Why the First Lessons of Money Must Be Taught in Cash

There is a moment in almost every childhood when money becomes real: the first time a child feels the weight of a coin, or watches a banknote leave their hand in exchange for something they want.

The white paper published by Koenig & Bauer Banknote Solutions returns to this moment again and again, because buried inside it is a lifelong lesson about value. When money is physical, its limits are visible. When it disappears into screens, those limits lose their edge.

The report brings together research from Switzerland, Germany, Ireland, the UK, and beyond to show that childhood financial learning is overwhelmingly shaped by cash. The Swiss pocket-money study is particularly clear: parents believe children understand value faster and with more confidence when they handle physical money.

Most children aged 5 to 11 receive pocket money exclusively in cash, because it lets them experiment — to save, to wait, to miscalculate, and to try again. Cash gives children a framework for understanding that money moves through life in a rhythm: earned, saved, spent, replenished. Digital transfers flatten that rhythm into a number that changes without explanation.

The Bundesbank’s work echoes this. Cash makes budgeting concrete. A wallet with a fixed amount forces a child to choose. A handful of notes makes the cost of a purchase visible. Even the emotional experience matters: the pleasure of dropping a coin into a moneybox, the reluctance when opening it again, the calculation involved in deciding what to keep for later.

As Romina Santelia writes, what children are used to, adults remember. These early encounters with limits, patience, and consequences shape adult habits long after childhood has passed.

The white paper warns that replacing early cash interactions with digital ones carries real consequences. Where pocket money arrives by bank transfer, parents speak less often with children about spending and saving. Children lose the chance to see money diminish or accumulate. Budgeting becomes abstract. A “tap” feels costless, and neuroscientific studies show it: digital spending reduces the psychological “pain of paying,” making impulse purchases more likely. Emerging evidence suggests this pattern begins in childhood and strengthens over time.

Yet the report does not pit cash against technology. Instead, it asks us to understand that cash forms the baseline. Children who learn money first through cash develop stronger self-regulation and budgeting skills; those skills carry into adulthood and help them use digital tools more responsibly. The decision is not digital versus physical. It is whether we preserve the foundations that allow future generations to participate in a complex financial world with confidence.

Cash has always been a teacher. The white paper shows it is still the best one we have.

The full report and White Paper is available here.