Making the Transition from Cash to Card
For two years now, J has been using cash, paper and pencil to manage his money. I’ve been paying monthly interest and bi-weekly allowance in cash. I’ve been calculating interest payments in Excel and emailing statements.
My goal was to help him understand cash (and math) by using hands-on, practical examples.
It’s been awesome. J started with $40 in his savings envelope in April 2016 and had over $500 by June 2018. (Pretty good for a kid with no job.)
Time to move on
When he turned 10 a few months ago, I knew it was time to learn something else. Cash is great, but how many of us really use cash and only cash every day? His financial education needed to include the responsible use of cards.
I wanted to open a checking account, but there aren’t a lot of options for him beyond custodial savings accounts. I also didn’t want to open an account and have to close it later because of the naming and ownership.
At our state credit union, J can open a regular account at 12 but we’re still two years away.
I’d been following Bill at FamZoo on Twitter for awhile. He has stellar tips for parents (having 5 kids of his own) on his other site, Family Finance Favs.
FamZoo offers prepaid cards to teach kids about money. Me looking for cards, check. Me wanting to teach J about money, check.
There are tons of benefits!
- Learn to manage money using a card
- No overdraft or late-payment fees
- Get cash via ATM (for free in the MoneyPass network)
- Move money between family members
- Track purchases
- Empower kids and retain parental visibility and control
To keep it simple, we got three cards:
- One for me (the main Bank of Mom card)
- A savings card for J
- And a spending card for J
When the cards came, J asked, “why do I need a card for savings?” YES! So far we’ve only ever put money into savings — we never take it out. When we save in the short-term, it’s for big ticket items or Christmas, but it’s always in a separate place. (I’d love to see something like YNAB for kids where one savings account had segments for an emergency fund, short-term goals, etc.)
Because he’s only 10, his name isn’t on any of the cards, which is kind of a bummer but not a deal breaker. (I learned later that you can put the child’s name on the card in the custom label right below the parent’s name.)
Also, we didn’t do a giving card, again, to keep things simple. He still has his giving account in cash in an envelope.
Adding money to the main card
I add money to my card using Popmoney (available as an online feature at my bank). I set up a free, recurring monthly withdrawal to the card, using the routing number and account number on the back of the card.
There are lots of ways to load money onto the card, but this was the easiest (and the freest) way, so I went with that.
Setting up allowance payments
With money going to the main card each month, it was time to set up an automatic allowance payment. J gets $5/week, and he has elected a split of 50/50 between his savings and spending accounts.
That means that $5.00 is automatically transferred from my account — $2.50 to his savings card and $2.50 to his spending card — every week.
Read more about setting up an automatic allowance payment — it’s super easy.
Setting up parent-paid interest
It’s just as easy to set up interest payments, too. I did a one-time edit to the savings account and specified 3% monthly interest.
And poof! Interest is calculated and paid each month automatically.
There is a cost
The prepaid cards from FamZoo aren’t free — there is a monthly fee. You can decrease the monthly amount by paying for 6, 12 or 24 months, too.
Why the cost? You can just get a prepaid card for free or almost free at the grocery store, right?
There are a LOT of features
You’re not just paying for the card, you’re paying for the whole package:
- An awesome app geared specifically towards teaching kids about money (plus a login for the kids, too)
- Kid-created budgets and savings goals
- Parent-created checklists (chores)
- Texts and email notifications of transactions (each time or in summary format)
- Great, actionable tips via the app, website, emails, newsletters and social media
- Private Facebook group
- Excellent documentation and customer support
We transitioned, almost
Just because we transitioned from cash to card doesn’t mean we let go of the register, though. I still think it’s important to keep track of what you spent and compare that to what the bank thinks you spent.
Instead of the individual sheets, though, I made a new booklet register. He started from the front with savings and from the back with spending. I also taught him how to use the “cleared” column, too!
So far we’ve only scratched the surface. I wanted to spend a few months getting used to the new system before we dived in to the budgets, goals, checklists and other great features.
October 2018 Update
We’ve been using FamZoo for awhile now and have made some changes to our original setup.
J is now getting his allowance once per month instead of once per week. Because he is using a register, adding weekly transactions was more work than we bargained for! Plus I think it will be good for him to learn to live on one paycheck per month.
The other major change is that we’ve stopped using the savings card. When we created our most recent budget for Christmas gifts, I had questions and talked with support. Chris mentioned that some parents set up IOU accounts for savings instead of cards so that the money has a chance to earn interest elsewhere (in addition to any parent-paid interest).
I created an IOU account for savings and moved all of the money from the savings card to the IOU account (this moved it back to my card). I then moved the money from my card to J’s account at Ally.
Ongoing, the process looks like this. $32 per month automatically goes from my checking account to my FamZoo card. Then, J’s allowance split sends a portion to his spending card, a portion to his savings IOU (which keeps it on my card) and a portion to his Christmas IOU (again, which keeps it on my card).
When he’s ready for his Christmas money, I’ll move the total IOU amount from my card to his card. And every month or two, I’ll move any money he’s saved and earned in his savings IOU to his Ally account.
Just a note that this isn’t a sponsored post, and I don’t receive any compensation from the promotion of FamZoo or their prepaid cards. I wrote the post to showcase why and how we’re using them as part of J’s financial education because I love their offerings.