Child bank accounts: Why banks and money-management sites are vying for kids' cash

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The Huffington Post

By:  Kelli B. Grant

October 17, 2012

Stashing allowance money and birthday cash in a porcelain pig as a kid is like hiding money under the mattress as an adult, if new money-management websites for youngsters are to be believed.

Think of them as Mint.com for kindergartners: Kids (and their parents) can virtually monitor chores completed, allowance earned, and how assets like gift cards are spent. The funds can be allocated toward goals such as saving, spending and donating. Sites like ThreeJars and Zefty have been around since the recession, and a half-dozen or so more -- including MoneyTrail.net , PlayMoolah , KidsCash and Kashpile -- have launched in the past year.

The growth comes at a time when, experts say, kids are more likely to be unbanked. There aren't as many kid-specific savings accounts from big banks as there were a few years ago, says Greg McBride, senior financial analyst for Bankrate.com. Most financial institutions aren't interested in attracting underage savers. "The banks don't have a shortage of cash; they have a shortage of revenue," says Dennis Moroney, a director of research at Tower Group, a consulting firm. New products have tended to focus on college-age kids, who are more likely to bring in revenue from bank fees and credit card purchases as they move into adulthood, he says.

The growing virtual piggybank market could be a smart way for parents to teach kids about real-world money matters. "It's making learning about money interesting for kids," says certified financial planner Lynn Ballou, a managing partner at Ballou Plum Wealth Advisors in Lafayette, Calif. "It's their money, which makes it more real than a game." Parents can tweak settings to mimic (or even beat) the returns on real accounts, picking a high yield so that interest accrues, and setting up "direct deposits" and "bill payments" for repeat transactions of, say, allowances and cell-phone app purchases, respectively. Kids, meanwhile, can request chore money and create saving goals. A few sites, notably Kashpile and KidsCash, also have e-commerce options that let kids request parental permission to buy certain items. (Kashpile founder and chief executive Bobby Singh says choices are limited to kid-friendly picks from Amazon.)

But these accounts could also create budgeting issues for parental trustees. The accounts aren't bank accounts, per se: They don't take actual deposits. That means parents will need to hold the cash in trust somewhere, and make sure it's accessible wheName

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This page contains a single entry by CFED published on October 18, 2012 4:18 PM.

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