The Tangible Lessons of Money: Why Kids Should Start with Physical Cash Before Going Digital

Financial Planning Dentist

In an era where digital transactions and virtual currencies dominate the financial landscape, the value of understanding physical money should not be underestimated, especially for children. 

The transition from earning, saving, and spending physical cash before delving into more modern financial methods offers a wealth of indispensable lessons that build a strong foundation for financial literacy. This article explores why it’s crucial for kids to grasp the tangible aspects of money before embracing the virtual alternatives and why the painful lessons of losing or misplacing cash hold invaluable teachings.

Hands-On Learning

Physical cash serves as an excellent teaching tool for introducing kids to the concept of money. Tangible currency provides a sensory experience that engages sight, touch, and even sound. Children can hold, count, and visually differentiate between various denominations. This tactile interaction fosters a deeper understanding of the value of money compared to merely viewing numbers on a screen.

Real-World Connection

Money is an abstract concept for young minds. Like distances or time children may find it hard to construct a framework for learning these ideas. Unlike other abstract ideas, money has a physical representation in the form of currency. Physical currency bridges the gap between this abstraction and the real world. Kids can connect chores, allowances, and monetary rewards with the physical notes and coins they receive. This connection lays the groundwork for comprehending the value of work, patience, and the trade-offs associated with spending choices.

Delayed Gratification

Physical cash creates the proper “challenge of delayed gratification.” When children can visually witness their money pile up, and have it in their possession they are challenged with the impulse to spend it. My mom always said it was “Burning a hole in my pocket.” If children are never confronted with that impulse, that sense of urgency, they will rarely overcome it. Conflict is an important part of our development of Good money habits. The act of saving becomes more tangible when they see their funds grow over time. This valuable lesson in patience and discipline paves the way for healthier financial habits in the future.

Understanding Loss and Consequences

One of the most profound lessons that physical money imparts is the experience of loss. While parents naturally shield their children from the pain of losing or misplacing money, this very pain provides an essential life lesson. The emotional impact of losing a few dollars due to carelessness can be a powerful incentive for kids to be more responsible with their possessions and money. This is definitely a point of conflict I reach with other parents, who chose to insulate their children from this pain – though I would rather my child experience the devastation their carelessness has from the loss of say $20, then $20,000.  

These losses, though small, teach resilience, accountability, and problem-solving skills that virtual transactions often lack. I know this might seem like a “willful” intent to have my children experience pain…and it is…but I think it’s an earned lesson that we ought not to rob our children of. 

Lessons in Budgeting

Physical cash inherently imposes limits on spending. Kids can visually see when their wallet is getting emptier, which prompts them to make choices about what they want versus what they need. This limitation introduces them to the concept of budgeting, a skill that becomes increasingly important as they navigate more complex financial scenarios in the digital world.


Another essential lesson that physical cash transactions can teach kids is the concept of sales taxes. I see many parents paying the sales tax or shipping costs of purchased items. Just Don’t; this is a huge opportunity to teach a lesson about where taxes come from and the effect it has on buying power.

While these taxes might not be explicitly stated on price tags, they are a part of many purchases. When kids pay with physical money, they often hand over more than the price of the item due to sales tax. This provides a valuable opportunity to discuss the role of taxes in society, as well as the importance of understanding the total cost of an item. By engaging with these real-world examples, children gain insight into how governments fund public services and the broader economic landscape.

I have had to see my child walk out of a toy store in tears because he had to put an item back as the result of sales tax…this lesson is priceless! He wasn’t mad at me, he was mad at taxes.

In the digital age, it’s easy to browse online marketplaces and make purchases with a few clicks. However, the true cost of an item might not be immediately apparent. Shipping fees can significantly increase the total expense, especially for items ordered from different locations. When kids use physical cash for purchases, they have a chance to experience the cost of this convenience firsthand. Whether it’s buying a gift online or ordering a favorite book, involving children in the payment process allows them to witness the final price and the added shipping cost. This lesson highlights the importance of considering all expenses before making a purchase, promoting critical thinking and wise decision-making.

A Concrete Value of Money

In the digital realm, the value of money can feel elusive, as transactions are reduced to numbers on a screen. Physical cash, on the other hand, provides a concrete representation of that value. Kids can witness the exchange of goods or services for money firsthand. This real-time experience helps them understand that money is earned through effort and must be spent wisely.

Embracing Technology Later

The transition from physical cash to digital transactions becomes more seamless when kids have a solid foundation in understanding money’s tangible aspects. Armed with lessons in earning, saving, spending, loss, and budgeting, children can approach the digital world of finance with a more critical mindset. They are better equipped to navigate the complexities of online banking, digital wallets, and virtual currencies, making informed decisions that align with their financial goals.

The journey of financial literacy begins with physical cash. The tactile experience of handling money, coupled with the lessons of loss and delayed gratification, provides invaluable insights that form the cornerstone of a strong financial education. While the transition to digital transactions is inevitable, ensuring that children first master the lessons that only physical money can provide sets them on a path to financial success and responsible decision-making in the modern world.

