Should You Give Your Kids A Digital Allowance?

Is giving kids cash for their allowance as outdated as teaching them cursive handwriting or how to use a rotary phone? Should you be giving them a digital allowance?


There is no denying that technology has changed the way we earn, save, spend and share money.

With a push of a button, hundreds of dollars can be transferred from one account to another.

Paychecks are practically a thing of the past with everyone using direct deposit.

Last week, I saw a guy pay for his groceries by scanning his wristwatch.

This begs the question: Is giving kids cash for their allowance as outdated as teaching them cursive handwriting or how to use a rotary phone?

What is a digital allowance?

A digital allowance is exactly what it sounds like. It means paying your child his or her allowance through digital means.
Almost 70 % of parents in a recent study said that their children were more (or just as) at ease using digital payments as managing actual currency so it would seem reasonable that we would teach our young people about money in the context of the modern world.

Cash vs. Cards

However, 80% of parents have concerns about their children learning about money in a cashless society.
Why? Think about your kid’s allowance as a pile of cookies. If you lay a pile of cookies on the table and tell your kids that they have 2 weeks to eat them at their leisure, they might gobble them all up.

But, on the flip side, they may conserve their cookies. Now, imagine that the cookies were not physically there. You hid them in the pantry. They could eat cookies at will, but they never saw the pile of cookies.

Do you think that your kids would behave differently with their supply of cookies?


In the same way that the hidden cookies are not concrete, digital money is abstract. It is more of a concept than a physical reality. In general, wasting virtual currency is easier because we are not seeing, smelling, touching and physically handing it over.

Studies have consistently shown that people spend more with cards than cash.

This is especially important to consider when it comes to kids.
Most kids don’t understand money at even its most basic level. Economic principles can be difficult to process. Put it in a digital form, and you are totally changing the game. Now, the money doesn’t even really exist.

I used to get an allowance as well as holiday money when I was young. I remember counting out my dollars for my purchases of candy bars and teddy bears and I saw the money literally leaving my hands and going into a register.

This was a powerful lesson: Money is not a never-ending resource and it will diminish over time.

Later, I was given a checking account. Now, as an adult, I deal almost completely in digital money and almost never carry cash. But, I can still remember handing over my piggy-bank money at the toy store. Those exchanges laid the groundwork for my most basic understanding of money as a scarce and depleting resource.

While digital money is the way of the future, is there value in teaching our kids the ways of the past? I tend to believe that there is a good reason to give your kids at least some cash.

The reason is this: concrete learning is a foundation for abstract understanding.

The reality is that in their adult life they will be using increasingly virtual means, but those virtual dollars are symbols.

Symbols are difficult for kids to understand – particularly before about age 11. In order to grasp a symbol’s meaning, kids have to have an understanding of what it represents. This means that they have to experience real-life currency to really understand what money is.

A blended approach to the digital allowance

As with almost everything in life, balance may be the best parenting bet here. You may want to start your young child off with cash allowance and then, around age 12 or so, begin to pay them digital allowance via a digital account. Or, you may want to have them keep savings in the bank and keep cash for spending. You could also pay them an allowance in an account and then have them pull the money from an ATM for spending.

(The ATM lesson may be particularly valuable because so many kids see the automatic teller as a magical money dispenser. Putting money into the bank and then taking it out via an ATM will let them see firsthand that there is nothing miraculous about it.)

No matter what you choose to do in regard to paying your child’s allowance, keep in mind that they are laying the very first foundations for their financial life and you are their guide.

Be conscientious and aware of the messages you are sending. It is probably more important how you communicate with them about money than it is how you give it to them.

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Jessica Gray
Jessica Gray lives in North Carolina with her husband and two little boys. She enjoys cooking, but she hates cleaning house. She's deeply passionate about kids and education - her experiences working with children as a teacher have been some of the most rewarding of her life. Writing has been a lifelong passion that started with notebooks, old scraps of paper, and journals. She loves to write informative and educational pieces for kids and adults.