Within a generation terms like cheque book and piggy bank may sound as archaic to young people as the threepenny bit and halfpenny are now.
From mobile payments to bitcoin, money is constantly evolving. Last month the UK Payments Council revealed that for the first time ever, non-cash payments had overtaken cash payments in Britain.
Many see this as a major milestone on the road to a cashless society. While it’s open to debate if we’ll ever be truly cashless, there’s no doubt cash will play a smaller role in the future. So how can us parents best prepare our children for the challenges and opportunities of living in a world without physical cash?
Make checking account balances second nature
As young people increasingly spend via cards and online, it’s vital they can visualise their savings. For many, the days of stuffed or hungry piggy banks as an indication of how much money you have are long gone, and paper bank statements may soon no longer exist at all.
It’s a lifelong skill that will be hugely valuable when children fly the family nest and their money and investments end up spread across many different places.
Understanding different fees for different types of spending
As more organisations offer more and more types of non-cash payments, it’s important to be aware that not all payments are equal. Paying for a bus with a card may incur no fee at all, but doing the same in a taxi can see fees higher than 10 per cent. Similarly, some electronic bank transfers are free while others may charge commission.
Talk to your child about different fees and make sure they learn to read the fine print before buying. This can also be a gateway into building awareness of things like interest rates and how loans or mortgages work. With so many ‘buy now and pay later’ offers floating around, it can be a good way to get your child clued up and analysing offers that seem too good to be true.
Add some resistance to ‘frictionless’ technology
Contactless cards, mobile payments, smartwatches, wireless wrist bands and even facial recognition technology are all coming into play to make spending simpler than ever. This can be fun and convenient for young people, but on the downside many believe it can also make it easier to over-spend and harder to resist buying non-essential goods.
This makes teaching young people to budget at an early age even more important. Setting personal payment limits and building a habit of saving from an early age can instil financial confidence and independence. Understanding the concept of ‘cashless’ money makes it less likely they’ll go on a ‘contactless’ spending spree they’ll later regret.