One in three parents agree digital purchases make it harder to teach children the value of money.
It can be hard for children to understand what they can’t see. And as there’s no visible exchange of cash for goods in digital purchases, teaching them the value of digital money can be challenging. Delving into the topic, we recently conducted some research which found that more than a third of children (35%) don’t know how digital purchases are paid for.
Our research also uncovered the most common myths children believe about digital money, including:
- 40% of five year olds think you can use a card to get free money from the ATM;
- 61% of six year olds think you don’t have to pay money to watch movies on your parents’ tablet or smartphone; and
- 33% of five year olds think there’s someone behind the wall who gives your parents money when they put their card in the ATM.
It’s clear we need to adapt our money lessons to incorporate digital spending. From experience, we have found the most effective way of doing this is to involve children in the digital purchasing process.
Sit them down when you’re buying
If you’re buying your child a game on your smartphone, instead of making the purchase yourself, sit them down and explain how much it costs. If the game costs $5 and your child receives $10 pocket money each week, explain that it’s worth half their pocket money, and potentially deduct the amount from their allowance or piggy bank. This way they can see that digital money has value, like cash and coins.
Use day-to-day examples
If your child often accompanies you to the ATM, explain that the money you’re withdrawing is from mum and dad’s savings and is of real value. Small lessons like these will help build their understanding of digital money over time.
Other lessons that Aussie parents have used to help improve their child’s understanding of digital money include:
- Showing them the value of an item in an online store (25% of parents);
- Opening a savings account with them (17% of parents); and
- Giving them a prepaid card so they can make digital purchases (16% of parents).
Teaching children the value of digital money is key to their overall financial literacy. It’s also important to continue with traditional methods, such as School Banking programs, which teach lifelong money management skills. Traditional and digital money lessons should work in tandem and complement each other.