How Do You Explain Invisible Money To Your Kids?

Learning about how money works is important for children. But today, when all of our transactions seem to take with the mysterious swipe of a card, or inside a computer. So how to teach children about money when nobody uses cash anymore?

I have a two year old son, and he is starting to understand the concept of “checking out” at the store. He likes to help write on the credit-card screen (I help him to type in our zip code, for example) and is generally very curious about all of this. But it occurred to me today that my son very rarely sees a cash transaction, or any cash at all for that matter. I use a debit or credit card (which is paid in full every month) for nearly every transaction.

I’m wondering if I should start using cash much more often so he can see the money and understand what is going on, and prepare him for using cash when he starts getting an allowance. Or, since cash is so un-used in my life (and so many others), should I teach him how banks and debit cards work?

In other words, how do kids today learn about “money” as a concept, when they so rarely see actual money changing hands?

(Photo: Jakesdad)

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  1. coffeeculture says:

    Make sure your child knows the connection between the swipe and the cash behind it…I know they sell those toy cash registers with the swiping card & cash inside.

    Maybe open a “bank” inside the house and allow your child to “deposit” their allowance into a lockbox (with interest). Then figure out a way to tie that to “swiping” the card (I don’t have any ideas right now).

    Sounds convoluted, but so is the idea of banking…this connection is sorely needed!

    • blandname says:

      @coffeeculture: When I was a small child (about six), I asked my mother at the grocery store checkout why the people with credit cards didn’t have to pay (to my six year old mind payment=cash)she explained that the card just deferred payment and that the cardholder had to pay the purchase plus interest at the end of the month.

    • AlexDitto says:

      @coffeeculture: This idea of the connection behind the “swipe” and the “cash” behind it got me to thinking: how many adults know the connection between “cash” and the “value” behind it?

      Interesting that our acceptable level of abstraction only goes so far.

      I don’t think the idea of banking is too convoluted, though. The idea of “gaining points/saving them” and “using points/spending them” seems to be a commonly recurring theme in life. You can make biscuits, save them, or eat them, for example.

    • Xerloq says:

      @coffeeculture: We do something very similar with my three-year-old son.

      He has a piggy bank at home that holds his allowance and money from extra chores. We’ve taken him to our bank (credit union, actually) to show him where we keep our money. He knows the CU is our ‘piggy bank.’

      When he sees something he wants, we ask him if he has enough money to buy it. If he knows how much he has, and if it’s sufficient to cover the purchase, we let him buy it – mom and dad cover it for him until we get home.

      When we get home, we make him watch us take the money out of his piggy bank. Seeing the money leave creates a strong connection.

      After doing this a couple of times he started asking if the store took money out of our bank when we buy things. He also thinks twice about purchases because he knows we’ll come take the money out of his bank.

      I’ll introduce the idea of credit a little later. Compound interest is going to be fun, though I have a plan.

  2. Downfall says:

    I’m 26. When I was in high school my geometry teacher was confounded that “figure out the angle of the hands of the clock at such and such time” word problems were basically ruined by the fact that most of us didn’t know how to read an analog clock. I suppose the next variant is that the next generation won’t quite get it when word problems involve loose change…

    • pecan 3.14159265 says:

      @Downfall: Seriously? You guys didn’t know how to read an analog clock? I’m a year younger and we’ve always had a ton of analog clocks in the house!

      • Applekid ┬──┬ ノ( ã‚œ-゜ノ) says:

        @pecan 3.14159265: I’m not that much older and my gut feeling after reading “high school” and “geometry” is that some jokers were pulling her leg to try to get out of answering those questions.

        I remember making issue with the “train leaves city at xx mph” word problems by observing that trains have to obey switching and vary their speed with the terrain and that without a full map of those rules it’s impossible to answer. He conceded that point and said it was ok for the class to assume it was constant speed…. except for me. The teacher amended my word problem to make me account for acceleration at the source and deceleration at the destination.

        I both hated and loved that guy.

    • backbroken says:

      @Downfall: Holy truck we’re doomed.

