When we were kids, understanding the value of a dollar seemed simple. Take a trip to the grocery store and watch as your parent or guardian would empty paper money from their wallet and give to the cashier. As a kid, a real treat was when my mom would let me count the change before handing it over the cashier. Counting change seemed like a fun game. ‘If I have enough of these dollars, I can buy something I want’ I would think, but things have changed for today’s children. While fundamental concepts are simple enough to understand with paper money, with credit cards replacing cash, and online shopping frequently replacing store trip, the concept of the wallet and money is a different game
Children are app-savvy, with a recent study showed that 75% of kids under the age of 8 using mobile devices, meaning that without establishing proper money habit fundamentals, the digitization of dollars may be creating problematic spending habits for both children and parents. In June, Amazon issued $70 million in refunds for in app purchases noting that there were ‘insufficient safeguards to prevent children from making unauthorized in-app purchases. In fact, one NBC news story recounting a child who purchased over $10,000 in app purchases for a fake pet, putting a family’s vacation in jeopardy (Amazon thankfully refunded the money).
The moral of the story is that without seeing the exchange of paper money for goods and services, kids risk growing up in a world where they fail to see the impact that their financial decisions can have on their future.
So how can parents take charge in this new reality of stored credit cards and one-click buying. Here are 4 ways that parents can use that are RockaDoo approved…
1. Take Charge Early – one of the key tenets of RockaDoos is that it’s never too early to form a strong foundation of money habits in your household. Studies show that money habits are formed by age 7, and that parental interaction is key to creating strong money habit experiences.
2. Enforce the concept of Needs vs Wants – Make sure to differentiate between Needs – purchases of tools or passionate projects that encourage/enable a positive experience/benefit for the child, and Wants – products that are desired, but do not have an added value for child development. Try practicing with your child by having them identify whether a proposed purchase is a Need or a Want. This will help to curb impulse purchasing and ensure that your child understands the value of the purchase they are making.
3. Don’t be afraid of technology – while limiting technology has it’s benefits, eliminating it entirely may be close to impossible as children are going to be faced with mobile technology from their friends and in school. Instead try limiting their time with mobile devices and supervise their activities. For preschool children, ages 2 to 5, set screen time to less than 1 hour a day of educational programing, and watch it with them so you can help them learn from what they’re seeing.
4. Translate Digital Dollars into Real Dollars – Research shows that children under 7 may not understand that exchanges of money often involves a set of unseen transactions (credit cards), so it will be key to translate these early, often inevitable online purchases into paper currency so that children are better able to comprehend their actions. You can do this by encouraging the child to create goals for saving before making a purchase by using an online app like Bankaroo. However, in our opinion for children under 8, nothing replaces a good old fashioned piggy bank. After that child makes an online purchase, ensure that the child physically removes money from their online or offline bank system to and from their piggy bank.
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