Is this the future of money management for children?

I know that there have been a number of posts on other blogs about a new savings product called SmartyPig.

I initially dismissed their site [AJC: particularly because they USED to have a $25 fee – now gone … site is now totally FREE – and they didn’t offer a ‘cash out’ option – now also gone … you can get your money back as a wire transfer to your bank or as a Debit Card] … but, reviewed their FAQ’s, I really believe that they have something interesting here.

 What triggered my second look was an e-mail that I received today from Jon Gaskell, one of the co-founders of SmartyPig:

I had a very interesting conversation last week. It was with a young lady saving for a down payment on her first home with her fiancée. They want every penny they can scrape together funding that goal – especially the presents she is anticipating receiving when she finishes up graduate school later this spring. 

They thought they had found the perfect way to reach this goal faster when they stumbled upon SmartyPig, she told me. They were really excited about the public contribution piece and the social nature of SmartyPig. They thought the widget would draw attention and letting friends and family members know about their goal would keep them focused.

The next day, when my business partner, Mike Ferrari, and I spoke to a mother who is using SmartyPig to not only teach her 10- and 12-year-old sons how to save “in a cool way,” but is using SmartyPig to help them save up for their cars when they turn 16. 
When our site update is complete, the customer will have a third option when he or she has reached their goal: an ACH transaction back to their checking or saving account.

There you have it, a quick’n’easy way to set up a specific account to save up for a specific goal – whether large (e.g. a car) or small (e.g. an iPod) … in fact, that is the advantage that SmartyPig has over typical bank accounts [AJC: SmartyPig is supported by a bank, hence all deposits are FDIC Insured]:

It is easy to separate money into ‘pockets’ for specific savings goals.

I’m not sure what their future plans are, but I see a big future for them  – in addition to the Adult-saving-for-‘stuff’ market – I see a particularly big opportunity in the kids market.

Most kids’ allowance sits in cash … for example, we divide our kids allowance into two: Savings and Spendings, which means that we would need to open at least two Smarty Pigs accounts for each child, with one having a Goal of ‘Retirement’. Actually, our kids are smart enough to roll their retirement savings into my Scottrade account, so they are fully invested in my stock portfolio … but, for most people, simply having an account where kids earn interest on their money is a big step ahead of sitting in cash in the top drawer of their bed-side table! 

From a marketing perspective [AJC: I simply can’t help myself!], the founders of SmartyPig COULD gain tremendously by writing two books:  

1. SmartyPig – Sensibly Spending Your Way to Wealth – this would be a Making Money 101 book squarely aimed at breaking down the debt and credit-card mentality. Any personal finance blogger worth her salt could ‘ghost write’ or, even better, co-write this with them. 

2. SmartyPig for Kids – which would lay out a simple – naturally, SmartyPig-supported – process for dividing money earned by doing chores etc. into Savings and (possibly, more than one) Spending/s accounts. It would lay out a basic money-management philosophy for children to follow that will help lay the foundation for a consumer-debt-free, savings/investment-driven adult life.

The children’s angle, I believe will be where the growth is for SmartyPig, as their product (with some, minor modification) solves a real need …

… but, the account balances involved will be small and the demographic (i.e. children) will not be as lucrative, so some some additional ‘smart marketing’ will be required to drag the parents along for the ride.

Now, I haven’t tried SmartyPig myself, yet, so please don’t consider this an endorsement until I (well, more likely my children, as I don’t really need to save for ‘stuff’ any more) have tried it …

On the other hand, if you have tried it already, please let me know what you think!

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