Could a child fund your next business loan?

Monopoly board

How news of a new debit card for children has raised fears for the future of pocket money.

OK, I admit that today’s title is slightly provocative.   After all, it’s not very likely that children will be helping to supply business finance any time soon, but – depending on the nature of your business – they might be some of your online customers and now they won’t even need to badger mum or dad for a debit or credit card number to use.

A story in today’s Guardian tells how children as young as eight will now be able to get their hands on their very own Visa debit card.

The card, developed by PKTMNY is aimed at children who want to shop online, buy certain items on the high street or withdraw cash, although without their parents needing to lend money.

Before too many alarm bells start ringing, I should make clear that parents will be able to set controls to restrict usage and that the card won’t be able to be used to buy alcohol or cigarettes or similar ‘adult-only’ items.

In return for giving their child financial freedom, parents will be asked to pay a £5 joining fee and a monthly membership fee of £1 per child, plus 50p for every cash machine withdrawal carried out in the UK.

Speaking to the Guardian, Mark Timbrell, the company’s founder said, “as a parent I know just how difficult it is to teach children about money, especially as the school curriculum focuses on using cash and visiting banks, neither of which reflect how children see money being used.”

Financial education is an honorable objective, after all, most of us would agree that it’s never to early to start learning the value of money and good financial management but is a plastic card the best way to go?

FundingKnight asked Daniel Britton, author of The Financial Fairy Tales series  what he thought about debit cards for children, here’s his response:

“In my experience initiatives which attempt to teach children about money are most successful if they underpin the mechanics with the key principles such as where money comes from and the implications of spending more than you have. It might seem cute to give an 8 year old a cash card but not if it sets them up for a lifetime of credit card debt”

As a parent, I can see the attraction of letting a child feel independent enough to buy something they’ve saved up for, but I’d worry about severing the ties between hard cash and the things it can buy.

In What’s Mine is Yours, Rachel Botsman shares research carried out by Richard Feinberg, a consumer psychology professor, who studies the influence that credit cards can have on financial decision making.

Amongst other things, Feinberg found that:

  • People who paid by credit card left tips 2% higher than those who paid by cash
  • People who had been exposed to credit card branding bid higher amounts in auctions than their peers who had been exposed.
  • Participants who had agreed to pay for an item by credit card placed bids 113% higher than those who had agreed in advance to withdraw cash for payment
  • Of those who paid by credit card, only 35% could recall the amount

Now, I’m not advocating a return to bartering at the village gates.  Credit cards have their uses and they are part of a healthy financial economy.

I also realise that the new children’s card is a debit card rather than something that extends open lines of credit to children…. but, still, I worry a bit about disconnecting a child from the actual act of parting with money.

If there are no real coins saved up and handed over, does it really have the same benefit for financial education?  Or am I just being over-protective or a barrier to change?

What do you think? Leave us a comment below with your opinion.  Or to help kickstart your own child’s financial education head over to www.financialfairytale.com

4 thoughts on “Could a child fund your next business loan?

  1. I disagree strongly with this. Children need to be taught that money is real – a card says nothing to them, it gives them no way to gauge price, value for money, how much money they have left, etc, without checking balances and with times waiting for payments to be taken and available balances to show, this could all be very confusing for an eight-year-old. Much better off, in my opinion, to use a good, old-fashioned money box.

  2. Thanks for commenting Michael – I’m glad I’m not the only one who worries about severing the link with real money and yes, it will be real money boxes for some years yet in our house!

  3. Pingback: FundingKnight Likes… The Financial Fairytales | FundingKnight: The Blog

  4. Interesting post. Thanks.
    Dan Areilys talk at the RSA “The Truth About Dishonesty”. (There is a shorter animate version too) gives a few examples of opportunities to be dishonesty (or what encourages it). Creating greater distance between us and the consequences of our actions being one. Perhaps we need to change the incentives and educate on consequences to reduce the distance. Whether its digital cash, downloads, cyber bullying etc. I’m not too sure we can avoid the need to close the distance regardless of age or medium. Physical cash vs digital cash seems to be different mediums to the same underlying concept with the same consequences when abused. Regards

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