‘We hope our children will learn the value of money’: Why many parents are going digital with pocket money
Money is a topic that is hard to get your head around, especially as a child. We all remember the first sum of money we got, whether it was for a birthday, a celebration, or for a lot of people, pocket money. Sweets, chocolate, and games. All essential purchases at that age.
Having that money in your pocket made you feel unstoppable, even if it was just a few pounds, as you finally had to opportunity to buy what you wanted even if, looking back, it wasn’t exactly logical.
And this is the issue that a lot of parents face with pocket money: the fact that children struggle to understand the true value of it. Luckily, as technology has progressed, the finance sector has been one of the most successful in keeping up with and using this change.
This has been seen especially in the personal finance sector, allowing parents to go digital with pocket money. But the real question is, why have parents decided to do so?
Ease of use:
A major factor, as with any change that is implemented, is convenience, and in this case, for both parties. Whether parents give out pocket money in exchange for chores, or without any work in return needed, it is often done on a regular basis (which tends to be weekly). Rather than having to remember to give their child money on a certain day, direct debits can be set up for a regular amount of money to be transferred tot heir child on a schedule.
Furthermore, rather than having to deal with the hassle of getting money out of a wallet, not knowing if you have enough or the correct amount, the exact amount will be sent each time. This regularity and pattern help to mimic how money works in the real world with a wage. When your child knows how much they will be getting, they can better plan their purchases, helping to get them into a budgeting mindset without having to explicitly tell them.
Another big worry that parents have when dealing with their children and pocket money is safety. If pocket money was to be given in cash form, your child would have to carry this cash around with them whenever they go out on the off chance that they would like to buy something. This may not seem like a big deal but if they have saved up weeks of pocket money, they could be walking around with a substantial amount of money, especially for their age.
This then raises the issue of the money being lost or stolen which is something nobody should worry about, let alone experience. By going digital with pocket money, children can then instead carry around just a card. In this case, even if they were to misplace their card, it can be frozen instantly, and their money protected.
This idea of safety can then also be extended into the idea of monitoring if they are spending their money safely. When giving your child cash, they can spend it as they like and where they like, which can be an issue if you do not know what they are buying. By going digital, monthly statements give a summary of expenses and where these expenses were incurred. This allows you to monitor your child’s spending and ensure they are acting safely and responsibly with their money.
Not only does this protect them, but it also teaches them the value of money by showing them how to use it safely.
When it comes to digital banking for children, a lot of parents opt for an easy-access savings account. The benefit of this is that it gives children instant access to their money, which is usually what pocket money is given for (small, regular purchases). However, there are some added benefits to these accounts that make it more favourable than cash.
Firstly, it makes it a lot easier for children to track their money. Putting all of your money in a piggy bank is great if you want to shake it around and guess how much you have based off of the noise it makes, but without opening it and counting, you never really know. By having the bank display exactly how much your child has, they can begin to pick up good budgeting habits from a young age.
Secondly, a lot of banks have specific accounts designed for children that also introduces them to the concept of interest. By having your child’s pocket money go into an account that pays interest, they can see the benefits of saving their money and their total balance increasing the more they save.
Apps helping to educate:
The entire aim of pocket money is to reward your child whilst also teaching them good monetary habits, and as mentioned going digital with pocket money does already do that in indirect ways. But there are also dedicated apps and banking features to assist you with teaching your child the true value of money and budgeting.
Most banks have always offered the opportunity to open separate accounts to organise your savings for each goal, but now it is easier than ever. For example, one of the newest and most popular digital banks, Monzo, offers “Pots” within their app, allowing users to organise their money how they wish. For example, if your child has had their eye on a game for a while, but also wants to save up for a hoodie, they can open two separate pots and track how close they are to their goal. When going digital with money, Monzo is a great choice as they are fully online, meaning they have no physical branches and thus maintain their app to the highest level. A lot of new banks are also taking this approach, again highlighting why going digital with money from a young age is a good idea.
There are additional apps outside of the bank’s own that offer help with educating children about money and budgeting, such as GoHenry, but these often have paid memberships and are usually aimed for older children. Of course, if the monthly subscription and what the app offers works for you and your child, they are great tools to be used, but do not think that they are absolutely necessary.
As with everything nowadays, times are changing. The days of notes and coins in our pockets are coming to an end, being replaced with a magnetic stripe and a PIN. Luckily, this is a change designed with everyone in mind. It allows parents to assess their children’s habits, allows children to learn and enjoy their money at the same time, and keeps everyone moving forward with their money.
As Clint Wilson, founder of Nimbl, said, “you wouldn’t teach your child how to use a typewriter instead of a computer, so why do the same with money?”. Whether you decide to go for prepaid cards, gift vouchers, or anything else, we are in a great time for children to be learning the value of money. Happy spending!