Because parents are notoriously bad at paying out their child's allowance, Dan Meader launched Allowance Manager, a cash ledger application that automates the payment.
"When [parents] forget to pay their children's allowance instead of helping them develop an understanding of money, we've taught them that parents can't be trusted," Meader, founder and CEO, said. "You can't learn to swim by reading about it or watching someone else do it, you just have to get in the pool and flounder around a bit; the same thing is true about money."
It all started when Meader's two kids, John and Will, asked if they could buy a new video game with their allowance. "They obviously thought they had more [money] than what I thought they had," he said.
But there was no way to check because Meader had forgotten to pay them several weeks and the kids didn't have their saved money with them.
So Meader, who has a technical background and worked at Apple for a decade, developed cash ledger software for use by his own family. He then launched it to the public in the summer of 2011, and nearly 100,000 people downloaded the application soon after its launch, he said. The app currently has about 200,000 users, which includes both parents and children.
"Those people that signed up for the cash ledger version, many started suggesting a feature to move real money into their kid's account," Meader said.
Allowance Manager launched a prepaid Visa debit card a couple of months ago. The company works with Arroweye to customize cards with images kids would want.
Meader wouldn't disclose how many users have the debit card product. Allowance Manager is working with some financial institutions to distribute the cards to their customers, and is looking for other partners. The company is looking to co-brand an allowance product.
The Allowance Manager app integrates both the parent's ledger and the kid's ledger so at any time both parties can open the mobile app to see totals and transactions. Parents can also make purchases for their child, and quickly and easily debit their account.
By giving allowance on a payment card, Meader hopes to support the move to a cashless society because it would be a more responsible society.
"When I received my first card statement from Amex and they summarized my expenses for me that was great," Meader said. "One of the benefits is being able to look back at your behavior."
Meader said his kids could look back and see how much they spent on
With Allowance Manager, kids can't access cash from ATMs. The feature was dropped because ATM fees are too high, Meader said.
One of the main goals of Allowance Manager is to promote financial literacy and sophistication at an early age. Meader's personal experience learning about money was a bit too unadulterated.
When Meader, who grew up in upstate New York, went off to college at the University of California-Berkeley, his father gave him a credit card to use for emergencies. When he arrived home on his first break, his father didn't even say hello. Instead he said, "Your definition of emergency and mine are completely different."
"He just gave me a parent-sized credit limit that I could do some damage with," Meader said. "My father didn't think late-night pizza, taking the cute girl out to a fancy dinner and beer was an emergency."
An Allowance Manager membership costs $7.95 per month with a $10 account setup fee. If users purchase an annual membership the setup fee is waived and they pay $79.
