Wednesday, June 14, 2017

Teach Your Young Gamer To Budget

Gaming Loot Microtransaction

Kids pay money to play online games.

But you already knew that. You recognize the names in their transaction alerts: EA, Minecraft, Roblox, Steam, Blizzard, Riot Games, XBox, G2A.

Kids also pay money to buy tchotchkies for their gaming avatars — skins, potions, weapons.

You may already know that too. If not, check out sites like realmstock.com — a marketplace for trading in-game items.

But did you know kids are even paying money to watch other kids play online games?

Yep, that’s a thing. Check out Twitch. Find a live streamer. Look for the subscribe button (probably upper right), and check out the options. Kids pay to get badges, emoticons, ad-free viewing, and other “benefits”.

In fact, one 14 year old FamZoo cardholder paid a total of $134.97 in the last 30 days watching other gamers game. Yikes.

Why do I know this? A Monday article piqued my interest in what kids are spending on gaming these days. The Wall Street Journal reported that gaming providers like EA are charging less for the games themselves while reaping huge profits from the little microtransactions inside the games.

And just how much are gamers spending on in-game microtransactions? A mind-blowing $71 Billion worldwide in 2016. That rivals the entire GDP of Cuba!

The article prompted me to dig into the FamZoo data around gaming related transactions by our child cardholders. That’s what alerted me to the Twitch trend mentioned above.

Some other discoveries:

  • The average spending in the last 30 days by teen gamers using FamZoo cards is $27.41.
  • The most spent in that same period was $262.09 by a 16 year old.
  • Some kids pay money to play chess online. Yes, that was my favorite discovery.

Obviously, gaming companies smell a profit opportunity with our kids.

Me? I smell a financial literacy opportunity.

Try this with your young gamer:

  1. Review the gaming related transactions over the last month.
  2. Agree on a monthly gaming budget. Use the data from step 1 as a point of reference, but not necessarily a benchmark — note the average monthly teen spending mentioned above.
  3. Track spending versus the budget each month. As they say, “What gets measured gets managed.”

You might even consider a separate prepaid card dedicated to online gaming. Load it each month with the agreed-upon budget. Any attempts to overspend will be harmlessly declined.

So, whether your kid is paying for games, paying for do-dads inside games, paying other gamers to game, or all of the above, you need to get your head in the game as a parent. Know what your kid is doing. Then, use your kid’s gaming habit as an opportunity to pass along some critical personal finance basics.


Want to turn these tips into action? Check out FamZoo.com.

Wednesday, June 7, 2017

Stop Tolerating Fs On Your Kid’s Card Report

Dad and kid with prepaid card report

Kids aren’t making the grade when it comes to successfully transacting with prepaid cards.

Just take a look at these stats from FamZoo cardholders.

I sampled kids from active families who have:

  • used a card for at least 3 months, and
  • have made 20 or more purchase attempts in the last 90 days.

A decline percentage of 3% means that for every 100 purchase attempts, the cardholder would likely experience 3 declines. If those 3 declines were incurring average bank overdraft fees, the cardholder would be facing over $75 in penalties. Ouch.

Here’s how the kids break down by purchase decline percentages, which I bucketed into subjective grade levels:

Decline Percentage Percentage of kids Grade
0% 19.0% A+. Bravo!
5% or less (but over 0%) 12.1% B. Getting there.
25% or less (but over 5%) 32.8% C. Lots of work to do.
50% or less (but over 25%) 16.1% D. Pretty darn awful.
Over 50% 19.7% F. Yikes!

That’s a lot of kids bringing home bad money habit report cards.

I’ve written before about the 6 month Zero Decline Challenge as a test for bank account (or credit card) readiness. The good news is 19% of the kids from this sample are at least half way there. But the majority are nowhere close, with 19.7% flat out flunking.

I’ve also suggested assessing a parental overdraft fee as a way to curb declined transactions. It looks like the Bank of Mom/Dad would be clawing back a ton of fees from these kids!

But maybe you’d rather offer the carrot instead of applying the stick. A reward to encourage the good behavior instead of a penalty to curb the bad.