    • korybing says:

      @Downfall: Honestly? I’m 25 and while digital clocks are all around, I still have no problem finding an analog clock. Maybe it’s because our high school was super poor but all we had in the classrooms were analog clocks to tell us when class started/was over. Are there really people our age who don’t know how to read an analog clock? That strikes me as really really sad.

      • Eyebrows McGee (now with double the baby!) says:

        @korybing: My husband’s 32 and has trouble with analog clocks. He can read them, but he has to stop and think about it. I’m a year younger and read them at a glance.

        Different emphases, I suppose.

        • Garbanzo says:

          @Eyebrows McGee (now with more baby!): The clock I grew up with had Roman numerals. I read analog clocks from hand position alone. The first time I ran into an adult who couldn’t read a numberless clock (because they couldn’t see what the hands were pointing to) it blew my mind.

          I’ve been on a lifelong quest to find a wristwatch with a 100% blank face. No luck so far.

          • pecan 3.14159265 says:

            @Garbanzo: I believe Movado makes blank wristwatches. It’ll set you back a lot of money, though.

            • Garbanzo says:

              @pecan 3.14159265: The blankest ones I could find on their webpage all have a dot at 12:00. I’ve seen plenty of watches that are blank except for one pip at 12. Also common is a pip at 12 and a brand name at 6. Still haven’t seen a 100% blank one.

              • Radi0logy says:

                @Garbanzo: How would you know which direction was the top if it had nothing at all on it? I guess in the grand scheme of things it wouldnt matter, but I’d be pissed to find out I had been wearing my watch upside down for 3 years.

          • MostlyHarmless says:

            @Garbanzo: I remember the first time as a kid when I saw a numberless wrist watch, and I suddenly realized that as long as you know what 12:00 position is, you do not NEED any numbers AT ALL. I was totally blown away at whoever thought of it.

            That was my first lesson/experience in minimalism. I follow that principle to this day when I design my slides/interfaces.

            • korybing says:

              @MostlyHarmless: I saw a clock at Target this weekend. It was made to look like a giant wall clock that had it’s sides sliced off, leaving only the 12 at the top and the 6 at the bottom. They called it the Half Hour Clock or something schmaltzy like that, but I thought it was really clever, since the arms still went around it, but the only “clock” part was that narrow vertical slice.

          • chrisgoh says:

            @Garbanzo: Look at a Swatch store, they have many with blank faces, like this one – [www.amazon.com]

          • Eyebrows McGee (now with double the baby!) says:

            @Garbanzo: Try Skagen:

            [www.skagen.com]

            [www.skagen.com]

            [www.skagen.com]

            [www.skagen.com]

            Just from a quick search. My husband wears a Skagen; one of the ones with a blue face. He loves it and it draws a lot of compliments.

        • korybing says:

          @Eyebrows McGee (now with more baby!): @Garbanzo: Same here. I can read them from the hand positions, but I also remember being taught extensively how to use analog clocks in elementary school. I had no idea so many people had a problem with them, that really floors me.

        • chiieddy says:

          @Eyebrows McGee (now with more baby!): My mother wouldn’t let me get a digital watch until I could read an analog clock and this was over 30 years ago, so the problem existed then too.

      • Downfall says:

        @korybing: I can read one if I stare at it, but it takes a while to deconstruct. And my school district wasn’t rich by any means, we just had bells. Most of us had watches– cheap timex digital ones!– to see how much longer was left in class. I don’t recall an actual clock on the wall, but that was obviously a while ago.

      • Rectilinear Propagation says:

        @korybing: I have a hard time finding clocks of any kind in public nowadays. I find it baffling that movie theaters don’t have clocks in their lobby. I don’t know if the assumption is that everyone either has a watch or a cell phone or if clocks are somehow ‘out of style’ but it still bugs me when I’m out somewhere and I can’t find a clock.

        • korybing says:

          @Rectilinear Propagation: That’s weird. I wonder if I just live in a place where digital clocks are less common? I’ve never thought that analog clocks were in danger of becoming obsolete around here. The giant clocks on banks and stuff are digital, but I’d be hardpressed to find other public clocks, especially indoors, that weren’t analog clocks.

