Debt can be stressful. That’s why the vital ability to manage money is something most parents work hard to instill in their kids. Allowances, chores, and piggy banks are tried and tested techniques, but in the digital age, there are apps and online services at our disposal for imparting financial wisdom and encouraging good habits. That’s important as cash declines in use, especially during the pandemic.
It might feel instinctual to shield children from the pressures of money management, but that may be a disservice. Research in the UK from Cambridge University suggests that the money habits kids will carry into adulthood may be set by the age of 7 years old.
But where do you start? And with what? Mary Gresham, an Atlanta-based psychologist who specializes in finance and families, says it should begin as soon as children are aware of the concept of money, usually around the ages of 4 and 5.
A good financial life is one of the most important contributors to lifelong well-being, according to Gresham, which is why she says parents should consider a financial education to be as important as academic education.
“Give an allowance and then have your children divide the money into four categories: spend, save, give away, and invest,” Gresham says.
This is a popular approach in the US, promoted by groups like Money Savvy, which even offers a physical piggybank with the same four categories.
Discussing family finances and allowing children to express their opinions on how money is spent can be beneficial, Gresham says. For money lessons to really sink in, kids must have some control and input on decisions. Family finances should be discussed openly, and kids should be allowed to choose how to spend their own money, even if that means they buy something you consider to be a waste.
“A month later, ask your child whether they’re happy they bought it,” Gresham says. “Was it a good value? Did it serve its purpose?”
This helps them to reflect and learn what is worth buying and what isn’t.
For the past few months, my family has been using RoosterMoney. The app lets me set a regular allowance for my kids (aged 11 and 8), set a chore list to give them the opportunity to earn a little extra, create savings goals, and give to charity.
As well as earning, they can contribute a little to family expenses for items they really want. For example, my daughter pays toward our Disney subscription, and my son chips in for Microsoft Game Pass.
Money is divided into different pots, and we match the money they choose to put into their savings pot to encourage them to save. All of this information is clearly laid out in an app we can all access, though parents retain control.
“We’re using technology to make it easier for parents to manage an allowance and keep on top of chores,” says RoosterMoney CEO Will Carmichael. “It helps parents keep track of how much they’ve given their kids over time and what they’ve spent it on.”
My 11-year-old son has a debit card linked to his RoosterMoney account, which he can use when he’s out and about or for online purchases. I get alerts when he spends (debit card support is confined to the UK for now). We still handle purchases for my 8-year-old daughter, but RoosterMoney gives her a running total of what she has to spend. For very young kids, there’s an option to award stars, which can then progress into money later.
“If it’s easier to learn a new language when you’re 4 or 5 or 6 than it is when you’re 30, is that an opportunity with money?” Carmichael says, explaining his reasoning for cofounding the company.
The app has been working well for us, especially since I rarely carry cash these days. My kids like the clarity it provides, and it has undeniably provoked more discussion about family spending in our household. That said, we definitely started much later than Gresham recommends.
Money Apps for Kids
We’ll likely keep using RoosterMoney, but there are many other great alternatives. My brother uses Gohenry with his kids and raves about it. Like RoosterMoney, it allows you to set up an allowance, tasks or chores, savings goals, and more. For $4 per month, you can also get kids their own Mastercard, set specific spending limits, and even restrict where the card can be used.
Other similar apps include Bankaroo, iAllowance, FamZoo, and Greenlight. These apps vary in complexity from simple digital piggy banks to keep track of allowances to full-blown bank accounts that can be used for real-world purchases. While they’re all designed with kids in mind, they may not always be the best apps to use.
“The apps that kids should consider are the ones their parents use,” Gresham says.
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Whatever app or account you choose, the takeaway is to start teaching your kids about money as early as possible. You may be encouraging good habits that will last a lifetime.
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