Money is a difficult concept to understand, especially when it comes in so many different forms—checks, currency, coins. Add to that the concept of debit cards and credit cards, it really gets confusing, and kids don’t always grasp all the nuances. They see their parents swipe a card in a machine, the cashier lets them keep the stuff they chose, and it’s all pretty cool.
When we use plastic instead of paper money, it can lead our children to have a disconnect between the reality that in order to spend money at the store, we need to make it and put it in the bank. And when it comes to credit cards, well, how do you explain that every time you use a credit card, you are essentially taking out a loan you must pay back? With this type of disconnect, kids can think that their parents’ money will never run out, that the plastic card is the source of all joy and happiness, and they won’t understand when they are told that they can’t have something because the parents can’t afford it.
Now, I’m not suggesting that all parents start operating on a cash-only basis. That would be too inconvenient for words. What I do suggest is sitting down with your kids and explaining to them how those cards work so that when they see you using them, they understand what’s going on. The debit card isn’t just a ticket to toys and junk food. The credit card isn’t a wellspring that will never run dry. If your children understand how these two concepts work, they will be more likely to understand the concept of budgeting more clearly, and be more supportive as you establish and enforce a budget in your own home. If it’s not clearly explained, they can grow up with misunderstandings about how money works, and that can lead to improper spending habits down the road.