. But are we better off? Are our children better off? Do they actually understand the value of money?
This was brought home to me when I was telling my youngest daughter that we needed to wait for payday to purchase an item. She looked at me like I was really forgetful and silly. She went to my purse pulled out the debit card, and proudly said just use this mom, you put it in the bank machine and every time money comes out, just like MAGIC. That really hit home to me how important it is for our children to see and use cash.
So how do we teach our children to value money, when the majority of all transactions are done on-line or with debit and credit cards with endless reward promotions? In order to teach a lesson, we need to take action.
Here is an easy first step: start by taking out some cash for the family fund. Yes take out a set amount of cash every pay day, bring your child to the bank with you and, what the heck, go and stand in the line-up rather than just using the bank machine. So take the time, now let your child ask for the money in different denominations. Take this money home and put it in a glass jar labelled Family Fun. Now over the next two weeks when the kids ask to go swimming, or to the movies or for ice cream, take the money out of the jar. Do not use your plastic cards for any of these purchases. Let them pay with the money and return the change back to the jar. Why? Because your time spent on teaching this life lesson to your child will be priceless in their future. We all want our children to grow up being honest, competent, highly functioning adults, not living off mom and dad. This simple little habit will help the next generation value money.
The next step is for them to manage their own money. I am often asked what I recommend when it comes to allowances for children. I have always told my children starting at a young age, mom and dad will provide for your NEEDS. Your allowance that you have earned, (not from cleaning their room, that is expected) is for your WANTS. It is so beneficial to teach children the difference between these very opposing terms. By giving children an allowance you are allowing them to learn to manage their personal finances. They can easily learn to save up for larger items, learn to give donations, learn the value of every coin. Allow them to spend it all in one day and then have nothing left for the remainder of the time till next allowance. Allow them to save up for that special something that you perceive as just another toy. We all learn by making mistakes, that means we are in fact trying.
Start this lesson early and you can avoid dealing with a 19 year-old, who has racked up their first credit card debt that was being promoted on campus that has a 29.99% interest rate. Teach this life lesson NOW, before the student loans, before the credit cards, before the DEBT…that is priceless!