Are the old-school allowance protocols and practices shifting in the digital age? Is it finally time to discard piggy banks?
A recent survey by Visa found that millennial parents are utilizing digital payment apps such as Venmo, Zelle, PayPal as a secondary form of payment for their teenagers.
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While the survey reveals cash is still king because it remains the most common way teenagers receive their allowances, data also reveals parents are utilizing digital payment options as a method of moving money to their teenage children across a variety of spending occasions.
Highlights from Visa’s survey
- Nearly three-quarters of parents (74%) agree that digital payments allow them to track how their child is spending the money they give them.
- Most parents also agree that digital payments save them time (70%) and remove the ability for money to get lost or stolen (70%).
- A majority of parents agree (64%) that it is more convenient to use digital payment methods than physical ones.
What is prompting the shift to digital payments?
Today’s teenagers are among the Gen Z demographic who are known to be tech savvy and the only generation largely considered digitally native.
"They are used to everything being a click away, including how they spend and receive money," Ruben Salazar Genovez, global head of Visa Direct at Visa, explained.
Erika Sanchez, vice president and general manager of Venmo, told FOX Business that with the introduction of the Venmo Teen Account, Venmo is committed to helping parents start conversations around personal finance with their teens.
"For the first time, the Venmo Teen Account gives teenagers a way to engage with and learn more about managing money through the Venmo app," Sanchez said. "Eighty-six percent of Gen Z are interested in using an app to learn about personal finance, and the Venmo Teen Account gives them that opportunity and allows them to engage with money more responsibly."
What are the advantages for parents to use digital platforms to pay their children?
There are distinct benefits for families. Here’s what to know.
Digital payment methods drive value by saving parents’ time and prevent their children from misusing or misplacing their money, Genovez says. The survey results reveal most parents agree that digital payments allow them to track how their child is spending the money they give them (74%), save them time (70%), remove the ability for money to get lost or stolen (70%), and that it is more convenient to use digital payment methods than physical ones (64%).
He says using digital payment apps creates a safer, friction-free payment experience with added protection from fraud and data breaches.
Accessibility in a pinch
Genovez reports that most parents are using cash to transfer money to their teenagers for events like a school fundraiser or sporting event.
What are the drawbacks for using digital platforms to be aware of?
According to Genovez, challenges that arise with being digitally connected include an increase in fraud and scams. To address these challenges, he reports how Visa has spent over $10B in technology to help reduce fraud and increase network security over the last five years "because trust is our most important asset, and we work hard to ensure that we have the full trust of our customers and consumers."
Is age a consideration of whether to begin using digital payments?
With the rise of digital innovations, Genovez reports that Visa is seeing that Gen Z teenagers (13-17) have more accessibility to money at a younger age.
"While there is no specific age we would recommend, Visa, a leading player in the money movement ecosystem, understands the need to rise to the challenge of connecting to this new generation as well as future generations through innovative digital banking experiences to capture the loyalty of the world’s fastest-growing consumer group that is reshaping the future of commerce," Genovez told FOX Business.
Why it’s important to share with teens that instant transfers can incur fees
While instant access to the money is compelling, note that PayPal and Venmo charge instant transfer fees, so consider using Zelle as an instant, fee-free alternative, Ted Rossman, senior industry analyst, with Bankrate.com, advised.
He says PayPal and Venmo charge a 1.75% fee for instant transfers involving consumer accounts (25 cents minimum, $25 maximum).
"This can add up, especially on larger transfers," Rossman said.
To be best prepared, he recommends building in enough time so that you can wait a business day or two for PayPal or Venmo to transfer the funds to your bank account at no additional charge. "
The transfer fees may seem small, but they can add up over time," Rossman added.