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How I’m Teaching My Kids the Value of Money in a Digital World

Hint: It involves using real cash.

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The following story was submitted by a Fatherly reader. Opinions expressed in the story do not reflect the opinions of Fatherly as a publication. The fact that we’re printing the story does, however, reflect a belief that it is an interesting and worthwhile read.

When I was a little kid, my rewards were physical things. I wanted baseball cards, comic books, and Matchbox cars. I got my allowance in the form of crisp $1 bills. I had an actual piggy bank, shaped like an actual pig. Everything was tangible. Naturally, now that I’m raising children of my own, it’s nothing like that. Everything is digital. And all that my adorable 8-year-old twin daughters, Annabelle and Madeleine, want are in-app purchases.

Each twin has an iPad mini. Whenever they’re allowed screen time, they’re on their tablets playing games with names like “Animal Jam” or “Dragon City.” That’s mostly OK, within reason. They play together, and they’re constantly talking and strategizing and engaging with each other. But like a lot of parents, I’ve come to realize that in-app purchases in kids’ games are one of the wickedest inventions of modern life.

All of these games tempt my daughters with offers to buy stuff while they play. From bigger dragons and faster animals to fancier castles and cooler-looking clothes for their characters, each purchase is helpfully priced at $1.99 or $2.99 or $4.99. No physical currency ever changes hands. And unlike the video games of my youth, it’s not a one-time purchase. Online games are based on a “freemium” model, which means they’re free to download but designed around in-app purchases ⏤ that’s how the gaming companies make their money.

Ten years ago, in-app purchases weren’t even a thing. Today, the money spent on them worldwide totals around $37 billion. Think about that: Zero to $37 billion in less than a decade. No wonder many of us are still catching up ⏤ it’s a new problem for our generation of dads.

So how are we supposed to teach our kids about the value of money when it’s all a bunch of pixels in some digital neverland?  I mean, I write about personal finance for a living. I’m supposed to know about money. And honestly, I was totally unprepared for this. In the end, though, I decided to go back to the basics and apply some old-school money management principles to this new world order.

Parental Controls Are Your Friend

Actually, the first thing my wife and I did was install a parental password on our daughters’ iPads that would require us to make any purchase. (This is easy to do with most tablets or smartphones. On an iPhone or iPad, for example, click on “Settings,” then “General,” then “Restrictions.”) This way, they have to ask their parents to make in-app purchases for them and can’t bankrupt us with huge iTunes bills. “Do we have any monies, Daddy?” the more aggressive daughter will ask me sweetly, knowing that I’m an easier mark than her mom. “Can I have some monies for this?”

Stick With Cash

My wife and I give our daughters an allowance in exchange for them doing some basic chores ⏤ setting the table, putting away their toys, feeding the cat, etc. They get $5 a week so we can divide it into thirds ⏤ $2 goes into a “spend” jar, $2 goes into a “save” jar, and $1 goes into a “give” jar for charity. (Yes, I know $5 is cheap. But they don’t do many chores. Also, their “jars” are actually decorative cans. Glass jars are way, way too breakable for my kids.) This is a good visual way to teach them about money. And linking their allowance to the performance of chores teaches them that age-old economic lesson: There ain’t no such thing as a free lunch.

More importantly, we pay them in cash. Yes, there are a lot of popular financial education apps out there that teach kids about money and help them track their allowances online (Bankaroo, iAllowance, and PiggyBot, for example) but we decided it was important to keep the cash tangible. We also started talking to them plainly and simply about money. They have a deeper understanding that mommy and daddy both go to work to earn money for the nice house that we live in and the yummy food that we eat. Having a “give” jar starts them thinking about charitable giving and opens conversations about where they want to donate.

Real Money Meets The Digital World

As for the root of the problem, all of those in-app purchases? Well, we came up with some simple rules. Our kids can use their cash allowance to buy as many big dragons and fancy castles as they can afford. But they can only use the $2 per week that goes into their “spend” jars, and they have to actually hand us that real, physical, tangible money to make a purchase. In the app world, it’s easier to spend “game currency” ⏤ money that doesn’t look like real money. It’s the same reason Vegas makes you play with stacks of poker chips, because it hurts less to part with them.

Our strategy makes it real for our kids. When they spend $2.99 on an in-app purchase, that’s three crisp $1 bills that could be used for candy or toy horses instead. This is serious business, man! Interestingly, fatherhood has made money more real for me too. It has permanently changed the way I spend our family’s money. Which is important. Because remember, parents: When it comes to teaching your kids about the value of money, their biggest role model is you.

Mike Brassfield is a senior writer at The Penny Hoarder. He has spent the bulk of his career as a reporter and editor at various fine daily newspapers. His twin daughters are the apple of his eye.