The Road To Hell Is Paved With Good Intentions and Plastic!
In May I wrote a piece about how debit and credit card companies are marketing products to younger and younger users. The title of the post was, Credit Cards For Kids: Get Them Started Early & Have A Customer For Life. If you read the comments below the post, you will find some input from the owner of PAYjr.
PAYjr is a very popular web site that takes a direct approach to help parents teach children as young as 7, 9 and 11 the benefits of using plastic, the proper way to spend with credit cards….well it teaches them….let’s say practical ways to manage their young finances using online card related tools and provides info for the parents to help the child becomes a better prepared - more responsible card user. The explanation from their web reads,
Headquartered in Dallas, Texas, PAYjr provides smart, practical and easy-to-use online tools that help parents teach their children, kids, and teens about money management and budgeting.
I must also say that this company and their products are ‘monster’ popular with the American public. For kids and parents looking at this type of product, PAYjr. must be a good one because many people use them and they have received wide praise.
After posting the earlier piece, I heard from David S. Jones the CEO of PAYjr. He is not only a very smart guy but also nice person and good at his job. We traded a few emails and I appreciate that he took time out of his schedule for some comments.
The focus of my original post was not to say that PAYjr or any other similar service had the intention of teaching kids the wrong things. They all seemed to have good intentions. The overall point I was trying to show was that I don’t agree with trying to teach a youngster personal finance using a plastic card or only an online account. I don’t think that is an appropriate way to prepare a future earner for their years ahead.
I see that the desired outcome of their teaching is to help kids better understand money management and to budget their money. However, my belief is that kids won’t always grow up to remember the lessons of their youth, but they will never stop associating ‘money’ with that useless plastic card.
I was not trying to slam Mr. Jones or his business, PAYjr is very popular product and web site (even his blog is good). They are very skilled in their approach at trying to educate and direct young people towards a responsible financial future.
A NYTimes article I read today written by By M. P. Dunleavey echoes my original sentiment. The title of that article is Cards Train Teenagers to Use Plastic and here is that point,
All told, America’s adults are on the hook for well over $2 trillion, and more than a third of that is credit card debt. Given the circumstances, what is the best way to prevent our young people from skidding into debt?
(A) Lobby madly for financial literacy programs in schools.
(B) Do nothing.
(C) Create teenager-oriented debit cards to encourage youngsters to assume that money always comes in plastic and that they should spend whatever is on their cards because that’s why the cards are there.
Guess what? Despite grass-roots efforts across the country to develop financial education programs for youngsters, Option C is looking like the front-runner. In the last couple of years, credit card companies have created cards that are a hybrid of credit, debit and gift cards — and the companies are marketing them squarely at teenagers.
…Although the cards are aimed at teenagers, the companies emphasize parental oversight and financial savvy. The MasterCard Allow Web site, for example, calls the card a “financial training program” and outlines “35 parental controls,” including the ability to monitor spending online and set spending limits. And some companies promote the cards as a step toward using credit cards. The parental information section on the MYplash Web site says: “This will give your son/daughter a chance to get acquainted with a cash card prior to getting a credit card.”
…A 2007 online survey about teenagers and money by Charles Schwab supports her concerns. Only 26 percent of the 1,000 teenagers surveyed said they were very or somewhat knowledgeable about how credit card interest and fees work. Less than half said they understood how a debit or credit card worked.
Are these so called financial education programs successful or do they just create more childhood conditioning which prepares youngsters for the plastic American lifestyle? What do you think?
Here are some more interesting facts about children and their money from the Charles Schwab survey,
“Highly motivated by money, eight in 10 teens ages 13-18 agree that “it’s important to me to have a lot of money in my life,” and nearly three-quarters (73 percent) believe they’ll be earning “plenty of money” when they’re out on their own. In fact, American teens confidently predict a future in which, based on the career that interests them most, they will be earning an average annual salary of $145,500 (boys expect $173,000 vs. girls, $114,200). The reality: Only five percent of the U.S. population currently earns a six-figure income, and the average national wages stand at approximately $46,000.”
“Nearly two thirds (62 percent) of American teens ages 13-18 believe they are prepared to deal with the adult financial world after high school, and a similar majority (63 percent) say they are knowledgeable about money management, including budgeting, saving and investing. Yet… fewer than half consider themselves knowledgeable about how to pay bills (34 percent), how credit card interest and fees work (26 percent) or whether a check cashing service is good to use (24 percent).”
“More than half (51 percent) believe that “it is easier to buy things with a credit card than cash” and, given the choice, more than a quarter (29 percent) would actually prefer using a credit card, a 61 percent increase in this stated preference over last year.”
About the Teens & Money Survey
The Teens & Money survey was conducted by StrategyOne, an applied research consulting firm, on behalf of Schwab and Boys & Girls Clubs of America. The nationally-representative online survey polled 1,000 American teens between the ages of 13-18 to better understand their views, behavior and knowledge of spending, saving, borrowing, and earning money. The survey, which has a margin of error of plus or minus 3.1 at the 95 percent confidence level, was conducted using the field services of Harris Interactive.
On a bright note, the information does show that twice as many kids surveyed had some type of savings account, than had a debit card in their own name. Not surprising either - 14% surveyed had their own PayPal account.
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POSTED IN: Money Items, Online Prepaid Cards
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