Piggy Banks vs. Banking Apps: Teaching Kids About Money in the Digital Age

A mom teaches her children about money
Liz Frazier is pictured with her two children. Photo courtesy of Liz Frazier

When you buy food with a swipe of a card and pay bills with a click of a button, what are your kids learning about money?

“It is getting harder and harder to teach our kids about money and finance in the digital world because there’s just not as much opportunity to interact with money,” said Liz Frazier, a New York-based financial planner and author of the book “Beyond Piggy Banks and Lemonade Stands.”

In a world of neat budgeting apps and debit cards for kids, Frazier recommends sticking with the basics — at least initially. Start kids on the three piggy bank system — one for spending, one for saving, one for sharing. Frazier uses simple clear jars so they can see their money grow.

Children also learn about money by watching their parents. While swiping a debit card at the store makes sense to you, kids don’t concretely view that transaction as spending money.

“As parents, we should try to expose [children] to real money whenever we can,” she said.

For those who don’t regularly carry around cash, this is easier said than done. Frazier recommends starting off with smaller purchases like coffee or lunch at a restaurant. Show your kids the bill, help them count out money for payment and ask them to check if they received the correct change. 

When you aren’t using physical money — like when you use a debit card for groceries or a check for a school fundraiser — treat those moments as opportunities to advance the money conversation.

“Start explaining the differences between what payment method you’re using — the debit card, credit card and cash — as you’re using it,” Frazier said. “They’re not going to totally understand everything in the beginning, but you just want to get them comfortable with the product.”

Once you feel your child has an understanding of money basics and has had plenty of interaction with physical cash, opening a bank account for your kid can serve as a good transition to working with online tools and digital transactions.

Fight the temptation to start an online account from the convenience of home. Visiting a brick-and-mortar bank or credit union is a better learning experience, Frazier said.

“Go to the bank together and have the banker explain to your child that you’re opening up an account,” she said. “At this point you can get a debit card and start using it together at the store or getting out money at the ATM. You can also look at the statements every month, or every week if you want to, and walk through what money you put in [and] what you took out.”

Opening a savings account is a good opportunity to introduce your kids to the concept of interest — how their money increases when they let their savings sit.

Conversations about money lessons for kids should stay positive and focus on useful information. If money stresses you out, do your best not to convey that to your children. Instead focus on the lessons you’ve learned from your financial mistakes. And don’t forget to tell your kids about your success and what goals you have.

It’s Never Too Late to Provide Money Lessons for Kids

Speaking of financial mistakes, Frazier said exposing your kids to money at an early age allows them to make mistakes when they’re young enough that the consequences aren’t so weighty. 

Maybe they spend all their money on a trendy gadget that turns out to be a dud, or they give in to an impulse purchase that sets them back from saving for something they really want. The fallback from those choices isn’t as devastating as not having any savings when an emergency pops up as an adult.

If you’ve missed out on teaching your kids about money in kindergarten and now they’re in their teenage years, it isn’t too late to start having personal finance discussions. As a financial planner, Frazier sees the negative consequences that come from people not being taught about money.

The Penny Hoarder conducted a financial literacy survey in 2019 and found that adults who didn’t grow up learning about money made less income and had less savings than those who were exposed to financial literacy growing up.

Teaching your kids about money is the best gift you can give your children, Frazier said.

“They are going to learn it one way or the other so you want them to learn it the right way,” she said.

Key Takeaways

  1. Give your children experiences with tangible money.

  2. Include your kids in conversations about financial decisions.

  3. Open a bank account for your kids to transition them to the world of digital finance.

  4. Share your personal lessons, successes and goals with your children.

Nicole Dow is a senior writer at The Penny Hoarder.