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Hi Nicole. I have a 10-year-old and a 13-year-old and with all this talk of going cashless, I am a bit worried about how to teach them about money. Currently, they save coins and notes in a jar, which I give them for chores – as you recommend – for other than normal around the house help. How do you recommend I start to show them the digital side of it all? Are there any good apps or services that teach kids as part of the technology? Cheers, Sandra
Sandra, a fully cashless economy would make it so much harder trying to teach children about money. And I am concerned.
The transition to a cashless economy means its becoming more difficult to teach kids about money.Credit: Dionne Gain
Yes, we have already moved far past the days of cash from a pay envelope being doled out around the dinner table for each essential, and maybe indulgence, until there was none left. But the appreciation of money has subsequently, arguably, been eroded.
So you are on track with a money box, particularly if it is see-through. For now, your children can see something vital: money runs out. In the transition to a world in which all transactions are electronic, though, I believe a mixture of the physical and virtual is best.
Indeed, I pay my children in cash, and they give it straight back and ask me to swap it to their special debit cards – more on that in a minute.
But this interplay and exchange is valuable because it communicates two important lessons. The first: money runs out. The second, which is related: you have to carefully allocate your finite amount.
What follows from that is the understanding every financially functioning adult needs: targeting goals and delaying gratification net you far greater rewards than spending as you go.
There are a range of transactional apps with a focus on children saving and becoming economically empowered. One such app is Spriggy.
The service allows parents to top up their digital wallet from an external bank account and then transfer money to designated accounts for their children.
It’s a child-tailored twist on a debit card (it’s a Visa) that allows you to set up and record chores, as well as neatly display separate savings for bigger goals. For teens, it has also just rolled out a BSB and account number for transfers from other family or friends to the Spriggy card.
However, Spriggy doesn’t pay interest. Instead, the business model is to charge an annual fee of $30 for using the app. So, you pay while they hold your money.
Meanwhile, some youth savings accounts, which do pay interest and generously so by adult standards, come with even better teaching tools and tech than Spriggy.
Of the accounts with dedicated money messaging for children, CBA has long been the trailblazer, although it was forced to close its schools banking program after a broader regulator crackdown. And special mention to Southern Cross Credit Union’s Little Star Saver for its fun finance intel and great stickers.
So what do I do with my children? Because not all accounts allow children to access their money, we do use Spriggy, but just for their day-to-day funding needs.
The home for their over-and-above savings is the highest-interest-paying kids account: Great Southern Bank.
That best-in-market interest is 5.5 per cent with no qualification conditions on balances up to $5000 for children aged up to 17; the Bank of Queensland offers a potential 5.5 per cent (you need to meet conditions) from ages 14 to 35, with a $50,000 balance cap.
Kids accounts also often waive fees for minors in an additional financial literacy learning. Besides cards and accounts, the other education-by-experience option when it comes to kids is over-the-shoulder investment.
We love an app called Raiz (formerly Acorn), a popular investment app which was the first to facilitate round-ups on purchases on a designated card.
This spare change and/or a nominated regular amount goes into a diversified, pre-selected investment portfolio and the app now also allows you to invest on behalf of your children.
It costs $4.50 per month for accounts with a balance under $20,000 – so watch that your change is not wiped out by that charge – and 0.275 per cent a year at and over that.
The nice visual interface helps me show my children that investment values fluctuate, but regular investing can be powerful.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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