          • pecan 3.14159265 says:

            @korybing: In my experience, most clocks in airports are analog because they can run on battery. If you have to adjust a clock for Daylight Saving Time, you want a digital clock that can do it automatically. But if there’s a power outage, you have to go around and set up the digital clocks again anyway. It’s a trade off, but most airports I’ve seen use analog clocks more than digital ones.

    • henrygates says:

      @Downfall: I thought they taught you how to read clocks in elementary school.

    • zombies.like.lattés.too says:

      @Downfall: to be fair, those word problems ruined themselves.

      more like “figure out the angle of the hands of the clock based on the 10 minutes of my life i just wasted solving this pointless problem.”

    • [DFX] Deimos says:

      @Downfall: What kind of idiot can’t read an analog clock?

    • psm321 says:

      @Downfall: Odd. I’m 24 and we definitely covered reading analog clocks many times over multiple years in elementary school, with the teacher’s big cardboard clock and smaller ones for all the students

    • Moosenogger says:

      @Downfall: Schools are still teaching how to count money and make change in the earlier grades. However, it might not be enough if all the kids see at home and in the world are people swiping credit cards.

      Actually, I think the whole idea of how credit cards works needs to be explained to a few adults, too:

      [notalwaysright.com]

    • thisistobehelpful says:

      @Downfall: That’s pretty bad. Especially considering shows like Blues Clues still teach kids how to tell time.

  3. diasdiem says:

    Answer: When you pay them their allowance. It’s much more economical that way.

  4. aixwiz says:

    Hey! Us old fogeys still use greenbacks! And debit cards, too!
    Like it or not, using paper money isn’t going away anytime soon and there are still plenty of places in the world that don’t accept plastic.

    • nonsane says:

      @aixwiz: There is even a monopoly game that uses credit cards.

      Playing old monopoly and new monopoly one after another might be a good way to teach the kids about it.

      Maybe not the earning part.

      • oneandone says:

        @nonsane: I dislike new monopoly. Played it a few months ago with an 11-year old child who had never played old monopoly. I found it very, very difficult to keep track of my funds on the card (especially since things are now in the millions of dollars). It’s much harder to budget your property purchases without seeing the piles of money in front of you! Maybe it’s just me, but I didn’t like it.

        It raises an interesting question, though – should younger kids be learning the skills they’re going to need to manage their lives in the future (and so need to be famililar with credit cards, electronic devices, etc) or learning the fundamentals behind those technologies? Or does learning how to do it the old fashioned way actually put them at a disadvantage?

  5. WonderKatGoBoom says:

    Field trip! Go deposit money, and then go to the store. You have to be redundant with kids. Ask several times, “Well, how much money did we just put in the bank? How much is that? Now why can’t we buy it?”

    Also, teaching a new generation to use a ledger and have a sense of personal responsibility might prevent them from having the problems my generation has had.

  6. Sneeje says:

    Sorry, this seems like a dumb question to me. You might as well ask: how do you teach math when spreadsheets and calculators are more common?

    First of all, to the OP, your kid won’t really understand anything about money until they are 5ish. I started giving my kids a weekly allowance at 6 (one dollar per year of age). They have to divide it up into spend (50%), give (25%), and save (25%). We spend time each week talking about the money itself, how to count it, and how it’s used.

    We’ll get into more complex concepts later, once they understand saving, giving, and spending.

    • frank64 says:

      @Sneeje: I am sure it is fun for them and besides teaching them about money, it also helps with basic reasoning and give them a sense of control on something.

    • redkamel says:

      @Sneeje: I know someone that makes their kids pay “taxes” and “utilities” out of their allowance. Its hard not to laugh when an 10 year old tells you has a 15 dollar allowance, but 5 goes to taxes, 2 goes to water and power, 3 goes to savings, 2 to charity and he ends up with 3 dollars.

    • BytheSea says:

      @Sneeje: ITA. More precious parents overparenting.

  7. mwshook says:

    An old problem! I’m now 30, but remember learning about this when I was a youngster.

    Every time we went to a local grocery store, my mom paid for her groceries with a check. I never really grasped the idea of a checking account, and her answers about paychecks and banks never really made a lot of sense.

    Later, she started using an old DOS version of Quicken to keep track of the finances. I got to see her put in the information from the paychecks and her checks to the grocery store, etc.

