Doug Anderson discovered his kids' interest in money started with the tooth fairy.
"They start learning a little bit about money because they start to accumulate some," said Anderson, who owns a business media company based in Washington, D.C., and has four kids, aged 6 months to 9 years, including a 5-year-old who just lost a tooth.
The tooth fairy still largely operates in dimes, quarters or even dollars. But soon, given the lack of cash parents cart around, could it start to pay by Venmo?
According to a 2016 Pew Research Center study, 24% of Americans indicated they don’t make purchases using cash during a typical week.
And that's made teaching children about the value of money, from how to count and pay with it, to how to save it, a particularly 21st century challenge.
“We’re vastly approaching that real time where’s there no cash,” said Neale Godfrey, of the Children's Financial Network, a company she founded in 1989 to help teach kids and parents about money. “Our kids will look back on bills and coins as relics.”
Fifty years ago, the ATM was a novelty. Now, there are so many different ways to pay for things. We’ve still got plastic — a 2016 study from credit card processor Total System Services found 75% of consumers surveyed said credit or debit cards were their most preferred form of payment, with just 11% preferring cash.
But now there are also digital options, from Apple Pay to apps such as PayPal, Zelle and Venmo, which let you to send and receive money with a few taps on a smartphone.
For parents, this shift means rethinking how to teach kids about money.
Where earlier generations earned cash allowances or received money as gifts from grandparents to buy a toy or candy, today they may receive a digital gift — such as an iTunes gift card. At school, we don't give kids lunch money. We just add funds to their school account digitally.
Robin Taub, a certfified public accountant and author of A Parent’s Guide to Raising Money-Smart Kids, suggests getting kids starting to think about money around the age of 5, or whenever they “start to express an interest or a curiosity” about money.
“That tangibility of feeling and handing over cash to somebody feels very real, that sense of loss which is hard to replicate when you’re using plastic,” she said. “You just don’t feel like you’re losing it or spending it.”
A world without cash isn't a crazy notion. Look at countries like Sweden, a model for a cash-free world, where even churches have started taking donations via mobile app.
Bring out the bills
Godfrey of the Children's Financial Network says the most important thing parents can do is not keep money a secret, but talk openly. "All they see us do with money is spend it. They don’t see us save, or pay bills or give to charity. Make money discussions a normal and healthy part of your life with your kids."
Cash still carries value when it comes to teaching, Godfrey says. "We teach little kids to brush their teeth. We teach them to stop at a light. We teach them not to talk to strangers. We try to make it as visual as possible.”
For older kids, Godfrey suggests starting off with something real, like taking their money to a bank and opening an account. Then, you can flip to online elements like apps, but kids now have a sense “that it started out to be real.”
Learning about the value of money isn't just about how many quarters are in a buck. It's important to teach kids about planning as both physical and digital temptations to spend pop up.
"Kids will probably tell you that 'you don’t understand,' so come prepared with a planning story of your own – when you resisted buying something impulsively so you could save for something important," Kurt Rupprecht, a financial advisor with Northwestern Mutual K Street Financial Group in Washington, D.C., said.
One way to encourage this is the 4-Bank System, where money kids receive is split between four "bank" jars: spending, saving, giving, and investing. "It’s a great way to teach children to plan and set aside money for different wants and needs, now and in the future," Rupprecht said.
There are other digital services parents can consider for older kids to help them manage money. Greenlight is a debit card for kids, and looks like your typical credit card. However, parents control what stores can accept the card and receive alerts when a purchase is made.
“(Parents) had this desire for their kids to be smart with money, but didn’t have the knowledge or the time,” said Tim Sheehan, CEO of Greenlight. “These topics weren’t really being taught in school.”
Anderson, the father of four, said around the time of the tooth fairy's visit to his kids, he started a banking account with each child to give them "an understanding about keeping (money) there and watching it grow." His kids earn "semi-regular contributions" by completing chores or meeting other goals.
He also makes sure to put those accounts under their name to capture their attention when statements arrive in the mail. "It gives the kid a sense of buy-in to it, but it also discourages them from spending it."
Anderson saw this strategy pay off recently when his two oldest kids wrestled with whether to purchase an Xbox video game console, even independently going online to find the best deal.
"They can feel a sense of pride and ownership they have this money in the bank and they can see it right there."