More and more countries have begun to reduce the number of financial transactions using coins and banknotes. In Sweden, for example, only 1% of the value of all payments are now made using ‘traditional’ money. Many shops, cafés and market stalls, even for small amounts, only accept cards.
But the question is, as we are moving towards being cashless societies, how can kids appreciate the value of money, when money becomes a virtual concept and nothing physical is exchanged?
A cashless society makes it tricky for parents to teach their kids about money. When there is no cash to see or touch, it reduces the opportunities for parents to teach kids about money management. And the intangible nature of virtual cash makes it difficult for kids to realize the consequences of overspending, much less the concept of saving.
In increasingly cashless societies, the tap-and-go methods of payment are becoming the trend, making it easier for kids to get into debt. Since credit cards are so readily available to young people, it exposes them to a high risk of getting into debt early on in their lives.
In a new survey of 1,100 students from high schools around Australia, Katrina Birch, chief executive of not-for-profit Financial Basics Foundation suggests most were “confused about credit cards.”
The survey found more than half the students believed it would take less than three years to pay off a $2,000 credit card debt, paying the minimum amount at an 18 percent interest rate. The correct answer is 15 years.
While Australians struggle to teach kids about digital money some countries are already one step ahead in preparing the new generation. In Singapore, specially- designed initiatives have been rolled out to help kids better understand money in a cashless world, and understand the process behind the tap-and-go action such as the POSB Smart Buddy Watch, where kids wear smartwatches linked to their parents’ bank accounts. Parents can monitor and allocate spending for their children through an accompanying mobile app, and children can pay for things like food and books with their watches in selected primary schools and stores.
The progressive switch to cashless societies can have a dramatic impact on future generation’s financial literacy if not sufficiently addressed.
Parents need to start teaching their children about money in both its forms, cash and digital. Looking at the digitalisation of finance will be vital in preparing them to manage their own finances.
Read more …from banknotes to credit cards