“The financial habits you develop when you are young are going to go with you into your adulthood.” – Warren Buffett

The “invisibility of money to young people” is one main factor exacerbating the problems that young people have with money. – Founders of Money Doctor, Nicky Reid and Marilyn Holness, quoted in ST

I read with some disdain the news of POSB introducing digital watches that basically act like prepaid debit cards for kids in certain primary schools. It allows students to buy food and stationery at the canteen and school bookstore by tapping the gadget on NETS digital payment terminals. They can also use the watch at such terminals outside school.

The initiative has been rolled out to various primary school levels at 19 schools, but the bank aims to get all students from all 190 primary schools here to own this gadget within the next two years.

But would you seriously considering giving such a “debit card” to your 8-year old? Albeit this smartwatch would have a safe daily limit of say $2 a day. But still…

I know countries around the globe are moving towards a cashless society, and cashless generally means greater convenience, and less hassle of carrying cash that can be physically lost or stolen.

Through an app that parents download onto their phones, they can track their child’s spending (and saving), and also send their child money in the event of an emergency.

But honestly, I think if we are talking about young children who are aged 7, 8, or 9, who are just getting a grasp of money matters, it is best to stick to the devil we know – real, tangible, countable cash.

Here are my 4 key concerns about this initiative.

1. It will create a “buy first, think later” culture

Because all you need to do is flash your watch and receive an item, it makes it all too easy to buy things and worry later.

We all know (even as adults) that it’s hard to curb spending with cards. Which is why as financially savvy adults, we choose to limit the number of credit cards we hold and have a clear reason and purpose for every card that we do choose to apply for.

As it is a digital medium, the concept of money is made more surreal and less tangible, which makes it harder for young children to fully grasp the concepts of spending within your means, budgeting, and saving, although the programme tries to sell these things.

Everything is reduced to mere numbers on a screen.

Instead they may learn that there is no need for delaying gratification, since you can just buy things so easily and without much thought.

Mary Hunt, author of Raising Financially Confident Kids, has this to say when comparing cash and debit/credit cards, “Cash is very visual, clear cut and not confusing…Credit sends a mixed message to kids.”

2. It takes away one of the most natural places for kids to practise money management

The school canteen /bookshop is one of the safest and most natural places for kids to learn about money –

• counting (Did I bring enough for a bowl of noodles?)
• budgeting (If I get an extra drink today, how much will I have left for tomorrow or day after?)
• differentiating between needs and wants (Do I really need that new rainbow-designed pencil?)

It also provides real-life opportunities for them to practise life skills such as checking the change, making sure that it’s right, and if it’s wrong, to be able to speak up and tell the truth. (With the digital watch, there’s no need for change.)

We give our eldest a weekly budget of $8-10. She’s expected to manage her budget on her own – in other words don’t go buy some fancy pencils on Monday and expect us to give you extra money on Wednesday when you’re left with nothing.

If she overspends, she will have to figure things out on her own – maybe go hungry, or buy something of lower value, or pack a sandwich for recess on Friday.

With all this daily practice, I’ve noticed her becoming more aware of the money that we spend as a family. One day, when I got charged for an extra cup of tea that I didn’t order, she was able to pick it up on the receipt, and I was able to ask for a refund.

With the smartwatch, it may become too convenient for parents to come to the rescue and top up a zero-balance account electronically. (Let’s face it, even if you don’t want to bail your child out, the temptation is there, at a click of a button.)

It thus makes it harder for children to learn through experiencing the very real consequences of money-related mistakes that they make.

As Hunt also says, “It’s important [that children] make choices and then live with the consequences.”

3. Is this going to be another digital distraction?

I’ve heard stories from my daughter about friends owning new gadgets like a smart watch. She says her friend sometimes gets into trouble for playing with her watch in class. It is a distraction to her and her friends sitting close by.

We live in an age of digital distractions. A child at lower primary levels is not likely to own a phone, but also for good reason, since they are not going to be travelling about on their own.

