Digital Disruption to Financial Parenting

Good money habits from decades ago are still good money habits we want our children to cultivate today. However, technology has changed the way society view and use money. This, in turn, has caused a digital disruption to our financial parenting.

Money: Same concept – past, present and future

Money has always been a mechanism of exchange. Whether it existed in the form of notes and coins or seashells or tulips, the fundamental concept of money is that it is an exchange mechanism. Money is also sometimes thought of as stored value. This concept was true fifty years ago, it is true today and it will remain true in the future. The fundamental concept of money will always be the same.

…. but different

Whilst the concept remains the same, the form money takes has changed over time. And it will change in the future. Many years ago, money existed in the form of sea shells or tulips. Today, it exists in the form of notes and coins. In the future, it is likely to exist in a digital form (eg. crypto-currencies).

There are many reasons for money to take a digital form:

  • It’s convenient: there is no need to wait in line to withdraw money first before we go shopping; there is no need to fumble with change; there is no need to go to the bank to deposit our pay. We simply tap and buy. Employers and customers now pay us by online transfer.
  • It’s borderless: it is no longer necessary for us to travel overseas to buy the item. With a few clicks of a button, we can buy almost anything we want.
  • It’s instantaneous: instead of having to send money by way of COD (cash-on-delivery), online transfers make payment almost instantaneous.

digital disruption
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Today, many transactions are using money in a form that we can’t see. We buy things with the credit card and we transfer money to each other online. Yet there are still inefficiencies in our existing system, especially for international transactions. To transfer money into an overseas bank account, we still rely on SWIFT codes and IBAN. To deposit a foreign currency cheque into a local bank account still needs clearance from the foreign bank. All of this takes time – it’s not convenient, not exactly borderless and definitely not instantaneous. Blockchain technology and crypto-currencies have the potential to make this process more seamless in the future.

The future form of money is likely to exist digitally. Money will eventually become an intangible commodity.

Money habits: same principle … but different 

The 3 fundamental habits around money – earning, saving, spending – remains the core habits we need to cultivate first. However, the way we cultivate each of these habits will need to change as money and society evolve.

On average, a pattern of behaviour becomes a habit when the behaviour is repeated at least 66 times. The way we form our habits with money is through the way we use money in society. As society changes, our pattern of behaviour with money needs to adapt to these changes in order for us to practise our behaviours.

Below are some examples of digital disruption currently taking place.

Digital disruption to garage sales

Neighbourhood sales were traditionally conducted from the garage. But the move towards higher density living has removed garages from many households. We now share car spaces or park on the streets. Without a garage in most homes, there is no longer a ‘garage sale’ in the traditional sense. Alternatives such as a ‘suitcase rummage’ are replacing the traditional garage sale. In a suitcase rummage, people bring their stuff in a suitcase and set up somewhere to sell.

The greatest impact on traditional garage sales, however, is the availability of online platforms that facilitate sales. These include Gumtree, Craigslist, eBay, Facebook Marketplace, etc. Moving items to these online platforms have many benefits over the traditional garage sale:

  • It is more convenient: We list items for sale as we find them, rather than having to wait for garage sale day. Bad weather often affected sales in a traditional garage sale. With online platforms, items are listed and sold whether it’s rain, hail or shine.
  • It is more efficient: instead of having to sit around for hours to wait for people to come and buy our stuff, we simply leave the items listed online and go about our daily life while we wait for buyers to contact us. Time is a limited resource, so the time we would have to spend minding a garage sale is now being used more effectively pursuing other activities.
  • It has more exposure: listing them online doesn’t limit buyers to those in the neighbourhood. Buyers from far and wide can find these items and we either post the items to them or they take a day trip to collect the item.

Digital disruption to advertising

digital disruption advertising
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Decades ago, businesses advertised their services by doing letterbox drops, newspaper listings, posters on community boards or the phone directory. Online advertising platforms and search engines have changed the way businesses advertise. If the phone book isn’t yet extinct, it is very nearly extinct. Whereas the phone book was only one book, there are now various online directories that allow businesses to advertise their goods and services across multiple sites.

Households are now refusing ‘junk mail’ in their mailbox so letterbox drops are no longer a popular option. As for newspaper listings, the last time I checked, newspaper readership is declining. Those who are still reading the newspaper are not likely to be looking at the classifieds. Pop-up ads in various places on the internet are replacing letterbox drops and newspaper classifieds.

The benefits of online advertisement are the same as for online sales. Online platforms have made it more convenient, efficient and effective for businesses to advertise their services to reach a much broader audience.

Digital disruption to shopping and research

In the past, we shopped and researched for items we want to buy by physically visiting the store or looking through catalogues. First, we waited for the catalogues to be delivered and then flipped through the catalogues to look for the items we want to buy. We write down the price and then visit a few different shops to compare prices before deciding on where and what to buy.

To research a particular product, we visit a shop and compared the features of a few different brands before deciding on a particular make and model of the item we want to buy. This entire process of researching, shopping and buying took time.

Today, all of this –research, shopping, buying – can be done online. A quick search on the internet will bring up a few different make and models of the item we want to buy. A few more keywords will bring up the various places the item can be bought, including online stores. A few clicks of the mouse and the items are purchased within a very short time. Again, the online platforms have made it more convenient and efficient for us to research, shop and buy.

Digital disruption to savings

In the past, we would be paid in notes and coins on payday. We would save up these notes and coins and then deposit them in a bank. Sometimes the bank will be shut by the time we are able to get to the bank and very often the banks aren’t open on the weekends. So there is sometimes a delay in depositing our money into the bank.

With payments now being made directly into our bank accounts online, there is no need for us to go to the bank to deposit our savings anymore. In fact, it’s quite the opposite. We now go to the bank to withdraw money, rather than deposit money. Again, the online platforms have made it more convenient and efficient for us to save our money.

What does this all mean?

The common theme from the above examples is that transactions are increasingly taking place online. This is a challenge for today’s parents wanting to cultivate good money habits in young children. The transactions we grew up learning, practising and therefore cultivating our good money habits are no longer commonplace. Yet we know it is through practise that we cultivate good money habits.

As society changes the way money is used, we must also change in the way we teach our children good money habits. What was effective in teaching us good money habits when we were children may no longer be effective for our children. In other words, technology is causing a digital disruption to our financial parenting.

We can no longer rely solely on offline transactions to teach our children as the opportunity for these transactions are fast disappearing. We also can’t transition our children’s financial exposure entirely online because we currently live in a limbo situation. There are transactions that are still happening offline and there is some occurring online. What parents need to do is find a way to balance offline and online transactions while being intentional if the lessons and habits we want to teach our children.

In my next post, I explore how parents can continue to cultivate good money habits in their young children in the digital age.