The Piggy Bank Moves to the Cloud: Teaching Kids About Money in the Digital Age

CW&W Executive Director Adrienne Penta and BBH Relationship Manager Beth Milkovits explore the complexity of teaching the value of digital currency in a time where we increasingly store and spend money online and in the cloud.

Once upon a time, there were only a couple places to store your savings: in a bank or under your mattress. These days, currency is found in almost too many places to count: an iTunes account, mobile apps, online games – does anyone have any FarmVille cash or Nintendo points?

These are all forms of digital currency, meaning anything that represents value in a digital manner. Digital currency often represents government-issued currency, but not always. As Yuval Noah Harari explains in his book “Sapiens: A Brief History of Humankind”:

Money is … a universal medium of exchange that enables people to convert almost everything into almost anything else. 

The digital economy is a natural evolution of this concept.

Many children are more focused on digital currency than hard currency. Any parent of an elementary school-aged child has heard the loud whines of a son or daughter begging for an in-app purchase – from securing upgrades to buying coins or currency to use in a game. Since these purchases seem like fun and games, it is often difficult to communicate that they cost real money, and gift cards and iTunes cards represent real value.

It is challenging enough to teach your kids about the value of a dollar when the dollar is represented by U.S. government-issued paper, and understanding currency in the digital economy takes some time and assistance as well. In this new economy, we are moving toward a system where most, if not all, payments will be made online or by using a smartphone, rather than from our wallets. The mechanism that children use for saving money is moving from a piggy bank to apps.

Children are digital natives, and as a result, are often tech-savvy navigators of this digital economy. In fact, their digital dexterity is often more developed than their understanding of the value represented by digital currency and online purchases. With less exposure to physical money, how can parents prepare their children to understand the value of a digital dollar when teaching financial literacy?

The Challenge of Behavioral Finance

There are some challenges to learning about the value of money in a digital economy. When it comes to money habits, research shows that people tend to spend more when we use credit cards – perhaps because money does not seem as real when we are using digital, rather than physical, currency. It may be that when we cannot see the actual reduction of our money (from our wallet or piggy bank), we do not fully recognize or internalize the extent of our spending.

Behavioral finance has some theories that may help explain this based on the idea that people are loss averse. Studies show that it hurts more to lose $1 than it feels good to win $2 – people value gains and losses differently, which in turn affects spending decisions.

A prospective consumer may think twice before spending in the real world because she does not want to part with her money. That consumer may reflect on whether the item is a want or a need or whether now is the right time to make the purchase. The divide between a digital token and actual money, however, reduces the feeling of loss aversion, and the decision to buy may be made more quickly. (How many times have you double-clicked to use Apple Pay without thinking twice?)

As we have discussed in other articles, delayed gratification and autonomy are keys to financial responsibility. As our economy becomes increasingly digital, these concepts remain important pieces of financial education, and in addition, parents and other teachers must highlight the connection between digital and physical money beginning at a young age. As children mature, parents should continue to reinforce that connection and gradually increase their children’s level of autonomy while still supporting them in navigating the digital world responsibly.


The first step is to link the digital currency to something physical, whether that is real money, or in the case of preschoolers, other types of tokens. While young children, starting around age two, can understand the concept of using a symbol to stand for something else, they struggle to understand complex token systems (like money). At this stage, the focus is to make the relatively simple connection between a physical and digital token.

PreSchool: Make the connection between a digital and physical token. Save up digital tokens throughout the week and turn them into ice cream or a toy.

Using an app or online tool, you can track the tokens your child “owns.” Then, use the tool to save up for a treat at the end of the week. Maybe the whole family goes out for ice cream, or you have a box of toys that the child can pick from. Convert the online token to a physical token, showing your child that her number of online tokens have reduced, and then use the physical token to “pay” for the ice cream or toy. No money is actually being exchanged in this simple economy, but the child begins to link virtual tokens with physical tokens.

