Credit and debit products target financial literacy
If you’re one of those who think high school kids should be able to elect Regents Trigonometry or Financial Literacy to graduate, there’s good news for a change.
A new credit card unveiled in May is designed for kids, supervised by parents, and conveys the fundamentals (and more) of how to responsibly manage personal finances.
Speaking with PYMNTS’ Karen Webster about her new Family Cash Mastercard, green light Co-founder and CEO Timothy Sheehan pointed to research commissioned by the company, which found that 90% of parents wished they had saved more for school fees and their children’s future.
Calling it “a huge problem,” Sheehan and his team understood the underlying fact that most parents didn’t have extra money to put aside. This got them thinking about ways to make placements easier for families.
“Is there a way to offer something like us, where it’s a 3% cash back card, but the cash back could be automatically invested in [exchange-traded funds] and make sure they are diverse? ” he said. “But somehow make it automatic so they don’t have to drastically change their behavior?”
The result was the Family Cash Mastercard, which accomplishes the savings mission without disrupting day-to-day spending – by simply generating cash back and investing it quietly. Parents who are also savvy investors can control where the money is invested and access it without penalty in an emergency. This family-friendly card and program design represents a growing realization that we can do more than live paycheck to paycheck.
“If you look at the S&P 500, it’s risen an average of 12% over the last 50 years every year,” he said. “When the composition comes into effect, it will create a nice nest egg for them to help their children go to school.”
Faced with a decision on whether to create a 529 plan expressly for education expenses or a vehicle with more freedom, Greenlight asked parents, and parents straightened them out.
“You’re talking 18 to 20 years that it could last,” he said. “A lot can happen during this time, so parents told us flexibility is more important than the little tax advantage of a 529, so please make it a general account. And that’s what we’ve done.
See also: Greenlight, Mastercard First College Savings Credit Card
‘Dad, Mom… What is credit and debit?’
Greenlight launched its children’s debit card in 2017 and placed it at the heart of a corporate mission to help children and young people gain financial literacy early in life.
Although Sheehan is a big advocate for financial literacy, he agreed that sticking kids in front of videos and websites and expecting them to learn how to use credit responsibly doesn’t work.
“In fact, ask them to step up and take action and manage their own money,” he told Webster. “Guess what’s going on? Interesting questions arise that they ask the parent, which is fantastic. As any parent of teenagers or teenagers knows, teenagers don’t want to be questioned by their parents. But what happens with using Greenlight is that it raises these questions.
He shared the story of a child using a Greenlight card at checkout and having to answer the simple question – credit or debit? The parent accompanied the child through the transaction, which turned into a car ride around the topic “Dad, Mom…what are credit and debit? »
“That’s where the learning happens,” Sheehan said. “Essentially, they learn because they have a reason to know what they asked for, and they’ll remember what they’re told.”
It goes in a lot of directions as kids have to decide if they’re open to buying it and if these headphones are worth not releasing this weekend.
Sheehan said, “It’s really interesting because we didn’t know all of this when we started the business. Parents who used Greenlight kind of taught us how they used it and they shared with us the conversations that followed.
See also: The family finance segment is booming amid increasing competition to serve cashless children
Credit for any age
With financial literacy being almost as big of an issue for many 40-year-olds as it is for the typical 17-year-old, Greenlight is a lucrative proposition grounded in altruistic purpose and designed to help shift the thinking and spending of financially uninformed people. all ages.
Sheehan said, “One of the things I’m happy with about Greenlight is that it’s a consumer product. It’s not something that’s only for the wealthy or a particular segment. It’s for everyone.
He added that “the product itself solves this problem [of], what parent doesn’t want their child to be smart about money and personal finances? We all want that, no matter your income or what your parents taught you. Although the parent may not necessarily feel like an expert in personal finance, they know enough to want their child to be.
Here’s what’s cool: It seems to have the desired effect. Sheehan told Webster, “I’ve seen comments where kids are starting to learn how to invest using Greenlight,” leading to moments like, “Hey mom, dad, do you know what a ratio is? P/E?” he joked. .
Because crypto is everywhere – including video games and NFTs – this also entered the conversation. “It’s what Jim Kramer might call a ‘specification’ – highly speculative,” he said. But he admits it has potential, especially for younger investors.
But that’s another chapter of financial literacy for high schoolers when perhaps such a class will one day start making trig a requirement. That’s no big deal for advanced math or STEM students, but it doesn’t help tweens understand interest rates.
He said Greenlight users who start as teenagers tend to stick with Greenlight until college – and why the company is exploring other ways to turn that loyalty into a lifelong customer relationship. .
“As the child grows into a young adult, they go to college and then they fend for themselves,” he said. “What could we do for them to help them more? We’re definitely looking into that, but nothing to announce. We are interested in trying to continue to help this person as they grow from child to teenager to young adult who is independent and trying to cope.