When Jill Kelley pulls out her plastic to buy clothes, movie tickets or gas, mom and dad are watching. Jill, 16, uses an Allow Card, a prepaid debit card featuring technology that lets her parents monitor and restrict how and where she spends her monthly allowance.
“I don’t mean to imply I don’t trust her,” says Jill’s father, Tom Kelley. “It just seemed like a great idea to be able to have some control over how she spends the money and not have cash around.”
And Jill doesn’t mind.
“I don’t even think about it,” says the Dobson High School student. “I’m not buying anything I shouldn’t be buying.”
The card is convenient for both father and daughter. Kelley can put money on his daughter’s card (before he gave her cash and couldn’t keep track of how much was going out of his wallet). His daughter doesn’t have to worry about losing cash, and the card is backed by MasterCard, so it’s accepted almost anywhere.
But there’s more at stake here than convenience. Using the Allow Card is also about his daughter’s financial future.
“There are lessons about what is credit and how credit can be damaging,” says Kelley. “My daughter isn’t getting any of that education in school.”
Here’s how it works. Parents open an account with Mesa-based Allow Card of America and can put money on the card through their own credit cards or checking accounts for a nominal fee. They can monitor their child’s spending via a passwordprotected Web site. The charges are displayed as they would be in an online bank statement.
Parents and their children can go over the charges together and discuss spending patterns. There are also monthly lessons about money management.
Most teens don’t understand how money works even though they use it every day, and what they know about money they learned from their peers, says Rena Gardenswartz, a fellow with the National Endowment for Financial Education, a nonprofit organization based in Colorado.
Jill, who like many other teens has a part-time job, had a bank account before receiving her Allow Card. The account was overdrawn without her realizing it.
“I didn’t even know you could overdraft,” she says.
The charge was $20, an expensive lesson to learn for a teenager. Some teens continue to rack up overdraft fees (sometimes at $35 a pop) or have credit cards in their own names. They fall behind in the payments and don’t tell their parents. In a credit-driven society, that could cost them more money when they apply for loans or buy car insurance.
“Teens really need to understand that their actions have consequences,” says Gardenswartz. “A lot of first-time college students get bombarded with credit card offers. They can get into trouble. They don’t realize what a huge effect that can have later in life.”
Tom Smith and Marla Beans, founders of Allow Card of America, created the concept after working in the credit card business and seeing the damage an ATM card can do in the hands of a financially oblivious teen.
They also wanted to help parents move away from what Smith calls the “ask and ye shall receive” method of money management.
Tom Ginter of Phoenix used to be an adherent of that particular school of financial thought. His children would ask him for money, and he’d simply hand it over: $50 for a sweater, $120 for a pair of jeans.
Ginter noticed a difference in his children’s spending habits after introducing them to the Allow Card. For him, the card isn’t about convenience or saving money. It’s about teaching his children to manage their money.
“They’re becoming more fiscally responsible,” says Ginter. “All of a sudden there’s value to (money) whereas before it was my money and it was free. Now my sons and daughters are saying, ‘No, I want to use my own money.’ ’’
Parents who give their children money whenever they ask for it and don’t bother to keep track of how much they’re dishing out are cheating their children, says Smith.
“Do you want to know the definition of a complete idiot?” Smith asks. “Someone who keeps doing the same thing over and over again. If we continue to teach kids the ‘ask and ye shall receive’ method whereby (children and teens) don’t learn to be accountable for their spending, in 10 years we’re still going to have a major epidemic of financial illiteracy.”