I have two kids, aged 5 and 2, who love playing with their piggy banks. At least once a week, they ask for pocket change to deposit, and they are excited to find coins in the sofa or on the ground.
But as much as I appreciate the classic money lessons an old-school piggy bank can help teach my two boys, there is no way I can rely on it to teach them how to handle their finances in a digital economy.
That is why I was delighted to learn about FamZoo. This website and app introduce children to the realities of banking, saving, investing, spending, debt, and money management through a “virtual family bank.” The program is easy-to-use, flexible, and can easily be tailored to your family’s particular needs and values.
Here’s how FamZoo works:
Two Types of Virtual Family Banking
FamZoo offers families two types of accounts: an IOU account, wherein the program keeps track of money that the parents hold onto for their kids, or a prepaid card account, which offers reloadable MasterCard prepaid cards designed specifically for families.
1. IOU Accounts
This was the original FamZoo program, and creator Bill Dwight came up with it so he and his wife could more easily manage allowances for their five children.
Dwight recognized that giving his children an allowance was a great way to teach them how to manage their finances—but everything from remembering to have enough cash on hand each week on allowance payday to ensuring that no one got sticky fingers around anyone else’s piggy bank was an incredible challenge for a busy family.
Additionally, Dwight wanted to have a way to teach his kids about the benefits of saving money, which a traditional savings account with its slow-to-build interest rate was not going to do.
FamZoo’s IOU account helps to fix all of these issues by recreating the banking experience in the home. You set up a family bank, with a virtual account for each family member, and Mom or Dad acts as the bank manager. You can set up automatic recurring allowance “deposits,” which will help your children to learn how direct deposit works, as well as options for earning money by completing chores. When Junior or Sis wants to buy something, they must come to you to make a “withdrawal” from their account.
For instance, if your five-year-old asks for a new Thomas the Tank Engine figurine while you are at Target, you can check your phone to see if his virtual account has enough money to cover the cost. If it does, and he decides he’s willing to spend that money, then you make a virtual withdrawal to pay for the 378th anthropomorphic train in his collection. (Not that I’m speaking from experience.)
In addition to automating allowances and keeping track of how much each child has available to spend, the IOU account allows you to:
- Offer rewards for chores and/or odd jobs
- Create “payroll” withholding for saving or giving
- Incur penalties for missed work
- Create savings goals
- Offer parent-paid interest on savings
- Share expenses, such as payments for recurring, shared bills, such as cell phone usage
- Match contributions
- Extend loans
Since my kids are so young, I will mostly use FamZoo to automate their allowances and keep track of withdrawals. However, as my boys grow, I will definitely want them to learn about saving for large expenses, earning interest, and managing loans, among other financial skills. I can add sophistication to their accounts as they grow, and provide them with a safe place to learn about handling money.
2. Prepaid Card Accounts
In many ways, these accounts are just like the IOU version, except that the kids are carrying prepaid MasterCards loaded with their allowances. This makes the prepaid card account a better fit for parents of older kids, who will often be making purchases without Mom or Dad right there.
To get started, you will order a family pack of prepaid cards that are linked together by a common group identifier. Your family pack will include a funding card carried by the parent, which is used to transfer money to the kids’ dependent cards. Parents load their funding card from an external source with a relatively large amount of money and then use the funding card to transfer to the kids’ dependent cards.
Unlike many prepaid cards marketed toward teens, FamZoo’s prepaid cards have very affordable fees. There is a monthly subscription fee, which covers all cards in the family, which can range from as low as $2.50 per month to $5.99 per month, depending upon whether you pay in advance or month-to-month. In addition, depending on how you reload your funding card, there may be a reload fee, although there are several free reload options.
Other than that, there are no fees. The money transferred among a family pack—both the “positive” transfers from the funding card to the dependent cards and “payments” from dependent cards to the funding card—is completely free of transfer fees. Within the United States, there are no per purchase fees, ATM fees are $0 in-network, and there are no replacement card, inactivity, or customer service fees. If you need more than the four cards (the number that comes in a family pack), there is a $2 one-time fee for each additional card.
It’s also important to note that any purchase attempts that exceed the balance remaining on a dependent card are automatically declined—without an overdraft fee.
FamZoo Options & Features
Once you have signed up, you will create a family bank and an account for each child. You and your spouse will be able to access all of the accounts, while each child will only be able to see her own.
To help you determine the best system for your child, FamZoo offers a bank setup wizard, which suggests some common configurations for family banks. The program will make suggestions of which system is appropriate for the age of your child.
One of the most popular configurations is the spend-save-give allowance plan, which automatically sets money aside with each allowance payment into spending, saving, and charitable accounts. You even have the option of offering interest on the savings account, with an interest rate calculator available to show you and your child exactly how much she will be able to earn.
Another option for earnings is the chore checklist, which offers accountability for paid chores that children are responsible for. You can link payment (or deduction) of the allowance based on whether or not the chores have been completed. Even if you do not link basic chores to allowance, the checklist can be a useful tool for reminding the kids of what chores to do, and if there are above-and-beyond chores for which they will be paid.
The customizable aspects of the program are one of its greatest strengths, but they can be a little overwhelming. Thankfully, FamZoo offers a number of great resources for determining the best virtual bank setup for your family. To start, on the FAQ page, FamZoo offers a list of blog posts describing six different family bank setups to let you get a good sense of the ways to personalize the system.
In addition, the blog page is regularly updated with great information and suggestions, and the site as a whole offers a number of valuable resources, from video tours to links to information about chore philosophies. The site is also very kid-friendly, with fun cartoons and material geared specifically toward young users.
If you have an Apple product, you can download the free FamZoo app to your iPhone, iPod, or iPad to keep track of accounts on the go. Otherwise, you can access the FamZoo mobile website with your device, or you can set up your phone to send and receive text messages regarding account information.
FamZoo Monthly Costs
FamZoo makes its money from a monthly subscription fee. If you pay month-to-month, use of FamZoo costs $5.99 per month, and the recurring fee is automatically billed. There are also three pay-in-advance options: $25.99 for six months, which equals $4.33 per month, $39.99 for 12 months, or $3.33/month, and $59.99 for 24 months, or $2.50 per month.
However, there is a very generous two-month free trial period, which does not require a credit card to set up, so even if you try it and forget about it, you will not have an unpleasant surprise down the road. Also, it is possible to find coupon codes for further discounts.
FamZoo Wins FinTech Competition
FamZoo was the winner of the first annual FinCon FinTech Startup Competition. Bill, the Founder of FamZoo recaps his pitch during the competition in this video:
Final Thoughts on FamZoo
The usual method of handling kids’ allowances does not reflect the realities of modern banking. Often, parents are stuck trying to remember how much money Junior or Sis might have in their piggy banks when they are at the cash register. That kind of mental accounting is both exhausting and counterproductive in teaching kids about how to manage money.
FamZoo places the onus of managing money where it belongs—on the kids. By becoming the virtual family banker, you provide the pertinent information, just like a bank does. It is up to your kids to manage the money, find new ways to earn, decide on spending goals, save, plan future payments, and request loans.