Is Technology Going to Cause Kids Debt Problems?Dec 07, 2016
Technology: it can improve life and cause a host of new issues at the same time, including debt problems. For example, Pokémon Go has led one Ontario children’s hospital to ask kids a new question when assessing their injuries—were they hurt playing the online game? For many caregivers, this is an issue they never had to consider when they were growing up. In the same way, new digital payment methods are making it easier for us to buy things, and easier to fall into an unmanageable level of debt.
Your children may be too young to use smartphones or RFID bracelets to spend their allowances, although some parents are giving kids as young as five years old debit and credit cards. Whether you believe that letting kids pay digitally is good for them or not, it’s important to prepare them for using this type of technology.
Why? People spend more when they can pay with a tap than they do when paying with cash or even if they have to enter a passcode. When it’s easy to buy, it’s easy to lose track of purchases, leading people to run out of cash before payday and turn to credit. If that happens month after month, they soon find they need help to pay off debt.
Your children are growing up in what is becoming a cashless society. In fact, A 2015 Bank of Canada study revealed that less than half of Canadians’ purchases are made with cash; other studies show the trend is going to continue. Talking about the pitfalls of digital payment methods has become part of giving good debt advice. But do these new payment technologies mean that your children are going to face debt problems when they’re older?
Of course not. Just as you can take steps to ensure your children don’t hurt themselves while playing Pokémon Go or other games, you can give them tools to prepare for success in a digital financial world. Here are a couple of ways to get started.
Explain what the tap means
If you use tap-enabled debit or credit cards, your children aren’t seeing money change hands when you make purchases. All they see is Mom or Dad touching a piece of plastic to a device and walking away with the goods. To them, it seems like you can have anything you want.
Help your children connect the technology with what’s really going on. Explain that the card is connected with your bank account and you can only spend as much as your income allows. Every time you tap, money comes out of your account and is no longer available for other things. The same advice applies if you use other digital payment technologies, like Apple Pay.
Introduce older kids to personal finance apps
Kids love technology and learn to use apps easily, so why not embrace it to help them learn to manage their money? There are many great free apps out there that you can use to help your kids learn to budget, track their spending, and monitor how much they are saving. Consider modelling good financial management by using your own personal finance app and talking to your children about how such apps can help pay off debt.
Digital payment methods are a reality and will probably be even more prevalent in the future. They can lead to debt problems, but they don’t have to. Help your children learn to navigate the cashless world they are growing into and they’ll be positioned to use technology to their advantage.
How are you helping your kids avoid future debt problems? Help others by sharing your tips at #LetsTalkDebt, #BDOdebtrelief