Allowances are a surprisingly big business in the United States. According to an early 2019 study from 70 percent of U.S. parents report giving their children a weekly allowance, and the average weekly take is $9.06. Considering there are roughly 75 million people under the age of 18 in the U.S. — those figures imply over a billion dollars is given to America’s children each month as spending money.
“I have four kids so there were many times when one of our kids needed money (e.g., to go to the movies with friends, school field trips, traveling with sports teams, etc.), but my wife and I weren’t carrying cash as frequently as we used to because we were making all of our purchases with our debit cards and credit cards,” Sheehan said.
The situation was further complicated by the fact that neither he nor his wife regularly carried cash on them, and the requests for funds were often a “little last-minute side.” That created an awful lot of last-minute, late-night trips to an ATM.
That led to some early market research that proved they were far from the only parents to have these problems. So Sheehan decided to build a solution — a debit card for kids that parents could control, or what is known today as Greenlight.
The product is pretty simple — parents download the Greenlight app for their phone, create an account and attach their Parent’s Wallet to their bank account or debit card. Once the account is created, Greenlight sends physical, Mastercard branded cards to however many children have been registered to the account (up to five). Greenlight doesn't have a minimum age requirement for children to be able to use the cards.
The most straightforward application of the product, is as an easier way to give a child access to money other than handing them cash. It is also a more transparent way, since parents can see from within the app where and how the cards are being used
Similar basic function, however, could be achieved with any number of prepaid products — what makes Greenlight unique is that it comes with a set of custom management tools built for parents in particular. That includes controls on where the card can be used, or how much can be spent at a single time. It also allows parents to set up a weekly, bi-weekly or monthly allowance autopay.
“ The day before your child’s allowance is scheduled to payout, the Greenlight app will send you a notification prompting you to check if your child’s weekly chores have been completed. If your child has not completed their weekly chores, you then have the choice to pause their allowance,” Greenlight explains on tis website.
The app has also has a savings feature that lets kids set money aside and watch it grow. Parents who want to teach their children an advanced lesson on financial responsibility can even set a custom interest rate that they fund themselves — say 10 percent — so they can better illustrate the power of saving money early.
“Interest rates are moving up, but they are still so low, it’s hard for kids to grasp — if parents can set a higher rate, [their children] will see the power of saving,” Sheehan said.
The mission at Greenlight, Sheehan said, is to raise financially responsible kids in a world that is becoming increasingly cash-free. Digital and mobile payments are potent tools that have better the lives of millions of people. However, the danger of things like cards and mobile wallets, however, is that they can make money feel abstract - at least until the bill comes doe at the end of the month.
"Our mission and total focus at Greenlight is to help parents raise financially-smart kids, so everything we’re doing is trying to move us closer and closer toward achieving that goal," Sheehan
How are they doing? Well, that is a matter for some discussion. In the years since the firm was founded, Greenlight users have collectively saved in the millions of dollars.
However, as Laura Levine, CEO of the JumpStart Coalition for Personal Financial Literacy noted in an interview with USA Today — the tool itself is only as good as the users of it. The concept behind using a plastic card wedded to an app to teach kids about spending and saving early in life is solid. How useful it will be will come from how avidly parents engage with apps like Greenlight and the educational experience its various services offer.
“What I remind parents is you don’t just hand the card over and walk away and say, 'this experience will teach them,'” she said. “I think these debit cards created for young people are a wonderful practice tool with a lot of parental guidance.”
Moreover, while Sheehan conceded that parents have to engage in the process to work — he notes that it is Greenlight’s experience that once parents start using the app, even in small ways, engagement goes up. This is why, he noted, for Greenlight the next big challenge is custodial brokerage accounts so that parents and kids can begin their next financial adventure together.