    It made a lot of sense after the first day she got Quicken. But I was probably 5 by then.

  8. thesadtomato says:

    I’m guessing the OP doesn’t live in a city. Lots of cash only restaurants/cafes here. If I had a child, the child would see me use cash.

  9. 2 replies says:

    Screw this!
    Why do you need to teach kids about credit and debit cards at all?
    Kids shouldn’t need to learn about any of that until they have mastered writing a check (and at least tried to balance a check-book).
    Don’t let them have a debit card until AFTER that (most likely after they have graduated from high school).

    High school and before should be when they are learning about responsibility and the value of a dollar, not how to spend the money they haven’t earned themselves.

    Why is is that EVERY YEAR the same “Teach your pre-schooler/elementry/middle/highschooler children about credit cards” posts come out?!

    • Pink Puppet says:

      @2 replies by: Pecan Ï€ pretty much nailed it there. Working out simple explanations and examples for children is important in their development. It isn’t like you have to give them a debit card, or anything.

      It’s very healthy for a child to have a reasonable respect for money and knowledge of the mechanics thereof.

    • lmarconi says:

      @2 replies by: I do all my “checkbook balancing” on spreadsheets or through online banking websites. My mother thinks that’s absolutely ridiculous and still sets aside an hour every Sunday to balance her paper checkbook – which I have no clue how to do. Different strokes for different generations?

      • XTC46 says:

        @lmarconi: that paper checkbook is just a spreadsheet you write on… The is a colum for a memo, the amount you spent, and your new total. Move to the new line, write waht it was for, how much it was, subtract spent from old total, and you have a new total…

        we learned this in 8th grade home economics…

        • lmarconi says:

          @xtc46 – thinksmarter on twitter: Yeah I know what it is, my Mom has made many an attempt to teach me and convince me of the benefits. I just prefer to naturally do it with online/computer tools – Excel, Mint and checking my balance online like @korybing mentioned, and I see paper as too tedious to be necessary to learn. At the moment I have one income and only a few basic bills, so it’s not very difficult to work everything out online.
          I think tools like Mint are a lot better for teaching kids today than teaching them how to do it on paper – there’s at least a chance they’ll use something online and not much chance they’ll sit down on Sunday to work everything out.

    • wcnghj says:

      @2 replies by: @2 replies by: Will one need to write a check for any reason in 15 years?

    • Rectilinear Propagation says:

      @2 replies by: OK, why does this make you so cranky? The guy just wants to make sure that his kid doesn’t get the idea that a magic card gets you anything you want. No one is saying everyone has to teach thier kids about cards ASAP.

  10. LMacConn says:

    I am not a child, nor do I have any children, nor to I spend time with any children, but I was a child once.
    I don’t think I really got the concept of money until I was a teenager, but that didn’t stop me from understanding it enough as a kid to read the business section of the newspaper and do pretty well at M.U.L.E. while in elementary school.

    My answer is… Video Games. Pretty much every video game that has in-game money renders it digitally, and there are a lot of video game adaptations of board games. So, once someone gets the idea of paper money down, I imagine they’ll have an easy time substituting monopoly money on a board game for monopoly money in a video game. As a teenager I got into SimCity and Civilization, and learned more about debt there. As an adult I learned about the stock market through games like Hollywood Stock Exchange, Investopedia’s Simulator. I also learned a lot about personal finance by playing different characters in different MMORPGs.

    Personally, I had an easier time understanding money digitally than by using paper & coin currency. Likewise, I have an easier time reading a digital clock than I do an analogue timepiece. Oh, and velcro was much easier than tying my shoes.
    Likewise, looking at an empty wallet and saying “all gone” doesn’t have nearly the same impact for me as looking at an empty checking account balance and saying “oh —-”

    • Outrun1986 says:

      @LMacConn: Neopets is a great one for teaching kids about money, plus its free to play. It has the stock market (kids can play the neopian stock market and watch what happens to their neopian money), you learn about how things go up in price when there is less of them and also how stuff devalues when the market is flooded as well. Its better if they play with fake money when they are small than make bad decisions with real money when they are older!

    • AnthonyC says:

      @LMacConn:
      This was my first thought, too.

