Kids are no longer using a piggy bank to obtain financial responsibility. Instead, digital tools, such as debit cards and apps, are the basis for learning smart spending and wise money management. Many of these products are prepaid cards that help kids track their spending, and also include customizable oversight features for parents. Some available products include:
FamZoo (famzoo.com) makes use of parent-paid interest to encourage saving. Common users of the app are preteen and young teenagers, but may also be used for kids from preschool to college.
Greenlight (greenlightcard.com) allows parents to control the stores at which the debit card can be used. Greenlight plans to introduce an investing feature to move users to a higher level of financial literacy.
gohenry (gohenry.com) is an app for kids (ages 8 to 18), but may be used by younger children. The emphasis is on building money management confidence in a safe setting while learning to spend and save.
Current (current.com) is a custodial bank account aimed at teenagers. Parents may also open accounts for younger children.
These products allow parents to channel digital funds to their children to pay weekly allowances. Also, kids may divide their money into accounts for saving, spending, and donating to charity. Most apps have a monthly fee, ranging from $3 to $5.
When using prepaid debit cards with children, consider the following:
Spend time talking about why the kids want to buy various items, and why certain household tasks earn money and others do not. Expand the Connect the discussion to talk about total family finances as well as money attitudes and values.
Allow freedom to make spending decisions to give kids experience at managing money, and to make mistakes from which they will learn.
Ask older kids to buy household items, even though they might be reimbursed. Buying shampoo, toothpaste, and snacks will prepare them for when they are on their own. Also consider billing them for monthly expenses, such as the cost of their cell phone.
For additional information on prepaid debit cards for kids, click here.
Have students conduct online research to evaluate apps that might be used by parents to teach their children smart spending and wise money management.
Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.
What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
Describe some possible money management learning activities for children that do not involve the use of technology.
Technology impacts every aspect of personal finance. FinTech (financial technology) involves apps, software, and other innovations for banking and financial activities, which includes PayPal, Venmo, and cryptocurrencies, such as Bitcoin. FinTech companies use online activities, mobile devices, software, apps, and cloud services to for financial transactions. Over 1.5 billion people around the world do not have access to formal banking. FinTech can provide these unbanked people with financial services through easy-to-use technology.
The main categories of FinTech for consumers are:
Crowdfunding, such as Kickstarter and GoFundMe, which allows individuals or businesses to go directly to potential investors for funding.
Blockchain and cryptocurrency, such as Bitcoin, with improved verification for financial transactions.
Mobile payments through a smartphone.
Insurance coverages provided by online start-ups.
Robo-advising provides portfolio investment recommendations and allocations based on algorithms. For stock-trading, investors buy and sell stocks using apps such as Robinhood and Acorns.
Budgeting apps, such as Mint and You Need a Budget (YNAB), monitor and plan spending.
As you walk into your bank, you are met by a video teller. These robo-banks allow you to connect with financial specialists based on your needs through a virtual concierge and videoconferencing. These banking staff members are located hundreds and thousands of miles away. Banks benefit from these actions with fewer branches and fewer employees covering customers in many geographic settings.
Other actions being taken by banks and other financial institutions to better serve customers include:
A variety of services to enhance the banking experience, such as offering co-working spaces for customers who work remotely.
Payment systems in the athletes’ Olympic pins to complete purchases transactions at the 2018 Winter Games.
Customers can pay with a facial recognition scan in some retail settings.
Financial services offered through Alexa (Amazon), Siri (Apple), and Google Assistant allowing bank and credit card customers to check their balances, pay bills, and send money.
For additional information on technology banking trends, click here.
Have students talk to two or three others to obtain their ideas about: (a) future banking technology, and (b) the setting and services of the bank branch of the future.
Have students create a presentation or video that communicates future banking activities.
What technology services do you desire from a bank for your financial services?
Describe actions banks might take to better serve the needs of customers.
Most financial institutions offer overdraft programs for checking accounts, which for a fee covers a transaction where there is not enough in the account. However, this service can result in several fees before the next deposit is made. For debit cards, an overdraft fee cannot be charged unless you have agreed (“opted in”) to these fees.
To reduce or eliminate overdraft fees, these actions are suggested:
carefully track your balance; sign up for low-balance alerts
check your balance when making a debit card purchase; also consider other checks that may not yet cleared
do not opt-in to an overdraft program for your debit card, or opt-out if you are currently opted in; while your debit/ATM may be declined, you will avoid high fees
link your checking account to a savings account to cover overdrafts
contact your financial institution to determine if you are eligible for a line of credit or a linked credit card to cover overdrafts
compare account fees at other financial institutions
Payday lenders see borrowers as prey, people floundering in financial difficulty.
The Consumer Financial Protection Bureau is planning to release proposed rules related to loans and other short-term borrowing, such as auto title loans. These efforts will include requirements that payday lenders make sure borrowers are able to repay the loans.
Payday loans are usually viewed as a temporary financial solution. However, quite often borrowers need more time. As a result, consumers get trapped in rolling over their debt and may be charged as high as 700 percent on an annual basis. According to the Pew Charitable Trusts, 12 million Americans use payday loans each year, resulting in $7 billion of interest and fees.
