Lose sight of cash, not money sense!

The use of cash in our everyday lives has steadily been reducing over the last decade as advances in technology have provided convenience for consumers by reducing the need to carry cash.

The Reserve Bank’s Consumer Payments Survey shows that in Australia, cash now accounts for 37% of consumer payments, down from 69% in 2007¹.

We can however see a further acceleration of this trend as we put our health and safety first. Given the unprecedented times we are currently going through, many of us have made every attempt to reduce our contact with others and items they have touched, including cash.

Shopkeepers have insisted on contactless payments and as consumers we have also made the choice to handle less cash not knowing where our notes and coins have been or who they have been in contact with. This is because we all have a real understanding that cash, by its nature, has the ability to move through many hands in a short period of time.

Whether these trends are short term or have a long-lasting impact on how we undertake transactions, we will have to wait and see. However there may be some other unintentional consequences of this shift in practice.

Lose Sight Of Cash – But Not Money Sense!

Is it a coincidence that, as our use of cash reduced over the past 12 years, the average household debt (after adjusting for inflation) has almost doubled² and Australia has the second highest Debt to GDP ratio in the world at just over 119%³?

In years gone by our ability to manage our money was very easy to see. As we spent our hard earned dollars we would see the size of our wallet or purse become smaller, and when it was nearly empty we would consciously adjust our spending habits accordingly.

Despite this ability being reduced in today’s world, many of us have learnt good money management skills from our earlier experiences. However, will our children have the same skills by growing up in a world where our wallets contain more plastic and less cash? Or worse still, where our wallets are being replaced with smart phones?

Will our children grow up having a firm understanding of saving, not spending more than they can afford, responsible borrowing and knowing the benefits of investing?

Good Financial Habits Start At Home

Take time to educate and inform your children, so that no matter what technology throws at them, they understand financial fundamentals.

Teach them where money comes from: money does not come from a hole in the wall or out of your phone. It is earned by an honest day’s living – going to work. The habit of creating chores and being paid for doing them still has a great relevance today.

As children start to earn pocket money for chores, encourage them to deposit it into a bank account. Help them monitor the account balance by regularly checking it online. Let them understand that as and when they make purchases the balance will decline and money does run out.

Establish savings plans with them to buy that one thing they have wanted all year. Do not overindulge them and hand out money as and when they want (or demand).

Encourage good spending habits and help them to overcome impulse spending. Assist them in understanding the difference between ‘wants’ and ‘needs’ and how many little transactions can quickly add up.

The role of a parent is definitely not getting easier in our fast-paced, instant gratification environment.

However if we are able to instil in our children at a very young age a good sense of money management, we will be giving them possibly the greatest gift in life – financial security.