​Different Types of Money

Dealing with money today is more complicated than at any time in history. Because your kids have more to learn about payment methods than you or your parents did, you may be finding it difficult to teach your child what money is used for and how it’s done.

• Where does money in an ATM come from?
• How does the seller get payment when something is bought online?
• How does online banking work?

Sit down with your child from time to time to discuss different ways to deal with money – cash as both paper and coin, ATM, phone app, computer access, debit cards, credit cards, EFTPOS. Don’t tackle all of those at once or your child will be overwhelmed.

Does the Value of Money Change in Line with the Different Forms?
Your child has probably already had some experience with using money to pay for something he wants. Or he’s observed you paying for groceries and might have asked some questions about how you can give paper to someone and get great goodies like ice cream and pizza.
So you’ve probably already explained a bit about the value of money. You can illustrate the fact that different forms of money can have the same value through a simple exercise.

• Take your child to your local ice cream shop. Ask him what he wants, and tell him that you’re going to have the exact same thing.
• Give him the cash to pay for his ice cream, and let him see that you pay for yours with a debit card.
• Once you’ve both finished your ice cream, have a discussion with him about the methods of payment – in this case, cash and debit card. He will begin to understand that the actual cost of an item does not depend on the payment types being used.

ATMs
Your child has probably already seen you take money from an ATM. Be sure to explain to him that you are not getting that money for free. He needs to know that you can only take money if you’ve already deposited money into your bank account.
In order for him to get a grasp of how an ATM functions –

• Let him watch you put cash into the ATM or at a bank branch.
• Explain to him that the cash is going into your bank account.
• Tell him the money will be held by the bank until you decide to withdraw some.

Debit and Credit Cards
Your child will already understand a little about debit cards if he’s seen you use it at an ATM to deposit and withdraw money from your bank account. Let him also see you use it to pay for goods in a store.
Credit cards are a little trickier for your child to understand because how much you can buy with the credit card does not depend on the money in your bank account. You will need to judge when he is ready to advance into the concept of credit.
There is an Australian start-up called Spriggy that helps children save and spend money and issues a child debit card linked to a parents account. The child can earn money (think pocket money etc) and the parent transfers to the child’s account which the child can then spend (and parents track) on their own debit card. I am creating an account for my daughter – will update you on what I think in the next blog post.
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Mobile Payments
Mobile payments come in various forms depending on what kind of smartphone a person uses

• Android pay

• Apple pay
• Samsung pay

These mobile payments will become more and more prevalent in coming years, making your child’s understanding of this system very important.
Explain to him that the phone has an app or a virtual wallet that connects to your bank in order to make the debit or credit transaction at the point of sale.
As you expose your child to the mobile payment type on your smartphone, he will learn little by little that the value of an item does not depend on the payment method but on the actual items that are bought.
 
Start Your Child Saving
You can start training your child into good savings patterns when he is still very young. If you give him weekly pocket money, then discuss with him how much he can set aside for savings each week in his own savings account at the bank.
Let him know in advance that if he meets the goal that you’ve agreed on, you will deposit a bonus into his account. This will start him off in the right direction to save on a regular basis.
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