In an online publication called Kids, Cash, Plastic and You: A Guidebook for Families on Mastering Money, the writers from Mastercard International and the U.S. Consumer Affairs say that cold, hard cash is quickly becoming “as outdated a form of money as livestock.” The article also says that “cash and checks make up most of the money you use.”
But according to Dave Ramsey, Williamson County resident and author of the book Financial Peace, you should offer up cold, hard cash when you part with your money, not credit cards. “A debit card is not bad to have in case of an emergency, but if you’re letting them have access to your account, why not let them have access to cash?” Spend less than you make and save money is the advice Ramsey offers in his book as well as on his syndicated radio show, “The Money Game.” And Ramsey has advice for parenting kids about credit and cash, too.
Ramsey says parents should live as examples and realize that young children don’t grasp the concepts of debt and interest. Instead they need to learn the principle of earning money.
“Begin teaching young children by letting them handle money,” advises Ramsey. “Give them lightweight duties and pay them for their chores, but refer to the payment as a commission or a salary — not an allowance — so they understand they are earning something of value for performing a certain task,” he adds.
Ramsey suggests parents implement an “envelope system” for getting started with children as young as 5 years old. Begin with three envelopes: one for saving, one for giving and one for spending. The saving envelope teaches kids to save for something big. “It teaches them waiting — delaying for pleasure.”
The giving envelope can be used for giving to church or charity, and the spending envelope can be used to build good shopping knowledge since when they see how fast money will disappear from it they’ll start looking for bargains.
But what about the times kids see parents shopping with credit cards or the influences of commercials showing the pleasures of Visa ownership?
“You have to teach them that Daddy is not a $20 machine,” says Ramsey. “You have to look for learning opportunities.” And this can be done as your children grow older.
“Gauge it by age,” Ramsey suggests. “The key is to look for lessons about money. Don’t take the fun out of it. Money’s fun. It’s a life skill. You teach kids to bathe. You teach them to handle money.”
Susan Day is editor in chief of this publication.