The biggest money challenge for kids today is learning how to manage cashless spending. Using the no-cash allowance solves this because kids track all their money as a number, whether it be a gift card, a debit card, or physical cash.
When kids use this process they see a single number representing their total funds. Seeing a number also makes kids think, at least for just a moment, if they really want to subtract (spend) and see their balance get smaller.
A no-cash allowance gives your child real control of real money, including cashless spending. Your child tracks and controls the money in an account in your home–similar to your checking account. It is possible that much of the money may never exist in the form of cash. The child receives larger amounts of money and more spending responsibilities over the years.
The no-cash allowance is a experiential day-to-day money management system for kids from preschool through high school. The kids (not the parents) are responsible for maintaining the account initially kept at home. All money in and out is tracked as a number giving the kids experience managing cashless spending like adults.
As facilitator or banker, you agree on the amount that your child can add to their account on allowance day. A consistent inflow gives your kids an amount they can rely on for future expenditures. This amount is guaranteed with raises on birthdays and is never withheld.
You must gain control over your money or the lack of it will forever control you.~ Dave Ramsey
Because your kids are tracking their own money, they can add their allowance to their account by themselves. This also means that if they don’t keep accurate records they won’t know how much money they have.
It is a great system for teaching children to handle money. It is easy to understand and deals with the subject in a very realistic and contemporary way. The examples of dialogue between a parent and child are excellent. They help to create a picture of a real life situation in conversation with children. ~ book critic
Kids need to manage cashless spending
The ability to control one’s money provides the power to make choices. Money management techniques learned by hands-on practice with real and invisible helps a child gain knowledge about the complexities and realities of money.
This is why it is so important for parents to provide their kids with money with responsibility and the control to manage all by themselves. The words of Confucius ring true when we let our kids manage their own money.
Tell me and I will forget, show me and I may remember, involve me and I will understand. ~ Confucius
Seeing the numbers tells the story
Putting the kids in charge of tracking their allowance has several benefits that add to the experience over the years. Learning to manage cashless spending is a life-skill that they can take with them when they leave home.
The account records the history of money in and money out, showing kids where their money went. “Oh, that’s the toy that broke the first time I played with it.” Parent and kids can review and discuss, encouraging money conversations. “If I don’t go to the movie, I can buy that new game today.”
Numbers eliminate confusion “Yes, you did get paid for mowing the lawn; it’s in your account” Kids own their number. My daughters could recite their account balances to the penny. “I have $23.42 in my account, and I have $36.12.”
79% of parents agree that conversations with kids about finances makes a difference. T Rowe Price Parents, Kids and Money Survey
The reality of seeing the numbers reinforces the result of money choices. Younger kids start with a paper and pencil log, while those computer-savvy kids create their own spreadsheet. It’s all about money in and money out. Any family can give their kids this hands-on money management experience in their home or homeschool. No apps needed. Let your kids be in charge and be amazed at how capable they can be.
Use my money: An 10-year-old boy had received a subscription to his favorite NFL team’s junior fan program. When his 11th birthday was approaching his mom asked him if he would like to continue the membership. He agreed that he liked it and then, to his mother’s surprise, said, “I think I want to use some of my money to pay for it.”
Accept responsibility: When an 11-year-old boy lost his very nice winter jacket at school, his mother was understandably upset. After talking about it he agreed that it was his fault. Mom then told him that he had to use his own money to buy a replacement. Without complaining, he did. It was the cheapest jacket he could buy, but the lesson was learned.
When your kids track all their money as a number, they become better money managers.
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Next: Defining the roles of parent and child in The No-Cash Allowance