We are becoming a cashless society
Gone are the days that children run down to the local shop to buy penny sweets.
This offers some exciting opportunities for us all. Contactless cards mean no more forgotten pins; transferring cash across the globe without logging into a bank (or facing its charges) is a breeze; peer to peer payments via my social network means I get money quickly and easily to my friends.
In some countries like India and Africa (MPESA) many now have their first payment experience through alternative methods instead of cash. That’s hugely exciting.
Technology is driving much of this and our earliest adopters are also often our youngest. In the UK, research completed last year by Dubit showed 85% of children between the age of 2 and 15 have access to a tablet computer. By the age of 8, many children have a smartphone and that number is increasing.
This means that a child’s exposure to money via online products and in app purchases, digital magazines and games is getting younger. And those products are getting more sophisticated in their monetisation strategies. Take Skylanders or Disney Infinity for example which re-shaped the way kids consume both digital and physical toys. You can buy the video game, then you buy the additional bolt on packs and then you are encouraged to buy the physical merchandise: Merchandising is big business. Savvy retailers require savvy spenders.
If we as adults are paying for things by card, then that means less cash in circulation in the household for kids to handle.
This increasingly intangible nature of money and exposure at a younger age means that families are and need to have conversations about money earlier. This provides both an opportunity and a challenge for anyone who wants to teach the basics of money management.
Good money habits start early
Research suggests that 40% of what we do every day is down to habit. For some of us, that might be opening the fridge when we walk into the kitchen… But those habits can also be positive ones too — whether we say please or thank you; whether we open doors for others. Or indeed whether we know what the value of the money we are spending is.
In fact many of the basic money habits we have formed are defined by the age of seven, such as understanding what “value” is, that there is an opportunity cost (if we buy one thing, it will be at the expense of another thing you might be saving for) and that you need to save some of what you get. Cement those habits early on and they will stay with you for life.
So how do we begin addressing these issues?
Learning about money should be a family affair
Financial literacy is now on the curriculum in the UK and indeed the US but there is a huge opportunity for teaching the value of money to kids at a young age within the family unit. Families can make it contextual to their personal circumstances and relevant — teaching those lessons at the kitchen table, when the utility bill comes in or indeed budgeting for the supermarket shop.
Sidonie Gruenberg popularised the concept of giving an allowance back in 1912. And pocket money can play a large part in cementing some of those dots and empower kids to start making some decisions themselves. It can also save you some money in what we like to think of as the pocket money paradox — because it regularises what you give!
Getting into a pocket money routine can be tough
That doesn’t make pocket money easy. Before we began building RoosterMoney, we talked to other parents who were unanimous in the fact that while they love the idea of giving pocket money to teach the value of money, finding a solution that is easy to manage is hard. Getting into a routine is especially difficult. Reward charts, marbles, house rules, set chores, weekly pocket money that you need to remember to give. Yet it is that routine or framework that allows parents to start instilling those money habits early on.
The Jam Jar doesn’t cut it any more
From a practical as well as educational point of view, the Jar Jar doesn’t cut it anymore. We need a way to make money and numbers tangible whilst making it digital and relevant. And jars aren’t mobile, they also don’t have location finders and while you can gamify a Jam Jar through rewards, children are now dealing in digital currency.
Conversations (and indeed arguments) about money don’t necessarily happen in the kitchen, they happen at the shops or on the school run. The solution has to be mobile and it has to be accessible to the whole family. Mom, Dad, children, gran and grandad all need access.
Creating space to talk about money
Every family manages pocket money in different ways too: Some parents want to set an allowance, others want to award money for jobs; some don’t want to use money but Stars instead.
In addition to needing something digital and relevant we also need something that is flexible to each families’ needs. We don’t want to tell parents how to teach their children the value of money. What we do want to do is provide a framework that addresses the pain points of managing and keeping track of pocket money in a digital age, whilst encouraging families to find space to talk about money. Whether that’s at home or in the shops or indeed on a day out with Granny.
Building good money habits early on
Digital solutions can help engage kids in positive money habits by helping families get into routines. At RoosterMoney we spend a lot of time looking at how to provoke conversations about money in the right situations. We don’t want to be a “solution”, we see ourselves as a framework, focused on helping parents teach kids the value of money in a way that works for their family.
Hook Model — Nir Eyal
Using Nir Eyal’s Hook Model is a great way to demonstrate what we are trying to do to provoke that routine — it’s taking a tactic used by app builders to engage users with their app and applying it to the family to get into good money habits. A pocket money “event” triggers a conversation. We encourage an action from this: this could be the child allocating their money to a Goal or putting it into their Safe (Savings Account) or asking to get something in the shops. And we reward them, whether that’s celebrating a goal achieved or reaching a Saving milestone. The investment is seeing their money grow, or their achieved goals catalogued. And by repeating that process we reinforce habit, making sure that the lessons kids learn stick and those habits are there for life.
RoosterMoney is focused on taking kids from their first steps in understanding the value of money to their first bank account, starting at the age of 4 and going up to 14. You can find out more about RoosterMoney here.