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A virtual bank for the kids' allowance
Suzanne Skyvara with her husband Zee and kids Tom and Michael.
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The bank of mom and dad can be an unreliable place. Forget FDIC insurance; if you’re a kid, getting your money out can be a challenge. Just hear the plight of 8-year-old Michael Skyvara’s friend Simon.
“Simon, he’s saying his mom always forgets so like every five weeks he gets like $2,” Michael Skyvara says.
Michael doesn’t have that problem. His parents are on top of things. His mom Suzanne’s laptop has a site showing her kids’ spending and savings in intricate detail. There are even pie charts. Michael and his brother get a weekly allowance of $7 each.
The money gets virtually deposited into virtual accounts on the site, and the kids get to decide how much to spend, save and donate.
Then, when they want something, Suzanne Skyvara is prepared.
“We might be in the toy store, and the boys start saying ‘I want this, I want this,’” she says. “And, it’s like, OK, it’s up to you, you have an allowance. So, I’m able to pull out the iPhone and go, OK, you actually only have $6 in your account right now and I don’t think you’re going to be able to pay for it.”
The Skyvaras live north of San Francisco and use one of the growing number of services that track allowances online.
On the virtual banking site she uses, her kids even earn interest: 5 percent a month.
Quite a rate, if you can get it.
Since these accounts are virtual, parents still have to keep the money on hand. Analysts say these sites are unlikely to take off until they’re tied to parents’ real accounts.
The American Institute of CPAs says the average kids’ allowance is $65 a month. That’s $780 a year. Only 1 percent of kids save any of their allowance.
Beth Kobliner, who wrote "Get a Financial Life," is skeptical these sites can teach good financial habits. She says these sites could ultimately lead kids to spend more.
“Every day, going online checking, gee, how much money do I have now, and oh! here are all the great things I can buy,” Kobliner says.
Most of these sites either charge the parents money or have tie-ins with stores like Amazon.
And, Kobliner worries that by reducing an allowance to numbers on a screen, kids won’t experience the pain of spending cold, hard cash, but at least their parents won’t forget to pay up.
Interesting article, I personally could not agree more with childhood education about finances. Unfortunately many kids don't understand the concept of a bank and assume that money just comes out of a machine. Recent research also indicates that many kids and teens resent banks from negative relations with their parents. Kids are responsible for millions of dollars annual spent online and we have started to see the trend of increased kids banks accounts.
If this approach is taken correctly I believe there are great opportunities for kids. The children get to learn about finances so they don't encounter financial distress from a lack of saving or budgeting correctly.
I found a solution that may be useful to all the parents out there looking to teach their kids financial responsibility. KidsCash is an online payment solution for kids that is safe, secure and fun.
It uses real deposited money in order to set up a virtual account and allow kids to budget, save, make donations or spend. Parents can then monitor their children's spending without the hassle of constantly needing a credit card. Kidscash also open up a new line of communication between parents and children to discuss basic household finances and educate regarding financial literacy tools. They also reward outstanding behavior such as donations and saving goals.
The economic future is unclear but if we arm our younger generations with the right knowledge, we can give them the tools to try and tackle any economic problems they may encounter
My neighbors developed a unique system over 20 years ago to teach their 3-year-old how to manage money. He's 26 now, married, has a newly born child, and still uses the system today! It offers a simple, yet comprehensive approach for teaching kids how to manage an income rather than just spend an allowance. Parents set aside coins and dollar bills for their child, divided into four banks: Giving, Savings, Reserves and Allowance. There are many opportunities (using their system, which comes with everything a parent needs) to teach principles and participate in real-world activities, such as paying taxes and giving to charity.
http://faithandfinancesforkids.com
Faith & Finances for Kids is Biblically based, so Christians in particular will love it! Just go on their site and read the reviews. They get invited to speak at churches regularly, and people are clamoring for the product.
The virtual bank idea is neat, I admit; especially with smart phone apps. But, I think to be effective, parents still need to set aside physical money and offer guidance on their own. I don't know what kind of features the online virtual banks offer, but it's clear that if you're serious about teaching kids about money, you need a comprehensive system that won't let you down. Faith & Finances for Kids is a great tool for parents that turns a cumbersome chore into an easy task... OK, e-a-s-i-e-r task.
Interesting that Beth Kobliner would see an online allowance tracker as encouraging kids to spend more. Our experience has been the exact opposite. Our kids - who are featured in this story - actually save a lot! They have specific accounts they have set up to save for big ticket items (like a computer), for college and also for charity donations.
We also make sure that our children are experienced at dealing with cash by giving them money from their allowance to keep with them in their wallets when they are out. At the same time, the financial world is going more and more cashless, so kids need to learn how to deal with money that has been reduced to just numbers on a screen.
If you're interested in learning more, I have reviews of some of the different sites at www.growingrichkids.com.
Suzanne
