No need to worry about coming up with cash for a child's allowance. Parents can now choose from an expanding menu of prepaid debit cards, aimed at giving them digital oversight of their children's spending and saving.
The latest offerings include cards with slick companion apps from financial startups like Greenlight, Current and goHenry. Unlike traditional debit cards, which are directly attached to checking accounts, all must be loaded with money by parents.
The digital tools aim to fix an increasingly common problem: Parents don't always have cash on hand. So they can be caught short when a child needs money for an outing with friends, to put gas in the car or to complete a chore. With an app, parents can put money on a child's debit card with a few taps on their phone.
Details vary by card, but typically parents sign up for the account, then link their checking account or debit card as a way to fund the child's card. Parents can give cards to multiple offspring, even those of tender age (goHenry recommends its card for children as young as 6).
Parents can use the apps to establish allowance transfers, set spending limits or offer payment for chores and a dizzying array of other rewards. Parents can get text or e-mail messages when their child makes a purchase. And parents can quickly tap the app to disable the card if the child loses it.
Financial advocates say that beyond all the bells and whistles, the main benefit of the "smart" prepaid cards is that they can prompt parents to talk with their children about money.
"These cards are a great tool to learn about money management, if they're used right," said Will deHoo, founder and executive director of the FoolProof Foundation, a nonprofit that promotes "healthy skepticism" about financial products.
Promoters said the cards do encourage saving. Greenlight lets parents automatically match money the child sets aside in a savings account. Parents can even direct the app to pay the child their own, personal interest rates — say, 20 percent or even 100 percent — as an incentive.
Greenlight also allows parents to supervise spending by choosing the type of stores or restaurants where children can shop.
Children with mobile phones can get their own version of the app, which lets them check balances or seek a parent's permission to buy a specific item.
Greenlight, with financial backers that include Amazon and two big banks, became available in 2017 and now has about 200,000 paying customers, said Tim Sheehan, the company's chief executive. Next week, the card will add new features, including the ability to use the card at ATMs.
Current, backed by investors including an arm of Fifth Third Bank, lets parents offer their children the option to earn money by doing chores.
The cards can offer a learning experience as long as parents don't go into "helicopter" mode and overdo their control, said Bill Dwight, founder of FamZoo, a longtime family finance and budgeting program that added a debit card to its menu several years ago.
The idea is to let children make spending mistakes, with guardrails to prevent disasters, Dwight said. "If you nag the kid about every transaction," he said, the child may tune you out.
Carrns writes for the New York Times.
