Piggy banks are not financially literate, but they are a fun part of childhood. Unfortunately, piggy banks do not teach real money management to kids.
Our kids are growing up in a world that uses increasing amounts of money that we can’t see or touch. We spend and receive money every day that never exists in the form of cash.
However, we continue to give our kids cash and piggy banks mostly because we grew up with piggy banks. But cash and piggy banks fail to teach today’s kids real money management.
A piggy bank is not a real bank
As storage containers, a piggy bank is no better than a paper bag or mayonnaise jar. Even with bells and whistles, a piggy bank only stores money.
A piggy bank doesn’t read checks
How can keeping cash in a container help your kids learn how to track a balance to manage a checking account?
A piggy bank can’t do math
A piggy bank can’t subtract withdrawals and adjust the total or print out a receipt like an ATM machine.
A piggy bank can’t process debit cards
Debit cards are the new cash, even though they don’t look or feel like cash. To use one responsibly requires thought and knowledge about one’s account balance. A piggy bank can’t adjust the total without a physical recount of the remaining cash.
A piggy bank can’t pay a credit card bill
In reality, a credit card lets you borrow money from someone else’s piggy bank. But you can’t pay a credit card bill with physical cash. Payment has to be done with a check or electronic transfer from an account with sufficient funds
Piggy banks do not teach real money management
Parents need to think outside a piggy bank and connect allowances to the real life. In doing so they help kids learn to manage money in a real-world setting.
Using a guide like The No-Cash Allowance can help parents teach their kids to manage money as a number. Children have a hands-on money management experience at home at no extra cost to their parents.
A no-cash allowance is a system in which a child controls all funds received from parents through a written account initially kept in the home. Adults act as bankers and the child as account owner.
A no-cash allowance teaches money management whereas piggy banks don’t. Using an account that records all money in and out as a number teaches that:
- Deposits of all money makes the number bigger.
- Spending money always makes the balance smaller.
- Numbers never lie so it is always clear who got paid and when.
- Decision-making about money become routine experience.
Rethink your allowance system
- Read my book The No-Cash Allowance or create your own allowance tracking system. It is essential that kids learn to record every money transaction and that the account be in writing or printable.
- Discuss the allowance plan with your parenting partners. Consider this as an educational activity that has consistent rules. This is more about parenting than financial expertise.
- Determine a regular amount for each child. Decide what additional earning opportunities to offer. Add spending responsibilities so a child has to balance spending for both fun and necessary expenses.
- Meet regularly with kids to discuss and review spending history and future plans. This is why a written or printable account is important.
- Be prepared to learn with your child. There will be many changes to how we use money in the years your children are at home. Consider this a great opportunity for you to have money conversations over the years.
Interesting read: Why Piggy Banks Fail to Teach Wealth Habits to Kids
Lynne Finch helps parents teach their kids about money from their first allowance to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school.
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