      SimCity, Civilization, any and all RPGs- instant need to understand cash, working to earn it, spending it, and in some cases borrowing it or leaving it in a bank for safekeeping (at interest). You won’t do well in the game until you get a sense for this stuff.

      Most online games tend to have some form of supply-and-demand-based price fluctuations.

      Similarly, there used to be a Caesar’s Palace game on the Genesis that worked wonders for showing why you shouldn’t gamble.

  11. Garbanzo says:

    I suspect that 2 is too young to really understand money anyway, even as cash. I went shopping in a drugstore with my sister and her daughter when the child was 2. Sis told the tot that she could have one thing in the store. Oh, you want the gum? Then you have to put the coloring book back. At that age the lesson was simply: you have to make choices.

    Maybe start there. Then when they’re a little older, give them a certain amount of cash at the store that they can spend as they wish, so they start learning about prices.

    When I was a kid my dad ran a family bank. He kept a ledger page for each kid that showed their balance and transactions. He gave out allowances by writing the credit in the ledger. When we wanted to make a withdrawl he just updated the ledger and gave us the cash. Seems like a natural enough way to introduce school-aged children to the concept of banking. Nowadays to update it you could allow the children to make a withdrawl by buying something at the store while you’re shopping, on your card. When you get home you just deduct the amount from their balance.

  12. Crabby Cakes says:

    Ah, now if only someone could explain this concept to my co-worker’s 20-year-old son, who recently racked up $700 in overdraft fees on $3-$15 debits. He A) didn’t know how much money was in the account because he hadn’t gotten his most recent statement and B) figured because the debits were so small, the bank wouldn’t notice.

    Let me reiterate that this is a 20-year-old 2nd-year nursing student.

  13. Illuminado says:

    I always used to joke with my little cousin when we were out shopping when I’d hand someone my credit card, “Shhh… they think it’s worth something!”
    I’d always get a couple of giggles until he was 10 or so and figured it out.

  14. Loias supports harsher punishments against corporations says:

    I’m for making children learn the old fashioned way first: with cash and then moving into a checking account as they get older. Children need to know that money is *tangible* even if most of the time we don’t use physical money. And, they need to learn that there are limits to what you can spend, or they will end up in debt.

  15. polyeaster says:

    @Coop B/c that’s what my folks did…and then I didn’t really have the experience of moderating my purchases…so now I’m severely in debt and even though I understand how the cards work, I can’t use them b/c it’s too tempting to treat them like they aren’t real money. Not educating your kids appropriately for their age is setting them up to fail later.

  16. MooseOfReason says:

    You can show them this video:

    Although I’m sure that’s not what you mean by “invisible money”.

    • Excited_Utterance says:

      @MooseOfReason: Well you’re a nut. You could go the sane route and do a serious investigation about how an economy of leveraged finance leads to an unstable regime.

      Or you could do this.

  17. axiomatic says:

    You charge them a 25 cent fee for every paper dollar they put in their piggy bank because the BANK OF DAD says piggy banks should only have coins in them.

  18. Mackinstyle says:

    I’d just simplify it to: money represents work you’ve done to earn things. The amount you have is recorded on a computer and you use it to get the things that you want/need, like Dora the Explorer shoes.

  19. reddbettie says:

    Once while working as a cashier in college, I was ringing up a man with his young daughter. He sat her up on the counter as he got his money out to pay. He gave her his credit card to hand to me. As she passed it over to me she said, “You know, even with this, he still has to pay!”

  20. xcharliemx says:

    I pull up to the ATM and request it to show my balance. I show my kids the balance. After they stop crying I explain once that’s gone the card won’t work.

  21. Al Swearengen says:

    How do kids learn about money? – When they go to college, get a college credit card, run up a balance on it, can’t pay it off, and have to come groveling back to you and you tell them to suck it up and pay it themselves. That is how they learn about money.

  22. BlackMage66652 says:

    He’ll probably figure it out by Middle School when he takes money out of your purse to buy some new fad item, whether it’s Pokemon, Pogs, Magic cards, games or junk food. He’ll do it atleast once.

