Cash cards for children - good or bad idea?

Well, finally summer is here and we are having lovely warm, sunny days here in Bergen. Hopefully it lasts until the weekend, as we plan to hike from Ulriken to Fløjen - 2 of the mountains behind Bergen, I'll let you know!

Until then - there has been a lively debate here recently about providing children with credit cards. Sparebank 1 in Norway has been doing so for over two years, and other Norwegian banks are jumping on the band wagon. There are, however, certain restraints attached:

- you have to have the agreement of your parents
- the card cannot be used on the internet
- there is a limit on the amount of money that can be used in one transaction (usually the equivalent of £10)
- it can be checked and topped up on-line

other than that, children as young as seven years old are allowed to get a card.

I find that quite remarkable and I'm not too sure that it is such a brilliant idea. OK it might be easy for busy, working (guilty?) parents to take out the Smartphone and pay their child's pocket money, instead of rooting around for coins or notes, but when I was a child I kind of enjoyed having 'real' money in my hand. I knew exactly how much was in my piggy bank, and only took money out when going shopping (usually for sweets!). Our children were the same and got real money given to them. It's funny how you notice their money habits evolve, from spending as soon as they have it, to saving for 'something big' and finally to being aware of the true value of things.

According to recent research in the USA, paying by credit card does not cause as much pain as paying with cash! A part of the brain called the insula, which is associated with pain processing was activated when subjects who had $20 cash to spend were subjected to pictures of items with prices that were too high. Not quite sure how that research actually was carried out, but other tests have shown that when paying for something with a credit card people focus more on the qualities and esthetics of the item than on the price. Buying over the internet apparently is even worse! We lose sight of the price completely!

Today, everyone talks about the endebtednessn of the average family, running several credit cards, a mortgage, car loan, etc., and of course it doesn't stop there. Greece is on the verge of bankruptcy, Detroit has alread filed, and Governments across Europe have a none to healthy debt to GDP ratio. So why encourage the next generation to use cards instead of money? I think we are doing our kids a disservice by introducing them too soon to the joys (?) of paying by plastic, even if it is really just a cash card and not a true credit card. Much better to let them have the physical coins and notes in their hands, and watch them disappear into the till when they buy something, which in itself is only shortlived (sweets, toys). I really think that is the only way in which one can learn about prioritising, saving and controlling our finances.

Of course, since all Norwegian banks charge for the use of credit and debit cards it is also just another way for the banks to earn money, so maybe the idea will come to the UK too, along with card charges. I haven't yet found any other country that allows children as young as seven to have a cash card though, so hopefully common sense will prevail.