Surveys show 90 percent of American parents don’t keep track of how much spending money they give to their children each month. And a typical college student will emerge after graduation with thousands of dollars in credit card debt.
In an effort to improve the financial literacy of American families, a Mesa-based start up company has created a stored-value debit card for kids that helps parents control their children’s spending.
Geared to children ages 10-18, the Allow Card is intended to help them understand the value of money while still giving them some degree of financial independence, said Marla Beans, chief executive of Allow Card of America, 1830 S. Alma School Road.
"Kids live in an ask-and-yeshall-receive world," said Tom Smith, founder and director of the company. "Parents have to scramble to meet their kids’ money demands. . . . With this, parents have something they can use to start teaching
their kids to manage money."
At the heart of the program is an online portal, www.allowcard.com. From there, parents can register for a card and load and reload money to the child’s Allow Card account from their own credit card, checking or savings accounts.
Both child and parent can use the Web site to keep track of transactions and how much money remains in the account. Parents can see where their child is spending and for what. Because of the nature of debit cards, kids can’t overdraw the account and rack up debt. If sufficient funds are not available, the transaction will be declined at the point of purchase.
The card is activated by a personal identification number which must be entered at the point of purchase, and provides protection against theft.
The Web site includes features that allow parents to set limits on the locations and merchandise categories that the card will accept. Also, the site contains financial lessons that help teach children to manage money.
The balances in the Allow Card accounts are held by Sioux Falls, S.D.-based MetaBank.
The program has a onetime $20 activation fee and a $3.50 monthly fee. The program also has a fundraising feature in which schools and organizations that offer the card to their students and members receive money back from Allow Card. The amount is $5 for each card issued and 25 cents for each month the account remains activated.
The card became available in late April after two years of development. Smith, a veteran of the automatic teller machine and credit card processing industries, came up with the idea after installing ATMs at two California high schools and being surprised by the amount of use they received.
"They were just using their parents’ cards. I thought if the kids had their own cards, they would use them even more," he said. But he also wanted to set it up so they wouldn’t go into debt.
Smith and Beans were partners in Scottsdale-based Provident One Payment Systems, which they sold in 2003.
Using proceeds from the sale, they set up Allow Card of America.
"We always wanted to issue our own card," Smith said.