The world we live in is rapidly going cashless, and the Covid-19 pandemic has only accelerated this. But what do these changes mean for our children?
Alarmingly, 37% of parents1 and 78% of teachers feel that digital transactions damage children’s understanding of money. But this is the reality of the world they are growing up in: one with an increasing preference for cashless payments.
It is therefore now more important than ever for our children to learn about digital money from a young age.
But this is no simple feat – children can find it difficult to understand the value of digital money when they can’t see or hold it.
So how do we equip our children with the knowledge and skillsets2 needed to manage digital money?
Important financial concepts to teach your child
Digital money is still a relatively new phenomenon (since it was only implemented with our generation), and before you can even teach your child to handle digital money, the financial concepts behind it are more important.
1. Digital money is still money
One of the first few lessons we teach our children in money management is to take good care of their wallets and cash. In a world where we give them access to digital money through stored-value items or smartphones, this needs to be communicated clearly.
Remind your child that these items are just like their physical wallets — they contain money that can be used all the same, just in a different form.
2. Digital money isn’t infinite
Since most digital wallets draw money directly from bank accounts, your child may be under the impression that digital money comes from an infinite source. Gently correct this assumption by helping them understand that digital money is still money, and that it can run out when you overspend.
3. Debt can be damaging
You may be reluctant to talk to your children about something as serious as debt right from the start, but familiarising them with the concept from a young age can help better inform their financial decisions with time.
You can start by first introducing your child to what debt is and the different kinds of debt, before gradually getting into the financial damage they can get from debt, and how to manage their money to mitigate this as they get older.
As online shopping becomes increasingly mainstream, your child may encounter Buy-Now, Pay-Later schemes. These are schemes that allow you to pay off a purchase in smaller instalments. Your child may easily be tempted to participate in these schemes, but if handled poorly, these schemes may incur debt.
Digital Money Parenting Tips
With these financial concepts in mind, here are 4 ways you can encourage your child to learn about digital money in their daily life.
1. Introduce digital allowance
Experience is the best teacher. If it’s possible for your child to pay for their expenses digitally, you may want to consider giving your child a digital allowance.
Just like with a physical allowance, they will be able to feel the pinch of overspending and experience the satisfaction of saving the leftovers. These experiences are key to helping them understand the importance of proper money management.
There are e-wallet apps and services out there that are designed to kickstart your child’s digital money journey. These apps often allow you to keep an eye on their spending habits. Consider holding weekly reviews of your child’s spending, where you can discuss what they’ve learned about budgeting, money management and saving.
2. Bring the digital into the physical
Many mobile games offer in-app purchases for character skins or in-game resources, and your child may not understand that these purchases cost money. Similarly, they may buy products online without realizing that they’re spending actual money.
To help your child understand that these purchases cost physical money, consider taking out a sum of their physical savings for them to make digital purchases with. This will help them realise that there is a trade-off, and that these items cost them money in the real world.
3. Keeping a daily record
To keep your child mindful of their expenses, you could get them to keep a daily record of their digital transactions3 on a journal or a calendar. This is also a good way to encourage them to build this into a lifelong habit.
But this doesn’t have to be a solo activity for your child. Why not do this journaling activity together, or even create savings challenges? It’ll create precious bonding time for the both of you while opening up more opportunities to talk to your child about money and budgeting.
4. Be wary of scams
As your child grows older, they will probably become more active on the Internet. You might also have given them access to a bank account. The more control they have over their Internet usage and their money, however, the more susceptible they are to online money scams. This is why digital financial literacy is very important to protect your child from these scams.
Keep a keen eye on the news cycle. Take advantage of news reports on scams and scam victims to open up conversations with your child. It can be as simple as a conversation over dinner, or having dedicated sit-down session with them.
In these conversations, build up their knowledge by teaching them about the common types of online scams like phishing scams or charity scams. You can also go further and train them to recognise the various red flags — needing to give OTPs, their bank account pins, passwords, or other confidential information, etc.
With digital allowances and expenditures, good money management skills become all the more crucial. Give your children a head start in saving for their pursuits in life with our suite of insurance savings plans.
This content is contributed by Eastspring Investments (Singapore) Limited. The information in this article does not necessarily reflect the views of Prudential. Prudential does not represent that such information is accurate or complete and should not be relied upon as such.
This article is for your information only and does not have regard to the specific investment objectives, financial situation and particular needs of any persons. Please seek advice from a qualified Financial Consultant for a financial analysis before purchasing a policy suitable to meet your needs.