New Credit, Debit Products Aim for Straight A’s in Financial Literacy

If you’re one of those who thinks high school kids should be able to elect Regents Trigonometry or Financial Literacy to get their diploma, there’s some good news for a change.

A new credit card unveiled in May is designed with parents in mind, to help them save for their kids’ college and family’s future.

Speaking with PYMNTS’ Karen Webster about its new Family Cash Mastercard, Greenlight Co-founder and CEO Timothy Sheehan pointed to research the company commissioned, finding that 90% of parents wish they had saved more for their kids’ college costs and future.

Calling it “a massive problem,” Sheehan and his team grasped the underlying fact that most parents didn’t have the extra money to put aside. It got them thinking about ways to make investing simpler for families.

“Is there a way we could come out with something like we have where it’s a 3% cash-back card, but the cash back could be automatically invested into [exchange-traded funds] and make sure they’re diversified?” he said. “But kind of make it automatic so they don’t have to drastically change their behavior?”

What resulted is the Family Cash Mastercard, which accomplishes the savings mission without disrupting everyday spending — just quietly generating cash back and investing it. Parents who are also sophisticated investors can control where the money is invested, and it can be accessed without penalty for emergencies. This family-friendly card and program design represents a growing realization that we can do better than paycheck-to-paycheck living.

“If you look at the S&P 500, it’s up on average 12% over the last 50 years every year,” he said. “When the compounding kicks in that will create quite a nice nest egg for them to help their kids go to school.”

Faced with a decision on whether to create a 529 Plan expressly for educational expenses or a vehicle with more freedom, Greenlight asked parents, and parents set them straight.

“You’re talking about 18 to 20 years that this could be going on,” he said. “A lot of things can happen in that time, so parents told us the flexibility’s more important than the small tax benefit of a 529, so please make it a general account. And that’s what we did.”

See also: Greenlight, Mastercard Debut College Savings Credit Card

‘Dad, Mom … What’s Credit and Debit?’

Greenlight debuted its debit card for kids in 2017 and placed it at the heart of a corporate mission to make help children and young people become financially literate early in life.

While Sheehan is a major advocate of 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.

“Actually have them engage and take action and manage their own money,” he told Webster. “Guess what happens? Interesting questions come up that they ask the parent, which is fantastic. As any parent of a tween or teen knows, teenagers don’t want to be questioned by their parents. But what happens in using Greenlight is it prompts these questions.”

He shared a story of a child using a Greenlight card at checkout and having to answer the simple question — credit or debit? The parent walked the child through the transaction, which turned into a car ride based around the theme “Dad, Mom … what’s credit and debit?”

“That’s where the learning happens,” Sheehan said. “Essentially they’re learning because they have a reason to know what they’ve asked, and they’re going to retain what they are told.”

It goes in many directions as kids have to decide about their openness to buying and whether those headphones are worth the tradeoff of not going out this weekend.

Sheehan said, “It’s really interesting because we didn’t know all of this when we started the company. Parents that were using Greenlight kind of taught us how they were using it, and they were sharing with us the conversations that were coming up.”

See also: Family Finance Segment Booms Amid Rising Competition To Serve Cash-Free Kids

Financial Literacy for Any Age

With financial literacy almost as big a problem among many 40-year-olds as it is for the typical 17-year-old, Greenlight is a moneymaking proposition underpinned with altruistic purpose and made to help evolve the thinking and spending for the financially uninformed of any age.

Sheehan said, “One of the things I’m happy about with Greenlight is it is a mass market product. It’s not something that’s only for the wealthy or for a particular segment. It’s for everybody.”

He added, “The product itself is solving this problem [of], what parent doesn’t want their child to be smart about money and personal finance? We all want that, no matter what your income is or what you were taught by your parents. Even if the parent doesn’t necessarily feel like they’re an expert on personal finance, they know enough that they want their child to be.”

Here’s what’s cool: It seems to be having the desired effect. Sheehan told Webster, “I’ve seen feedback where the kids are starting to learn how to invest using Greenlight,” leading to moments like, “Hey mom, dad, do you know what a P/E ratio is?’” he joked.

Because crypto is everywhere — including videogames and NFTs — that entered the conversation as well. “It’s what Jim Kramer might call a ‘spec’ — highly speculative,” he said. But he admits it has potential, especially for younger investors.

But that’s another chapter in Financial Literacy for High School Seniors when such a class maybe someday begins to push out trig as a requirement. It’s no knock against advanced mathematics or STEM students, but that doesn’t help tweens understand interest rates.

He said that Greenlight users who begin as teenagers tend to stick with Greenlight through college — and why the company is exploring more ways to build that loyalty into a lifelong customer relationship.

“As the child grows and becomes a young adult, they go to college, then they’re out on their own,” he said. “What could we do for them to help them more? We are definitely looking into that, but nothing to announce. We’re interested in trying to continue to help that person as they grow from child to teen to young adult who’s out on their own and trying to make it.”