Hey there! It's Talk About Money Tuesday, your favorite day of the week! π€
Let's dig into what the value of money really means in today's tap-to-pay world. With kids rarely handling cash these days, do they really understand what that $20 grandma sent them via Venmo is worth? According to the data point below, not so much...
Money Stat
72%
Apple Pay, Cash App, Venmo, Zelle β these are just some of the digital payment options that can create a psychological detachment from money, known as the "cashless effect." Kids and teens can fall into that trap, just like adults, and they often struggle to grasp what money is actually worth. In fact, a recent survey showed that nearly 75% of parents think their child (age 18 and under) doesn't really understand the value of a dollar.
Money in the News
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The news: The price of gold has skyrocketed to more than $4,000 an ounce for the first time ever.
What it means for young people: Investors often turn to gold when they lose confidence in the dollar and they're worried about the economy. That's because gold holds its value and is considered a "safe-haven" asset. When prices go up and the value of the dollar goes down, people of all ages start thinking about how to make their money count.
Kids and teens have probably noticed their allowance or paycheck doesn't buy as much as it used to because things cost more. Yet even if young people aren't stocking up on gold bars, the big picture revealed by the recent spike in gold prices is the same.
β‘οΈ The value of money can change overnight.
β‘οΈ What they do with money matters more than just having it.
β‘οΈ Holding something with lasting value is more important than ever.
Tip for parents & mentors: The modern day gold rush that's underway provides an opportunity for you to talk about value vs. price. Instead of just telling kids to save their money to make a purchase, ask if the item is worth the price. Get them thinking about quality and long-term satisfaction, not just whether they can afford it. You can also compare items side-by-side to help them learn to make decisions based on value. Show them a flimsy $20 toy that's sure to break in a week and a $40 toy built to last for years and ask them to think about which one gives them more value for their money.
When your child waits to buy something better or chooses a quality item over a low-value purchase, acknowledge their financial savviness. Positive reinforcement helps good behavior stick!
Get in the Zone
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Money skill: What things really cost
Why it matters: Young people don't use cash as much as prior generations did, so it can seem like a tricky task to teach them what money is worth. But the key is helping them see, feel, and understand that digital dollars are still real money.
Try this: Focus on teaching the value of money in a cashless world in practical ways.
βοΈ When you pay with a card or app, say the amount out loud and link it to a trade-off: "This dinner cost $20. That's two weeks of allowance."
βοΈ Pull up your child's bank or app activity and review it together with them to see where their money went over the week. This reinforces that every tap and click represents money leaving their bank account.
βοΈ Compare common purchases to help build relative value awareness: "This $10 latte = a quarter tank of gas or just over half the cost of a Netflix subscription."
βοΈ Encourage youth to wait 24 hours if they want to buy something on impulse. While they're waiting, ask them consider whether the item will last and if they'll still want it next week.
Smart Money Quiz
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If inflation is causing prices to rise and the dollar to lose value, what's the smartest long-term way to protect your money?
A. Move all your money into a regular savings account
B. Spend your money quickly before prices go up more
C. Invest in assets that historically grow faster than inflation
D. Keep most of your money in cash to avoid market volatility
(The answer is at the end of this newsletter.)
Loose Change
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π In "you need more dollars to buy the same things" news: the average price paid for a new vehicle last month hit a record high.
π A challenging economy has made turning to GoFundMe to raise money for a basic need more common than years past.
π΅ Check out this inflation calculator to see the changes in the purchasing power of the dollar over more than a century.
Thanks for reading! Have youth financial literacy questions or money success stories that feature kids, teens, or college students? Reply to this email and ask (or share) away.
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'Til next time,
Audrey
βFounder/Certified Financial Education Instructorβ
The FinLit Zone
ANSWER
C. Invest in assets that historically grow faster than inflation. While saving is important, regular savings accounts earn interest that is often less than inflation. Investing in things like index funds, real estate, or businesses allows your money to grow at rates that often outpace inflation. These assets aren't guaranteed to increase in value every year, but they're among the most effective ways to protect and grow the value of your money over time.
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