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PayPal’s new service digitizes allowances

Tyler Metzger

I don’t have kids. I don’t need them now, and I don’t want them now. But living in the world of everything credit cards makes me think how I would handle the little brats’ online spending. I mean, after all, I can barely handle mine, so how would I deal with theirs
At what age can kids handle their own finances?
PayPal, the payment engine behind the online auction Web site eBay, has begun offering a service to help people wrestling with this dilemma. Quietly launched last month, the PayPal Student Account system allows parents to establish up to four subaccounts in their kids’ names and link them to a primary PayPal account. Kids can then use the money at any Web site that accepts PayPal, or even get a MasterCard in their parent’s name tied to the subaccount.

The service, which is by invitation only and for just for ages 13 and up, seems to offer parents a flexible way to manage their child’s online spending. Parents can deal out money in random amounts, or create a recurring allowance by transferring money online or by cell phone. The subaccounts can also be monitored by text messages or e-mails to alert the parents of hefty purchases, and they can be turned off and on at any time.

Minus the convenience, kids also have a new weapon when they’re strapped for cash. Instead of whining to mom and dad face to face, they can text “Get $50” to PayPal, for example, and parents are shot a text to deny or approve it. That’s light years away from the old days of waiting to find the courage to ask for some loot.

When I was in high school, my parents gave me cash for lunch and other things. That was fine, but I always ended up starving myself and spending it on junk. So I usually was low on money, but that was on me, not my folks. So I guess in a small way our system taught me a little about frugality, which I still use today.

But how do you learn to be frugal with a credit card, or even just an account number, when you’re 13? We are living in a cashless society, but most of us grew up without cards, and I feel that actually dealing with real money, real numbers, is a much better way to learn how to budget.

Will coming generations be affected as finance technology changes? Especially in the face of the current economic crisis, will youngsters be more likely to view money as a virtual commodity due to emerging services like this? And moreover, how do you handle your child’s finances? Post your comments below.


Note: This post is showcased in the 88th edition of the Carnival of Money Stories hosted by the Dough Roller. The carnival is full of personalized stories that shed light on financial issues like no dry textbook could.

See related: Teaching children about credit, debit cards, Protecting your children from identity theft, How young is too young for credit cards?

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  • Seems a little too easy for kids to ask for more money when they run out.
    Plus, you can only spend online and they have to ultimately trf the money to a bank account.
    Very appealing idea, though.

  • Seems a little too easy for kids to ask for more money.
    Plus, you can only spend online and you ultimately, have to trf the money to a bank acct if you want cash.
    Great idea, though.