If so, consider paying out a bonus for making the grade each month. Of course, it’s your call as to which grades warrant a bonus and how much, if any.

To help kids make the grade, offer this simple study guide for avoiding declines:

  • Check the balance before a purchase. Most cards have handy apps that make checking the balance easy for kids.
  • Watch out for recurring bills. That’s where lots of the kids are going astray with declines. They sign up for services like Spotify and forget to leave a buffer on their cards for when the next billing hits.
  • Remember the PIN. Not only will the wrong PIN yield a decline, but 3 PIN strikes and you’re out. Help your child pick a memorable but secure PIN.
  • Locate the card security code. Typically, it’s on the back next to the signature panel. The code is a security measure intended to reduce fraud when the cardholder is not present for the purchase — like when purchasing online.
  • Match the billing address. Make sure your kid knows the address on file for the card. That’s the address your kid will need to supply for the billing address when purchasing online. If the two don’t match, the transaction will be declined.

After mastering those points, your child will be on the road to an easy A+.

Whether you opt for the carrot, the stick, or just a discussion when it comes to declines, make sure to pay attention. Ignoring bad habits won’t improve them. Turn on card activity alerts to detect declines right away, and coach your kids in real time.

Raising your kid’s money habit grades early will pay big dividends in the future.


Want to turn these tips into action? Check out FamZoo.com.

Thursday, June 1, 2017

Get Your Kid A Just-In-Time Card For Smarter, Safer Spending

Phone with money request for prepaid card.

More and more parents are ordering “Just-In-Time” spending cards for their kids.

What are those? Prepaid cards used only at the moment of purchase.

Here’s how it works.

Normally, the balance on the Just-In-Time card sits at zero. Earnings from a kid’s chores, odd jobs, allowance, or part-time work accumulate in a separate short-term savings bucket. That savings card or account is never used for purchases directly.

When the child wants to make a purchase, she:

  • Checks the balance of her savings to ensure sufficient funds.
  • Requests an immediate transfer from her savings to her Just-In-Time card for the required amount.
  • Waits for her parent to approve and complete the transfer.
  • Makes the purchase using the freshly loaded Just-In-Time card.

Once notified of the purchase, the parent can return any remaining funds to savings and bring the Just-In-Time card balance back down to zero.

Sound like too many steps?

With the latest app-driven card offerings, the cycle can be competed in real time with just a few taps on a smartphone. More often than not, requests from my kids are sent, received, and approved (or not!) while waiting in line at the register.

Why bother with the Just-In-Time card two-step at all? Four solid reasons:

  1. Reduce impulse buys. Now your child will have to stop, consider, and justify each purchase. He can’t just swipe a loaded card willy-nilly on a whim.
  2. Increase dialog. No more silent purchases. A little discussion (often minimal) will accompany every purchase. More money discussions means more money skills. It also means more comfort with financial transparency — your child’s future spouse or partner will appreciate that. And, as Ron Lieber says: “Every conversation about money is also about values.” Bonus.
  3. Increase earnings on savings. Your kid’s money will spend most of it’s time in savings. If you’re offering a healthy parent-paid interest on his account, the funds can grow nicely. Further incentive not to spend.
  4. Thwart fraudsters. Chipotle, Target, the local restaurant, the gas station down the street, that weird gaming site: they’re all places your kid might use his card. What else do they have in common? They’ve coughed up payment card data to fraudsters.

    The chances keep increasing that any card your kid uses will be compromised and have its data sold off on the dark web. Down the line, someone somewhere will probably use that stolen data to hit your kid’s card with a fraudulent transaction.

    Fortunately, his Just-In-Time card has zero dollars on it. That fraudulent transaction will be declined. You’ll see the alert. You’ll order a replacement card without hassling over lost funds. Easy-peasy.

    Meanwhile, your kid’s savings card hasn’t been used anywhere, so its funds are safe.

With a Just-In-Time card, moving money at the very last moment will help your kid hold onto money over the long haul.


Want to turn these tips into action? Check out FamZoo.com.

