Should I let my kids handle cash during COVID19? & undermining ex-spouses…

By Jason Bryce

Single mums face extra burdens in many areas of childrearing. One of them is teaching kids about money. And this COVID-19 pandemic is giving mums plenty of extra things to think about. Some questions that you may not have found answers for yet are:

1. How can I teach good money habits when my ex-husband / mother-in-law / grandparent gives my child whatever they want?
2. Should I continue to give my kids cash pocket money (notes and coins) during and after COVID-19? Can kids understand budgeting and saving if they don’t get to feel money in their hands?
3. And how do I manage kids online if they have access to money online?

There’s plenty of research to show that single parents face extra challenges when it comes to educating their kids about money. Singel parents do it their own way and find their own answers to their families questions. Some choose to dealy the money education.

Ashley, a single mum interviewed for a study on children’s financial education (see below) is choosing to not give her 11-year old daughter Agatha any money or money education at all yet. Ashley said she provides everything and Agatha should focus on school and not concern herself with doing little jobs to earn money she doesn’t need. Ashley has had struggles with health and wants to teach Agatha the importance of a good diet.

Rhiannon said she is not sure how to discuss money with her three children. Rhiannon said she wanted them to focus on essentials like family and being healthy.

Britney makes a link between money and relationships. Britney is teaching her kids about valuing relationships and has noticed that “family dynamics are less stressed” after some key conversations about money with her daughter.

For single parents educating their kids about money, it starts with cash, coins and the occasional note in a moneybox or piggybanks and graduates to a bank account when your child goes to primary school.

The two big extra challenges for single parents are consistent messaging and undermining behaviour.

Consistent messaging in a single parent family

First of all, messages need to be consistent but single parents are dealing with ex-husbands, mothers-in-law and others who may not be sending the same message to your kids about money.

Parents who find it difficult to ensure consistency with other family members face real challenges according to a recent study on children’s financial education in the UK.

Here is a classic parents mistake cited by the university researchers that can really set back how children see and value savings and the value of money: (and every single mum will relate to this):

You give your child $5 to put in their moneybox to save up for an expensive new toy then another family member takes your child out and buys them an expensive new toy.

This confuses children say the researchers but pretty much all families deal with this one way or another. Generous well-meaning family members can be just as problematic as trouble-makers. Here are some strategies suggested by the research:

Catherine’s children’s father often made big (infrequent) purchases for their kids.

So … Catherine has been encouraging her children to do chores to teach them that money takes time to accumulate.

And … Catherine has explained why their father sometimes buys them big presents: his financial situation is different and the children understand this is something he can’t do it very often.

Some families used the differences in spending habits and patterns to teach lessons about how NOT to manage money said the researchers. But this needs to be done gently and let kids work it out themselves really.

For example, Carina spoke to her children about their uncle who likes to spend money but often asks Nana and Pop for a loan.

Undermining Behaviour

Unfortunately, children learn more from watching how their parents manage money than from what their parents tell them about money.

A long way behind both of those sources of information is school. The defining feature of a good financial education is a great parental role-model. The good news is that you don’t need to be rich to be a good financial role-model. A single mum on Parenting Payment Single knows more about budgeting and managing finances than many company CEOs.

But look at these case studies (cited in the financial education research) of single parents sending the wrong messages:

Melissa warned her daughters about debt and told them to not get into debt.

Melissa used catalogue loans to buy gifts for her daughters at Christmas even though she still had not fully repaid previous debts.

So  .. now Melissa is showing her daughters the trouble she has got into and how she is working her way out.

Single mum Ashley, with daughter Agatha, has been very cautious with her finances because she is starting a new business and waiting for it to pick up. But Ashley said at Christmas budgeting is impossible and she wanted to spend as much as necessary to buy others the gifts they would want.

So … now Ashley and Agatha are dealing with the issue of saving up for a mobile phone.

Bethany encourages her daughter (11 years old) to save but Bethany has no savings herself. She runs a business with her ex-partner and does not put money aside for superannuation or savings.