Alone the same lines, why give them a smart watch that will serve as a distraction, as the latest cool gadget in town, and as a means of comparing between the haves and have-nots?

Will it not distract them from the real meaning and purpose of school, which is to learn, to practise life skills, to socialise, and to curb impulsive behaviours?

4. Are there going to be safety issues with money flowing so easily to your child?

This may sound extreme but imagine if your child finds himself in the situation where he is being extorted for money or for an expensive item at a bookstore outside school.

Of course the daily /weekly allowance limit won’t be set too high, but if he’s being forced and he calls you for help, the parent may try to send him the money he needs on the spot, just to bail him out of trouble.

It’s potentially tricky to navigate such unexpected situations. Also the issue of privacy regarding spending habits that are tracked electronically is always lurking in the background.

TRAINING IN FINANCIAL LITERACY STARTS YOUNG

We treat financial literacy training with our kids quite seriously.

As mentioned earlier, we choose to give a weekly allowance, so as to give my daughter a chance to exercise choices and learn responsibility.

We also make sure they have a bit leftover for the practice of saving. This goes into 3 piggy banks – for spending, saving, and sharing.

The “spending” bank is to allow the kids some freedom to exercise choices. We try to discuss with them and help them make better decisions by weighing the pros and cons of buying a small toy now versus waiting a month later for the money to grow in order to buy a more valuable or higher-value toy.

We dissuade them from impulsive buying behaviour, and try to verbalise our own money decisions and dilemmas, so that they learn from us.

The “sharing” bank is to encourage the kids to share in terms of buying small treats or gifts for their siblings. It is also for giving to the church or to communities in need.

The savings go into their individual savings fund. At the end of the year, we tally the total, and put them into their own fund. (This is the equivalent of a savings account except that the money isn’t physically with the bank, it’s kept as part of our family bank account. But the concept is the same, they get to practise and see us tally their money at the end of the year, and they know that we’re safekeeping it for their future.)

I’m sharing this because financial management is probably one of the most important life skills and gifts that we could ever give our children.

The money habits they form now will likely follow them through life.

Just look around at those with burgeoning credit card debts or finance-related troubles – “money no enough” is one of the top destroyers of families around the world.

I understand the beauty of hassle-free technology and conveniences that it brings, but in this case, I think it only benefits the markets and companies involved, not so much our children. So please, please leave our kids’ pocket monies alone.

OPT FOR LIFE SKILLS INSTEAD

Yes, not opting for this smartwatch may mean slightly longer and slower queues at the canteen. But the upside then is our kids get to exercise invaluable life skills of

• patience (why so slow…)
• prioritisation (I want to pee but I’m hungry, hmm quickly get food and then go to the toilet)
• flexibility (Wah, chicken rice queue so short today, let’s go for it!)

Yes, it means that we have to scrape together small change for our kids every week. (I like to give my daughter a mix of $2 notes, and various coin denominations, in order to teach her to count and manage her own daily budget.)

Yes, it means that our kids may accidentally lose that $2 note on an odd day or two, but then they get to exercise problem-solving skills and initiative by asking a trusted teacher or friend to help.

When it comes to technology and kids, we need to proceed with caution and think about the cost.

What price do we as a society pay in the end?

Are we letting go of precious opportunities to hone life skills and money wisdom?

Will we raise a generation of children who think that money runs on tap and it’s easy come, easy go?

Like how we are so reliant on our smart phones and can’t be bothered to use our memory to remember phone numbers. Or when we rely on calculator or excel spreadsheet to tell us what the answer is, and avoid doing mental calculations on our own. Will our kids not learn or bother to count simple cash anymore?

Precious opportunities to hone life skills are lost when we rush into technology recklessly. As Dr Nicky Reid, founder of Britain’s Money Doctor, said in this ST article:

“As parents, we always want to make things better for our children, like giving them everything. But as we become more affluent as a society, we are not giving them that life skill.”

I hope that we will take the time to think first, and weigh the pros and cons, before we embrace and adopt smart technology like this.