The cash in a jar system does not work simply because cash is no longer the main way we make purchases and pay our bills. A recent study1 revealed how we make purchases and payments.
While it doesn't look like cash is going to disappear tomorrow it's use is continuing to decline2.
Twenty-one percent of young Americans -- aged 23 to 34 -- say they make all or most of their purchases with cash, down 18 percentage points from the 39% who say they used cash to that extent five years ago.
Not only are we using cash less and less on a daily basis there are many different ways to pay and shop - online bill pay, person to person transfers, digital wallets, online shopping, debit and credit cards, bitcoin, etc. Many ways to manage your money online banking, micro saving and investing, mobile apps, etc.
And if you are going to help your kids enjoy the confidence of financial fitness they need to learn how to operate financially using modern financial instruments, applications and tools.
So coaching your kids with the Cash Jar System today is like using beginner equipment.
When you first start out playing a sport it is common to utilize “beginner” equipment. You might play tennis with an inexpensive racket, play baseball with your brother or sister’s hand-me-down glove, or learn to ski on a very old pair of skis. That is fine when you are learning something new. You need to determine if you like the new activity before you invest in better equipment, especially as your skill level improves. The same approach does not work for teaching personal finances to your kids.
I followed the advice of many financial experts regarding how to teach my kids money skills when they were young, about 5 years old.
The common advice was to take three piggy banks, jars, or envelops and designate one for spending, one for saving and one for giving.
That worked well while the kids were young and it helped them develop an appreciation for money in its physical form. However, once they past the age of ten it started to hinder their development of real-life financial skills.
Personal finance skills are not like learning to pay tennis with a cheap tennis racket where you can first determine if you like it before buying a better racket. No, personal finance is a life skill that kids need to learn as they grow and upgrading their equipment is a necessity.
At the age of ten all of my kids began to ask me to buy them music or apps from iTunes, items from Amazon, or another on-line site. They were not asking me to buy it for them, but rather they wanted me to purchase these items with my debit or credit card and they would pay me back with cash from their spending piggy bank. Should not be a big deal, right?
Well, multiply that by multiple kids, multiple songs and multiple birthday party gifts that need to be purchased and you can see how quickly this gets out of hand. The world is moving away from cash, piggy banks, jars and envelopes.
You need to think about smashing your kid’s piggy banks and move their money into bank accounts and the world they will operate in financially as they get older.
I know, the piggy banks are cute! Maybe don’t smash them, but put them in your son or daughter’s keepsake box, so they can reminisce about their younger years when they are adults! If you are promoting only using cash to your kids past the age of ten, you risk them having money skills that are years behind where the world is going.
When my kids were eleven I started to upgrade their financial equipment to bank checking accounts and savings accounts and even a debit card.
Yes, at the age eleven my daughter had a debit card!
I will admit at first I was not sure myself about that; however, my thought process was to help my kids transition to the real world financially while they still lived at home. It would be unfair to them to cast them into the world without such skills when they reach young adulthood, go off to college or live on their own.
The result was spectacular.
I provided my kids the framework and the game plan for learning real-life financial skills at a young age and today as they are young millennials I can tell you I am not worried about their money skills as they all have a solid base.
Imagine if Jordan Spieth was not allowed to upgrade his golf clubs until he was almost eighteen. He certainly would not be competing at the professional level and winning major tournament victories like he is today.
Think about how you can upgrade your son or daughter’s financial fitness skills to match the real world as they grow.
The Moneyletics Programs are an upgrade to your financial fitness equipment. The program guides you through how to help your kids learn to use various online tools, debt cards, spreadsheets, applications, and tactics to achieve financial success with confidence.
And it works.
In fact, that's why I wrote the Money Athletics Program book, the first published book in the Moneyletics MAP Series. In conversations with fellow parents they started asking to share what was working with my kids. As more and more families started using the system and having a good experience with their kids I knew it was time to share it with more people than just my neighborhood.
Please let me know what is working for you and keep an eye out for webinars and other events to help you along the way