piggy bank Most parents are all to familiar with this scenario:  When you run out of cash and say to your children, “Sorry, not today,” even preschoolers will tell you that you can use your “card” to pay.  On a recent playdate with my nieces and nephews at a games arcade, the brass coin-like tokens have been replaced with a plastic card you swipe at the machines.  I can tell you that my four year old nephew really did not understand when the card wouldn’t work anymore!

In a world of credit and debit cards, store accounts, internet banking and the fear of carrying real hard cash on our person, our children don’t often get to experience money literally passing through their hands.  Even school fun days use coupon systems instead of cash – oh for the days of the old Tickey Afternoon!

This cashless society makes financial sense to us, but when you consider that children learn best through concrete, real, physical experiences, what are they actually learning about the value of money today?  For the most part I think they think there is a never ending supply.  And they are so smart today that when you say, “Do you think money grows on trees?” they answer “Yes, notes are made from paper which is made from wood!”  And if you say you have no cash on you, they will remark, “Just use your card!”

Children need to learn by handling real money

Pocket money paid into our children’s bank accounts over the internet doesn’t have nearly the impact of cold hard cash either.  In my childhood (yes, long before the advent of internet banking), my dad would draw a portion of his salary in cash.  He would then divide up the money as per the household budget, and post it into various brown envelopes, one for each category, and pay us our pocket money, of course.  Money left over in an envelope at the end of the month stayed there and the next installment was added to it. If we wanted to go out for a burger, or needed new clothes or a tennis racquet, we would check out the relevant envelope and based on the amount of money inside it, make our purchasing decisions.  If there was no money in a particular envelope that was the answer as to whether you could buy something or not.  In this way we had a very concrete experience of the value of money, saving and spending.  We didn’t always get what we wanted, but we never lacked for anything.

While it would be a wonderful exercise to bring home one’s entire salary one month in cash, pile it on the dining room table and get the kids to count it out, this is an impractical suggestion.  Instead, you need to find ways of making money real for your children.

Pocket money tips to help create money-wise kids:

  • Give them their pocket money in cash (small  notes and coins especially for children under 7)
  • Give them three piggy banks and teach them how to divide up their pocket money into these categories:
    • one for saving which teaches them about delayed gratification
    • one for charity which fosters a habit of giving to others
    • one for spending which teaches them to enjoy their money
  • Set a savings goal.  When they reach R200 in savings, take them to open their first bank account.  Do this at around age 7/8 and make a big fuss about it.  I actually took my camera to the bank the day my children opened their account.
  • Play board games that use money, such as Monopoly

Pocket money is your child’s first personal experience with their own money.  As children learn best through concrete (real) experiences we need to expose them to real money – notes and coins versus credit or debit cards.