Don't let Pikachu shock your child's wallet! Practical money management tips from Clint Wilson

As society becomes increasingly cashless, paying for things becomes easier and easier. With the swipe or tap of a card, or the click of a mouse, contactless payments and ecommerce have made paying for things quick, simple and painless. Well, relatively painless.

Whilst cashless payments make life easier for parents, for our children, they make understanding the value of money much harder. We recently surveyed 6,000 parents and found that 7 in 10 felt that children understand the value of money less well than they did when they were young. Two-thirds believe that digital money is partly to blame.

It’s easy to see why. When we were young we knew how much money we had with a quick jangle of our pocket! These days, as online and card spending increases, it’s possible for children to spend without ever actually handing over any cash.

With digital payments, it’s easy for children to lose track of how much they’ve spent or to fail to appreciate the value of what they’re spending.

A friend of mine learned this the hard way. In the space of one afternoon, her son managed to spend more than £170 on in-app purchases on a game on his dad’s iPad. Each new character could be bought with a single tap that cost £1.50. While the son knew each tap cost him money, because he wasn’t handing over cash he quickly lost track of how many times he’d tapped and how much he’d spent. Needless to say, his dad wasn’t happy when he opened that month’s bank statement!

With the introduction of a monetised element in Pokémon GO, allowing players to spend £3.99 on 500 pokecoins, there is a risk that this experience will be repeated by children across the country. Children might know how many combat points a Squirtle would fetch, but do they know what else the £3.99 used to catch him could get them?

Thankfully, there are a number of simple, practical things you can do to help ensure that your children develop an understanding of the value of money.

Rebrand ‘pocket money’
While parents give their children pocket money to encourage responsible spending and saving habits, children often see it as a treat and have a tendency to want to blow the whole lot in one go. In our house it was always Moshi stickers and gel pens. Perhaps the root of this problem lies in our use of the term ‘pocket money’? It implies something that is easily spent, a treat to spend on sweets or comics, knowing that for important purchases like trainers for school, the bank of mum and dad will cover the cost. An ‘allowance’ on the other hand, suggests something that requires budgeting and more careful management. It’s typically something given to older children. Don’t believe me? Try telling your 15 year-old he can have his ‘pocket money’ in front of his mates and see his reaction.

The other problem with the term is that it can create confusion around paying for things online. There is a danger of allowing children to develop a disconnect between pocketed pocket money, physical currency, and pocketless electronic money. By changing the name to ‘allowance’ it may help children realise that money is equal in value however it is spent, be it from an electronic wallet or our physical wallet.

We could start our children’s financial education by changing the words we use. Parents often use the term ‘allowance’ when their children go to secondary school, but how about introducing it earlier, while they’re still at primary school, aged 7 or 8.

Give children more responsibility
The best way of learning is through doing, even if it means making a few mistakes along the way. So, at the same time as introducing the term allowance, make it meaningful to your child.

We all spend much more on our children than the pocket money we give. So, consider giving your child some control over elements of the wider spending. My wife and I tried allocating some of our daughters’ clothing spend to their allowance and, after a few mistakes, they have become much more responsible with money. Rather than buying the first dress or top they see, they now spend longer looking for something they really like, or one that’s on offer -meaning their money goes further.

Don’t ignore online spending
Buying online is an integral part of most household expenditure and it’s important to introduce this early to young people. As well as understanding the value of money, however it’s spent, children need to appreciate the risks and benefits of buying online. If you currently use your card for their app purchases or music downloads, consider making this spending part of their allowance.

Once children are old enough to use a computer without full time supervision, then they should be taught about spending safely online – it’s all part of keeping them (and their finances) safe. How to identify a secure site, enter card details correctly and complete the banks security checks are all important skills for children to learn.

Consider a child-focused product
There are prepaid debit cards available specifically designed for young people and it's a great, safe way to introduce them to learning financial confidence. Our children use a service that allows us to set spending controls and even decide how/where they can use their card (online, cashpoints etc.). We get an alert every time they use their card and our girls can check their balance and add money to their savings, online or via an app. It’s really helped them learn to spend and save more wisely.

Empowering children to make better decisions, by giving them more responsibility, is all part of them growing up to become responsible, confident and competent adults. Done in a controlled way, with supervision, this is a great way for them to learn. Don’t be afraid to start early.

Clint Wilson is a father of four and the founder and CEO of nimbl, the prepaid MasterCard debit card for children aged 8-18. 

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