Bethany says: “I’m not a saver. There’s not enough to save”

So we have all been these situations. The researchers say the single parents who are doing it the best are sitting down their kids and explaining things as they go. They are also the parents who are in charge of their money, whether it comes from Centrelink, a job or a vast portfolio of investments….

Sandy pays all her expenses every month using a credit card. At the end of the month she sits down with her daughter to match receipts to statements to keep track of her spending and check she hasn’t been wrongly charged for anything.

Sandy first got a credit card when she was travelling and still uses it for benefits like insurance. Sandy hasn’t yet explained all the reasons why she uses a credit card but they share the budgeting and receipt matching every month.

Sandy isn’t perfect and she’s doing what we all do – making things happen with a limited budget. All the way along she is taking her daughter with her so the researchers are giving a Sandy a big thumbs up.

Should I continue to give my kids cash pocket money during COVID-19?

First of all, some reassurance. There is a lot of fake news going around that the WHO has told people to stop using coins and notes.

The World Health Organisation has NOT warned consumers against using cash during the COVID-19 pandemic. The World Health Organisation has made public statements to counter the false claims.

“We did NOT say that cash was transmitting coronavirus,” said WHO spokeswoman Fadela Chaib.

“We said you should wash your hands after handling money, especially if handling or eating food.”

“Doing so is good hygiene practice.”

Here is another fact check on this issue by a reputable British organisation. The Reserve Bank of Australia has looked at the issue as well and decided that Australian notes are a minimal risk of virus transmission.

ASIC’s Moneysmart Service says cash is important to helping kids gain an understanding that money is real.

“With credit cards, tap-and-go, online banking and shopping, kids do not often see actual money changing hands,” says Moneysmart.

“Handing over money for something can give them a sense of what things actually cost.”

So if we keep our hands clean, handling cash is important to children as they learn to understand money.

“Invisible money makes it easier for them to think money is unlimited, rather than something that has to be earned.”

ASIC recommends a piggy bank for younger children that keeps coins and notes. When you think they are ready, a kids bank account is a good way to introduce concepts like saving, interest and banking.

There are plenty of new solutions to helping us educate our kids about money. 91 per cent of 14-17 year olds own a mobile phone so they are going to have bank apps, savings apps and criminals looking for their passwords.

Are there any apps for kids’ pocket money in Australia?

Yes there are apps for pocket money so you can manage your kids spending and saving and help them learn. ZAAP is a kid’s saving app that you can connect to a debit Mastercard or a wearable device to make payments in-store.

Most of the banks have kids savings accounts and right now the Bank of Queensland is among the best paying children’s accounts in the market.

Some other banking and micro-investing apps aimed at young people include Pocket Money, RAIZ and Spaceship. Some of these apps help educate young people and put their money into shares.

Commonwealth Bank have one as well, called CommSec Pocket.

How to manage kids and money online?

If you suddenly see a $200 charge for “in-app purchases” you can join my club of bad parents leaving their kids alone with a screen for too long.

These days my “in-app” and online purchases are protected by my fingerprint so that has been educational for everyone.

You can set up payment limits and prevent your kids buying online but this is a challenge for every parent.

Moneysmart recommends what my Nana recommended – recognise the difference between your needs and your wants. They have a great kids activity on this.

Also – make a budget, get the kids involved in choosing things for their own party, so they can compare needs, wants and budgets.

As your kids get older parents need to talk to kid about the cost of things they understand, like a pet, or consumer questions about buying, selling donating, investing, saving. Later they will want to know about the costs of bikes, homes, cars and things they can see.

In their teens, they will ask questions about moving homes, tax, super and payslips.

Spending time, explaining, budgeting, modelling good behaviour are the keys to teaching kids good habits around money.

Yes, kids need to handle cash to understand more easily about money and how much it is worth. Moving with them through the myriad of options for online banking and commerce is a parent’s joy and nightmare.

Jason Bryce