Today’s fantastic family finance article is:
“Don’t give your kid a credit card — or even a debit card — for as long as you possibly can.”
Many parents echo this cash-only mantra for kids. And Beth isn’t just “any parent.” She’s a personal finance commentator and journalist, author of Make Your Kid a Money Genius (Even If You’re Not), and a member of the President’s Advisory Council on Financial Capability.
Here’s the expert rationale: cash makes kids more mindful of their spending. It’s tangible. Kids feel every transaction. On the other hand, cards and electronic payment methods discourage mindful spending. The money seems invisible, magical, infinite.
And therein lies the rub.
“Protecting” your kids from non-cash forms of money only prolongs their ignorance. It’s a very dangerous ignorance. Consider that cash transactions will be a vanishingly small fraction of the financial reality your kids will be experiencing as young adults.
So take the time to explain to kids how all forms of money work. Demystify the “magic” of electronic payment. Give your kids hands-on experience with appropriate versions of the payment methods they’ll be using as adults. Your kids are smart. They’ll pick up on the concepts rapidly.
Sure, they’ll still make mistakes. But better to make those mistakes with this “magic money” early, while the repercussions are minimal. Later, those mistakes will be far more costly, if not debilitating.
And what about mindful spending? Turn on real time transaction alerts that report the remaining balance after every purchase. Instant awareness.
Don’t protect your kids from the more magical forms of money. Educate them.
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