Why digital banking is an essential financial literacy skill for kids
The piggybank is obsolete. The Covid-19 pandemic accelerated the world’s shift towards digitization. Virtually every aspect of modern life has been digitized, and it seems there is an app or digital solution for everything, from transportation to shopping, learning, and banking. However, while the world progresses, the tools for teaching children about money have remained largely unchanged. My youngest daughter’s school-based financial education last year was limited to identifying different coins. However, in a cashless world, the traditional approach is no longer sufficient and perhaps detrimental. It is crucial to introduce children to digital banking to equip them with the necessary financial literacy skills to navigate the digital economy. By giving kids an introduction to digital banking, credit unions can ensure that the next generation has a strong foundation for managing their finances.
We all had piggy banks. The piggy bank has been a popular tool for teaching kids about saving money for many centuries. In fact, the piggy bank can be traced back to the Middle Ages in Europe. Back then, people would save their money in jars made of clay, and the clay used to make these jars was called “pygg.” Over time, the pronunciation of “pygg” evolved to “pig,” and people started making their jars in the shape of a pig. The piggy bank also has roots in Chinese culture, where it has been a common tool for saving money since ancient times. The piggy bank became a symbol of frugality and saving, and it was often given as a gift to children to encourage them to save money.
Today, where cashless transactions are becoming increasingly common, the teaching value of a piggy bank is not as relevant or practical as it once was. A piggy bank is a physical representation of money, which can be a useful tool for teaching children the basics of saving and budgeting. However, with the growing trend towards digital transactions, children may not be exposed to the tangible representation of money that a piggy bank provides. Instead, they may be more likely to interact with money through digital interfaces and payment methods.
Like every other skill that we teach children, it needs to be taught in phases based on age and level of responsibility. A six-year-old should not be given unfettered access to a debit card and even tweens may not be prepared to safely manage passwords or security for their own digital bank accounts. Instead, digital banking should be introduced in phases, teaching children the basics of online transactions and gradually increasing their level of responsibility as they become more proficient.
Chore and allowance apps present a perfect starting place for children and young adults to become comfortable with using digital tools such as mobile applications and online accounts. This familiarity can make the transition to using digital banking platforms easier. In these programs, children can track their earnings and begin to equate effort with value.
Chore and allowance apps can teach children about budgeting, saving, and spending money wisely. Not only are they good practice for the future but they are convenient for parents who do not need to find exact change to pay their children for chores, grades, or weekly allowance. Being able to view digital accounts whether or not they are attached to an actual bank account allows kids to experience money in a digital way. These skills are essential for managing finances, and they can be applied to digital banking as well.
Many chore and allowance apps allow parents to monitor their children’s spending and savings habits. Some apps facilitate setting savings goals for digital purchases. For example, if a child wants to purchase a new video game or app, parents can encourage them to save a certain amount each week or month until they have enough to make the purchase. This can help parents teach their children how to manage money responsibly, which is a crucial skill when it comes to using digital banking.
Using chore and allowance apps can help children and young adults understand the importance of keeping their personal information and financial details secure and how to protect their personal and financial information from cybercriminals. This knowledge can be applied to digital banking, where security and privacy are paramount. By understanding the risks and how to protect themselves, kids can avoid becoming victims of online fraud or identity theft.
As part of their financial wellness offerings, credit unions can provide access to chore and allowance apps to their members whether they connect to actual accounts or not as a way of teaching the next generation about money in a cashless world. There are several chore and allowance apps on the market and some specialize specifically in working with credit unions and providing custom branded platforms, including My First Nest Egg.
Teaching kids about money in a cashless world requires creativity. Chore and allowance apps can serve as a stepping stone to digital banking by providing a foundation of financial literacy, digital literacy, and responsible money management.