More related articles:

Boulder Financial Advisors, Investment Specialists, Real Estate Advisors
Kevin Taylor

What’s making Real Estate investors “Smile”?

Investing in the property along with demographic trends is a wise and efficient investment strategy because it allows investors to capitalize on the housing, storage, and infrastructure needs of huge swaths of people. For example, as the population ages, there is an increasing demand for senior living facilities and healthcare services. By investing in properties with supportive demographics investors are more likely to see better returns. Similarly, as the younger generations continue to delay homeownership and prefer renting, investing in rental properties in desirable areas can provide a steady stream of income. By analyzing demographic trends and investing in properties that align with these trends, investors can make informed decisions and potentially maximize their returns while minimizing their risks. This brings us to the demographic shift of Americans moving southward…to the “Smile States” First, let’s define what “smile” states are. These are the states that have a southern border on the Gulf of Mexico and a western border on the Pacific Ocean, and up to the mid-Atlantic states,  forming a smile-like shape on the map. These “smile” states include California, Arizona, New Mexico, Colorado, Texas, Florida, Georgia, Virginia, and the Carolinas. Overlapping, The states that attracted the most “new residents” in 2022 are Florida, Texas, North Carolina, and South Carolina, followed by other states in the South and West, Including, Texas, Colorado, and Arizona (the full list can be found here). But why do people invest in these states, and what’s driving the real estate market in these areas? One of the main reasons people invest in “smile” states is for the lifestyle they offer. These states have a warm climate, beautiful beaches, and plenty of outdoor activities. This makes them attractive to retirees, who are looking for a place to settle down and enjoy their golden years. According to the U.S. Census Bureau, Florida is the top destination for retirees, with over 500,000 people moving there each year. But it’s not just retirees who are attracted to these states. Younger people are also moving to “smile” states in search of job opportunities and a lower cost of living. For example, Austin, Texas, has become a hub for tech companies, attracting young professionals from all over the country. Additionally, the Raleigh, Durham, & Chapel Hill part of North Carolina has seen a bump in younger Americans migrating to the area to enjoy the weather, adorable housing and cost of living, and thriving economy. Another factor driving the real estate market in “smile” states is the shift in demographics in the United States. According to a report from the Urban Land Institute, millennials and baby boomers are driving the demand for rental housing in these areas. This is because many millennials are delaying home ownership and opting to rent, while baby boomers are downsizing and looking for more affordable housing options. But it’s not just the “smile” states that are experiencing a shift in demographics. The entire country is undergoing a major demographic shift, with people moving from high-tax states like California and New York to lower-tax states like Texas and Florida. This is according to a report from the Tax Foundation, which found that people are leaving high-tax states at an alarming rate. This has created a demand for real estate in these lower-tax states, as more people look to relocate. Investing in “smile” states can be a great opportunity for those looking for a better quality of life and a potential return on investment. With the shifting demographics in the United States, these states are becoming more attractive to both retirees and younger professionals. As people continue to move around the country in search of better taxes and weather, the real estate market in “smile” states is likely to remain strong.

Read More »

Property Condition one of the six critical factors in Real Estate investing

When investing in real estate, the property’s condition and age are important factors to consider. The condition of a property can impact its value, cash flow potential, and the amount of maintenance required. Here are some elements to look for and how much due diligence investors should expect to do. Structural Condition: The structural condition of a property is one of the most critical elements to consider. This includes the foundation, walls, roof, and other essential components. A property with a sound structure is more likely to appreciate in value and require less maintenance over time. Mechanical Systems: Mechanical systems such as plumbing, electrical, and HVAC are important to consider when evaluating a property’s condition. These systems can be expensive to repair or replace, so it’s essential to ensure they are in good working condition. Age of Property: The age of a property can impact its condition and potential value. Older properties may require more maintenance and repairs, but they may also have more character and be located in established neighborhoods. Upgrades and Renovations: Properties with recent upgrades and renovations can offer a higher potential return on investment. This includes updates to the kitchen, bathrooms, flooring, and other areas of the property. Location: The property’s location can impact its condition and potential value. Properties in areas with high demand and limited inventory may be in better condition than those in less desirable locations. Due diligence is an important part of investing in real estate. Investors should expect to conduct a thorough inspection of the property, review any available documentation, and seek professional advice from experts such as real estate agents, home inspectors, and contractors. It’s essential to assess the property’s condition and age to ensure that it meets the investor’s criteria and investment goals. In conclusion, the condition and age of a property are important factors to consider before investing in real estate. Investors should conduct due diligence to evaluate the property’s structural condition, mechanical systems, age, upgrades, and location. By doing so, investors can make informed decisions about the potential value and cash flow potential of the property. Investing in a property with good condition and age can be a smart strategy to minimize maintenance costs and maximize the return on investment.

Read More »

Pin It on Pinterest