For additional information on payday loans, click here.
Have students ask people to describe situations in which a person might use a payday loan.
Have students create a list of methods that might be used to inform others of alternatives to payday loans.
What are benefits and drawbacks of payback loans?
What alternatives might be considered instead of a payday loan?
While beneficiary, collateral, and fair market value are familiar to many, these terms can be especially confusing to those with limited English-language skills. In an attempt to assist various people, the Consumer Financial Protection Bureau has created the Newcomer’s Guides to Managing Money to provide recent immigrants with information about basic money decisions. These guides offer brief suggestions to those who are new to the U.S. banking system. The guides also include guidance for submitting and resolving problems with a financial product or service.
The Newcomer Guides include these topics:
Ways to receive your money, comparing cash, check, direct deposit, and debit cards.
Checklist for opening an account, to assist with starting a bank or credit union account.
Ways to pay your bills, providing guidance on whether to pay by check, debit card, credit card, or online.
Selecting financial products and services, providing assistance on deciding which financial services are right for various household situations.
Print copies of the guides can be ordered or downloaded. These publications are available to English and Spanish with additional languages to be offered in the future.
For additional information on money guides for newcomers:
Automated investment services are expanding. Many financial service companies are offering “robo advice,” in which investors complete an online questionnaire and a computer program generates and monitors a portfolio of funds. Robo-advisers are also designed to automatically rebalance a portfolio based on changes in the market as well as any changes in the amounts allocated to certain investments.
With many investors already making their own trades online, investment companies believe that robo advisors have these additional benefits:
lower costs for obtaining advice and conducting transactions.
an ability to adjust the portfolio for tax purposes by selling shares that have declined to offset gains.
an easier investment approach for younger clients with less-complicated financial lives.
Some will be concerned about automated portfolio management. Human advisors will still be available to address issues about mortgages, insurance, estate planning, retirement income, and other topics that robo-advisers are not yet equipped to answer.
For additional information on robo advice, click on the following articles:
While smartphone apps have made banking easier than ever, threats to financial security continue to grow. However, some simple actions can be taken to avoid banking app mistakes.
1. Don’t conduct banking transactions on public Wi-Fi networks since they are vulnerable to hackers. Use a virtual private network (VPN), which provides added security and encryption.
2. Log out after your session to prevent a thief from getting access to your bank account.
3. Select a not-so-obvious username. Create password recovery questions with responses that are difficult to obtain from public records.
4. Update your app when a new version is available to take advantage new security features.
5. Create a strong password with special characters, and it should be at least 12 characters long. Change your password every 90 days.
For additional information on banking app errors, click here.
Have students talk with others about their experiences using banking apps.
Have students locate online information about the latest security features fof banking apps.
What are benefits of costs of banking apps?
How might banking apps be improved for increased financial security?
“. . . Financial coaching initiatives that target the working poor have sprung up in communities across the country.”
For low-income wage earners, the idea of paying hundreds of dollars for professional financial help can seem about as far-fetched as buying a winning lotto ticket. And yet, help is available in a number of the nation’s larger cities including Chicago and New York. In most cases, the financial coaches volunteer their time and have a background in personal finance or have received financial and investment training. The participants receive specific suggestions geared to their individual situation that are designed to improve their credit score and help them build a sound financial future. According to Richard Cordray, the director of the Consumer Financial Protection Bureau, “Having a trusted, well-informed financial coach can increase your odds of financial success.”
For more information, click here. Note: There is a short video that accompanies this article.
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Point out that often low wage earners don’t have the money to pay a financial coach to help them manage their finances.
Describe different situations where the advice from a financial coach could make a difference in someone’s financial future. For example, a coach’s suggestions on how to improve someone’s credit score could lead to obtaining a credit card for emergencies or a short-term loan to bridge the gap between unemployment and employment.
Assume you are unemployed and have exhausted your emergency fund. You are behind on monthly payments including your rent and utilities. What steps can you take to improve your financial situation?
In the above situation, what suggestions do you think a financial coach could provide that would help you work through this difficult situation?
You want a car and need financing, but your credit isn’t so great. Most dealerships have a Finance and Insurance (F&I) Department that will tell you about their financing options. To get the process started, the F&I Department will ask you to complete a credit application, which includes your monthly income and information on current credit accounts, including debt you owe.
At least that is how it’s supposed to work. But there have been reports that some dealers inflate your income information for the financing without your knowledge. That can cause you serious financial harm. You could be saddled with car financing that you can’t afford to repay. That means your car could be repossessed and your credit score could take a hit.
The Federal Trade Commission has a few tips to help you avoid unscrupulous finance deals:
Consider your options for financing. You might be able to arrange financing directly with a credit union or finance company before you pick a car.
Research the dealer before visiting the sales lot. Check the dealer’s reputation online by searching for the company’s name with words like “scam,” “rip-off,”or “complaint.”
If a dealer encourages you to overstate your income, take it as a sign that the dealer is not reputable, and leave the dealership.
Ask to see the credit application, completely filled out, before you sign it. Make sure your income and other personal information is correctly listed.