Article

Virtual spending

Slowly but surely, we are moving towards a cashless society. “Virtual spending”, the ability to make purchases and transfer money using methods other than cash, is constantly evolving. Here are some examples, from the familiar to the cutting edge:

• Cheque
• Money order
• Debit card with microchip technology
• Debit card with InteracFlash (Interac’s new “contactless” card, which you simply scan at the checkout counter and doesn’t require a PIN)
• Prepaid debit card
• Virtual VISA debit card/Interac online (allows you to shop online and pay for your purchases directly from your bank account)
• Credit card (with or without microchip technology)
• Prepaid credit card
• Proprietary online payment systems (e.g.iTunes)
• Virtual accounts and transaction gateways (e.g. PayPal)
• Gift cards
• Reloadable store cards
• Mobile payment application (e.g. Starbucks app)
• Electronic Funds Transfer (EFT) (e.g. payroll direct deposit)
• Interac e-Transfers (transferring money via email)
• Online and mobile bill payments and fund transfers
• Virtual currencies such as Bitcoin
• Biometrics (new e-verification tools for online and mobile banking such as fingerprinting and iris scanning)

In the not too distant future, we will be using our smartphones as mobile wallets, replacing the need to carry around cash, debit cards and credit cards. Some banks in Canada are already allowing customers to deposit a cheque simply by taking a picture using a smartphone! Because virtual spending is not as tangible as spending cold hard cash, it poses unique challenges for parents and for children, including making the spending feel real.

On the one hand, virtual spending is convenient and easy and can be more secure than using cash. But on the other hand, it can desensitize you to spending, which may lead to over-spending.

That’s why it’s more important than ever for your children (and you) to have a budget.

Some other issues related to virtual spending that you may want to consider and discuss with your children include:

• Young kids and pre-teens must understand that when they buy things online (e.g. music, movies or games on iTunes, etc.) they are spending real money.
• Consider making these online purchases part of your child’s allowance. You may even consider asking them to reimburse you in cash, to strengthen the connection between their purchases and the cost.
• Use a passcode lock to control your kids’ ability to access your smartphone or tablet.
• Keep your online store or iTunes passwords a secret. Do not auto save/store passwords so your kids can’t make purchases without your permission or buy things “by accident”.
• Talk to them about the importance of cyber security. Make sure they only use encrypted websites and that anti-virus software is kept up-to-date.
• Using cash is untraceable but digital spending leaves behind an electronic financial trail. Discuss how this is both good and bad: we give up our anonymity and privacy for the ability to easily track our spending and see where our money is going.