When Will Kids Stop Using Cash and Plastic?

Week of May 7, 2019

When will kids stop using cash and plastic?

"Why would I give my kid a physical credit card? He’s just going to lose it. And, besides, he doesn’t even have a wallet. No kid has a wallet." That is a quote from one of our parent interviews.

Putting aside for a moment the physical complications of kids and plastic, the adoption of digital payments is accelerating whether it is tap-to-pay at the register, peer-to-peer with Venmo and Zelle, or even credit card credentials stored in your browser. Fewer and fewer Americans carry a meaningful amount of cash on them (one in six report having not a dime).

The trend is happening even faster in other parts of the world that are leapfrogging the US in terms of adoption and sophistication. In Sweden, less than 15% of all transactions are made with cash -- down from a 40% less than 10 years ago. And in developing parts of the world, shoppers are scanning barcodes with their phones and paying by text.

In the US, restaurants are experimenting with no cash accepted policies. And, the prototype stores from Amazon do not require the shopper to present any form of payment. Closer to home, the teenage babysitter wants to be paid by Venmo despite the fact that the company’s terms of service require she be at least 18 to sign up.

So, what does this mean for children that are being raised in a cashless society?

Raising Cashless-Kids

The IEEE, a well-regarded organization of engineers, puts the end of cash at 2030. But, surely children growing up with cell phones in their hands are going to be virtually cashless much earlier. New technology across all sectors is replacing legacy solutions at an unprecedented clip -- for the first time a majority of households have tossed their landlines for cell-phone only connectivity.

Most of you reading this newsletter are digital immigrants rather than digital natives. You were introduced to technology over time rather than being immersed in it from birth. Growing up with technology fundamentally changes one's interactions and expectations -- no more “remember when” stories. Toddlers wobbling on their uncertain legs are swiping picture frames waiting for them to react. Grade schoolers talk to inanimate objects. And, teens demand cars and food to suddenly appear after a few taps on a screen.

The ease and speed of money movement, the decrease in costs, and the access to new financial products across the socioeconomic spectrum will change how we interact with money. However, the technology does not change the requirement that we teach our children the habits and skills to become responsible financial actors. When it comes to money, digital banking and payment comes with new powers and new responsibilities.

Digital Banking is here for everyone

Till helps your family make the most of it

What we found interesting

Plant a seed and then water it

In 2017, Israel rolled out a program to put 600 Shekels (a bit over $150) a year into a special account for children that was unlocked when the child turned 18. The program encouraged parents to match that amount from the government’s monthly child allowance allocation and pick between a savings or investment vehicle. The result? A bit of good news and bad news. The good news -- 65% of families matched and 60% picked an investment vehicle. Taking these steps results in an account whose final value is 5x greater than an account with no matching and a low-interest savings account. The bad news is the matching and portfolio construction differences were greatly impacted by the families’ socioeconomic standard, education and ethnicity. A recent study from Wash U in St. Louis offers up some ideas around engagement and program structure.

No need to file for an extension

Little Michael was the first baby to be born in OKC on tax day. And being first was worth $1,529 towards his college savings account. The Oklahoma State Treasurer presented the family with the check that will grow tax free until Michael is ready for the next step.

Are women more realistic or do they have less opportunity -- or both?

A recent article in the Economist tells the tale of two surveys about millennials comparing their hopes with their realities. One comprehensive survey from TD Ameritrade finds that more than half of millennials believe they will become millionaires. While another from Brookings tamps those expectations by pointing out that this generation is not as well off as past ones; with most of the blame going to the 2008 recession. Digging into the TD Ameritrade study, you find that participants who think they will be millionaires are overwhelmingly men, while those that do not think they will be millionaires are overwhelmingly women.