Wednesday, May 24, 2017

Show Kids What The S&P 500 Looks Like

S and P Index Map

Today’s Headline:
Financial stocks lifted the S&P 500 as the index notched a fourth consecutive session of gains.

You and your kids hear the names in the headlines almost daily. The DOW. The NASDAQ. The S&P.

“Dad, what’s the S&P?”

“It’s a stock market index.”

“Oh...What’s that?”

“Ummm... Ask your mom.”

The next time it comes up, don’t dodge it. Don’t pass the buck. But, don’t try to explain it either.

Sit your kid down in front of the interactive map at FinViz.com and show her instead.

  1. What are all those little tiles? Each tile is one of the 500 companies in the S&P 500. Fly over a few with the mouse. Recognize any?
  2. Why is the Apple tile called AAPL? Those initials are like the company’s nickname on the stock market. It’s called the ticker symbol.
  3. Why is AAPL so much bigger than the others? The more valuable the company, the bigger the tile. Apple is killing it. (That’s why they’re building a spaceship for their headquarters.) Can you find Starbucks? Disney? Nike? (Hint: Look in the Consumer Goods section. See the groupings and sub-groupings?) How do the company sizes compare? Any surprises?
  4. What do the colors mean? Green means the company got more valuable today. It’s stock price went up. People were willing to pay more for a share of the stock at the end of the day than at the beginning. Red means it’s value went down. Grey means it didn’t change. Mouse over the company’s tile to see a pop-up chart of how the price fluctuated throughout the day. Who are the big losers? The winners? Any surprises? There’s always a mix.
  5. But some of today’s losers seem like great companies. Did they just have a bad day? Use the little pull-down menu on the left to change the time frame to a longer period. Try 1 month, 2 months, 6 months, a year. What do you notice? What companies are green over all the periods? What about the overall color of all the tiles together? How does that change as the periods change? What’s more likely to be green over time: all the tile colors mushed together or one tile chosen at random? Try picking a few to see.
  6. So who picks these 500 companies anyway? Some group of nerdy economists. They get together and choose the 500 large companies they think are most representative of the overall U.S. economy. How do they figure that out? Go ask your mom...

Why does it matter if your kid knows what an index is? Because one of the world’s richest men and greatest investors, Warren Buffett, has some sage advice: invest in a low-cost S&P 500 index fund.

Now your kid knows what the S&P is and why buying all the stocks in it is a smart play (see #5 above).

And when your kid opens a Roth IRA with that first summer job, she’ll know exactly where to invest the funds for the long term. Move over Warren.


Want to turn these tips into action? Check out FamZoo.com.

Wednesday, May 17, 2017

Pre-Negotiate Your Teen’s Summer Paycheck Savings Split

Teen On Job In Rickshaw Bagworks Factory

Parent: “How much did you save from your summer job last year?”

Teen: “Umm, nuthin’.”

Sound familiar?

Time for a preemptive strike before summer rolls around again.

As Warren Buffett says, “Do not save what is left after spending, but spend what is left after saving.”

So, negotiate a savings split deal ahead of time.

If your teen agrees to save 27.68% of every paycheck this summer, you will agree to do one or more of the following...

OK, so that last one is more of a mandate than a negotiation. It reminds me of Chris Rock’s definition of allowance.

With the negotiation (or mandate) firmly in place, make sure your teen has separate spending and savings accounts (or cards) ready to go.

When the job starts, help your teen automate the paycheck split if possible. Many employers support splitting direct deposits percentage-wise between multiple accounts. If not, turn on activity alerts for your teen’s main account so you’ll know to manually transfer the right percentage to savings as soon as each deposit hits.

The added payoff for these summer paycheck splitting experiences? Your teen will be more likely to get an early jump on employer matched retirement savings plans later as a young adult. It will just feel natural. Smart move.

So, what should your teen do with all the accumulated savings at the end of the summer?

Start a Roth IRA, of course.

Then, 50 years from now when someone asks your teen: “How much did you save from your summer jobs?”

The answer could very well be: “Oh, about a hundred thousand dollars.”