  23. krista says:

    Start playing simple “shopping” games at home. You can use real cash or monopoly money – doesn’t matter. You can even incorporate the debit card concept once the child is a little older by putting money in the “bank” and giving a card worth that much.

    Have the child be the shopper sometimes, buying groceries or mommy’s shoes. Then have the child be the shopkeeper selling lemonade or artwork to mommy and daddy. Once the child gets a real allowance, let them spend it at the store for toys or candy, handing the money themselves to the cashier (always so cute!)

    Once they are good at numbers and counting, have them help figure out the cheapest item at the grocery store using the info tags. Discuss why you buy some things as cheap as possible, or why you want to sometimes spend more to get better quality.

  24. Covertghost says:

    How my parents did: Don’t spend money you don’t have, credit counts as money.

    I’ve never overdrafted, never in any real debt, etc.

  25. Pinget says:

    This really isn’t hard. For starters, the invisible money is called “Republican credits” at our house, a Star Wars reference. My older son gets money for doing chores, which he tracks in a ledger. When I buy him something with my debit card against his money, he subtracts it from the ledger. This is just like a checkbook for his money. What’s not to get?

  26. trixare4kids says:

    I just hope that she’s not letting her kid fiddle around with zip codes and checking out when there are people behind her (like me) trying to get out of the store and on with their lives.

    And get off my lawn too, ya hooligans!

  27. ponycyndi says:

    My son is 5 and is only now grasping the non-cash concepts- I occasionally get checks in the mail, or have cash to deposit, and I make a point to take him with me. He also knows that I go to work everyday, and that they pay me money into my bank, and I use the card to get the money out (usually paying transactions, not atm)

    I’ve also bought gift cards in front of him – same concept, you give them the money, then you can use the card to pay for things.

    For the OP, he is just letting the baby see him buying things- he also needs to see trips to the bank, and where money comes from, like explaining that daddy goes to work, and they give him money for that.

  28. thesadtomato says:

    @diasdiem: I read that one! Hilarious.

  29. MostlyHarmless says:

    @pecan 3.14159265: agreed. digital clocks are nowhere nearly as cool looking as analog ones. unless they are really artsy – and by extension expensive.

  30. SadSam says:

    @korybing:

    The save, give, spend plan is great and there are books/jars/piggy banks that go along with the plan if you need that much help.

    As child gets older you open a savings account for them and teach them how to make deposits, calculate interest, etc. When kids are older they might receive or earn more and be responsible for more, like they get the back to school money and they learn that they can buy one pair of really expensive jeans or they can buy more if they shop smart, etc.

  31. thisistobehelpful says:

    @wcnghj: Awww they’re just so cute when they’re all grown up!

  32. chocobo says:

    @wcnghj: I plan to exactly what your parents did when I have a kid.

    Set up his own bank account and give him a debit card as soon as he’s old enough to use it, and then set him up so he can check the balance online. He will learn how to not spend more than he has at a very young age.

    And if he does need to learn from making mistakes, it’ll be for spending $5 more than he has available… not for spending thousands of dollars at age 20 without any clue how to pay it back, like many uneducated college students do.

  33. catastrophegirl chooses not to fly says:

    @Downfall: i get your point but sundials are still around for purchase and some people do actually read them.
    unlike checks written from scratch, using a sundial isn’t too likely to get you investigated for suspicion of fraud

  34. XTC46 says:

    @Outrun1986: Yea, I had the min balanace, if the close it for in activity, oh well, but I havent gotten anything from them and neither have my parents…maybe ill stop by a branch to make sure one day)

  35. thisistobehelpful says:

    @Eyebrows McGee (now with more baby!): I wonder what how you use a sundial inside the arctic circle. Can it be used to tell 24 hour time then or is it just completely useless?

  36. Toffeecake says:

    @MostlyHarmless: All this talk makes me want to go digging around for my binary watch now!

  37. subtlefrog says:

    @MostlyHarmless: My favorite analog clock in the house has – what else – frogs on it. And if the battery is in, on the hour it plays the call of each frog. Oh yeah.

  38. Eyebrows McGee (now with double the baby!) says:

    @chiieddy: With my armillary-style sundial, you just have to read what two numbers the shadow falls between. Very easy. :)