Elementary School

At this stage of development, children are taking pride in a sense of accomplishment. Using a token system, which may or may not be linked to actual assets, can help connect digital currency and physical money. Parents can use an online system or app to track the child’s allowance or savings account. This helps children make the connection that their real-life activities increase their online wealth.

Allowing children to have an appropriate amount of autonomy in managing their virtual savings is another key to long-term financial independence. For birthdays and holidays, many children receive gift cards (in the Penta house, the iTunes gift card is the most prized gift). Allowing elementary school-aged children to decide when and how to spend these relatively modest amounts of savings is appropriate.

Elementary School: Connect digital currency and physical money. Allowing her to decide when and how to spend a gift card or make in-app purchases lasts longer than when it's linked to mom's credit card.

For example, Adrienne’s 8-year-old son loads his iTunes gift cards onto his (child) Apple account, which allows him to make in-app purchases he deems worthy – shockingly, he is able to conserve this savings much longer than a similar amount of her money! How long (or not) a child’s savings last can be a valuable lesson in money management.

The later elementary school years are a good time to introduce the concept of saving toward a larger goal. Allow your child to set his or her own goal and determine how to save for it. This can provide an opportunity for parents to talk to children about how spending on smaller items more often reduces their tokens, which means it will take longer to save for the larger item.

Middle School

Children at this stage are most likely participating in virtual economies with their peers through gaming, social media, and other types of interactive media. If you have not already, consider creating an online account that a child can use for specific purposes, such as purchasing games and making in-app purchases, or making buying decisions elsewhere on the internet.

Children can choose to use some of their physical dollars (gifts, allowance, and so forth) by exchanging them with their parents to fund the online account or gift card. This way, children cannot spend beyond their means, and they have a choice of where to spend their money at a time when autonomy is important.

Middle School: Begin to understand the digital economy and how money is spent in it. Create an online account for specific purposes; discuss how she is using her resources and what she witnesses from her peers, too.

During this time, peers are likely to affect how children interact with the digital economy and how money is spent in it. Children at this age might be interested in discussing how they are using their digital resources and what they are witnessing their peers do in these online communities, which provide opportunities to discuss both virtual economics and values – the why behind spending and saving decisions.

High School

At this age, there are many options to give your child more autonomy over her financial decisions while being able to monitor her accounts and behaviors. Children can get a debit card or credit card connected to their parents’ account. These cards offer different learning opportunities. Because debit cards are directly linked to assets in a bank account, they may help make the connection between physical dollars and digital currency, as they offer children a view of the declining bank balance.

In the case of credit cards, parents can set a low credit limit to prevent overspending and increase awareness. This may offer an opportunity to discuss financial habits such as paying regular bills and how compound interest works.

High School: Provide some level of autonomy over financial decisions with a credit/debit card linked to parents' account. Mistakes are better made now, while parents are able to monitor the situation.

Either way, it is important to let your child make her own mistakes. Children may spend more on Lyft or Uber than they realized or overdraft their account. These personal finance mistakes are better made while parents are able to monitor the situation, rather than later when the mistakes can have bigger consequences.


Teaching children the life skills of delayed gratification and autonomy are core tenants of understanding the value of money. As the world moves toward a digital economy, it might become more challenging (for both children and adults) to embrace these skills, and it is important to link physical currency to digital currency at an early age. Parents have the opportunity to engage in conversation and have fun while teaching kids about money and the value of a digital dollar.

At BBH, we have helped countless families approach conversations with their children about money. For more information, reach out to our Center for Women & Wealth.

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A Guide to Talking to Your Children About Money

BBH Relationship Manager Beth Milkovits provides a guide for introducing the concept of money and its value to children. She outlines the different ways parents can present money management responsibilities and impart the value of a dollar and importance of giving to their children in various stages of childhood development.

1 This article covers the digital economy, which is also sometimes called the internet economy, the new economy, or the web economy. We focus on online payments, video game tokens, in-app purchases, and so forth, and do not address cryptocurrencies or bitcoin.


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