Compounding over decades for the win!


Want to turn these tips into action? Check out FamZoo.com.

Thursday, May 11, 2017

Clean Up Your Kid's Spotty Bill Payment Record

Teen with Spotify decline transaction.

51.8% of Spotify’s attempts to bill kids on FamZoo prepaid cards failed in the last 90 days. Yep. Over half. Yikes.

The reason for the vast majority of those failed attempts? Insufficient funds on the card.

Here are the full stats for the Spotify billing attempts:

48.2% Successfully billed. Golf clap.
43.7% Billed amount exceeds card balance.
3.0% Billed to lost card.
3.0% Incorrect card expiration date entered.
1.2% Incorrect card security code entered.
0.9% Failed address verification.

By comparison, in the same 90 days, 98.4% of Chipotle purchases were successful. Hmmm.

Clearly, lots of kids aren’t ready to plan ahead (beyond their next burrito) and responsibly handle a recurring billing arrangement.

But who cares? FamZoo prepaid cards don’t charge any overdraft fees. What’s the harm?

The harm is the habit.

Kids who develop a habit of missing online subscription payments now might be cavalier about missing regular rent payments later. Or student loan payments. Or credit card payments.

That means late fees, mounting debt, and tanking credit scores.

All bad.

So, make sure you’re nipping your kid’s bad payment habit at the bud. Here’s how:

  1. Add responsibility for a recurring payment. Put your kid in charge of handling a regular monthly payment — Spotify, Netflix, a share of the family data plan. Don’t forget to increase your child’s budget based allowance to accommodate the increased fiscal responsibility. Remind your child to maintain a buffer on the card to safely handle the billing when it hits.
  2. Assess a penalty for misses. Review your child’s transactions each month or set up real-time activity alerts so you know when payments have failed. When they do, tack on a penalty. Consider it an overdraft fee from the Bank of Mom or Dad. Missed payments need to hurt.
  3. Insist on a proven track record. Is your teen claiming readiness for a checking account or access to a credit card? Your teen will need to prove it first. Six straight months with zero subscription payment failures feels like a good prerequisite.

Remember, a spotty Spotify record now might mean a spotty credit score later. Make sure your kid faces the music early.


Want to turn these tips into action? Check out FamZoo.com.

Wednesday, May 3, 2017

Help Kids Squeeze More Than Money Out Of A Lemonade Stand

Squeezing lemonade.

I know it’s Spring because the lemonade stand deposits are trickling into kids’ accounts at FamZoo.com. A typical entry for an 8 year old reads:

4/24/2017 Cash deposit from lemonade stand $7.00

The deposits from last lemonade stand season — typically late March through September — yielded these fun facts:

  • The average lemonadepreneur was 11 years old.
  • Earnings deposits peaked in June and September.
  • Deposit sizes for transactions containing the keywords “lemonade” and “stand” fell within these ranges:
    Min: $0.50
    Max: $56.10
    Average: $11.47
    Median: $7.00

But lemonade stands aren’t just about lining your kid’s pockets with extra spending money. Don’t let your kid miss out on these additional golden opportunities:

  • Understand the equation: profit = sales - expenses. Don’t gloss over the expenses part. If you let your kids just bank the total sales, you’ll be robbing them of a valuable business lesson on profitability. Show them how to estimate expenses and create an initial budget. Let them know you’ll be fronting the seed capital, but they’ll be reimbursing you for expenses afterwards.
  • Learn sales and marketing techniques. For classic examples, see what Chris taught his 6 year old daughter about getting outside her comfort zone and attracting customers in his thoughtful post: Grown Up Lessons From A Lemonade Stand. At minimum, your kid will meet some new people. That alone is a good thing.
  • Develop some grit. Kids get bored and frustrated when initial strategies fail or sales hit a lull. Chris’ daughter did. But he helped her refine her approach and stick with it. End result: “the lemonade stand was her favorite part of the day.” Good lesson.

So this year, help your kid squeeze more than money out of that lemonade stand.


Want to turn these tips into action? Check out FamZoo.com.