Money Lessons To Teach Your Kids

Remember the excitement you felt when your parent put a crisp dollar bill in your hand? Or counting coins in your piggy bank, saving up for that new toy or trip to the arcade? The next generation of American children may never know this feeling if a growing handful of Internet companies have their way.

Beginning this spring, parents will be able to give their children money through the Web so they can spend allowances without ever leaving home. And startups building these so-called electronic wallets are betting parents will opt for the convenience of online shopping and the ability to track how their children are spending money.

“Kids and teens are very into computers and the Internet, but they haven’t been able to participate in e-commerce until now,” says R. Paul Herman, CEO of iCanBuy.com, a parental-permission e-commerce site for kids that launched in March and is enjoying a lot of industry buzz. “We see our future in helping kids learn how to save, spend, and donate wisely.”

Herman also undoubtedly sees his future in dollar signs as kids’ fascination with the Net grows. At the end of 1998, 5 million children age 2 to 12 were online, but by 2002, that number is expected to reach almost 21 million, according to Jupiter Communications. And e-marketer projects that by the end of 1999, 44 percent of the 19.3 million U.S. teens (age 13 to 17) will be online. Kids and teens have tremendous buying power.

Packaged Facts, a division of Kalorama Information, estimates that in 1998 children between the ages of 5 and 14 alone spent more than $28 billion, and directly influenced $126 billion in spending by parents and other adults. Teenage girls, especially, love to shop. Packaged Facts cites a recent Kurt Salmon Associates survey which found that 88 percent of girls age 13 to 17 say they love shopping compared to 55 percent of all Americans age 21 to 62.

Getting kids to buy online is tricky, however. Only about 9 percent of Americans younger than 18 have a credit card, and these are in a parent’s name. And collecting any information about children is becoming more problematic. The Federal Trade Commission in March 1998 concluded that of 212 Websites targeted toward children, 89 percent collected personal data from kids, while only 23 percent of the sites advised children to get a parent’s permission before handing out such sensitive information as email addresses and financial and medical specifics. As a result of that study, Congress is expected to pass legislation this year that will regulate the online collection of children’s information unless that data is given by a parent or guardian. Teachers should be aware of these guidelines as well.

Virtual mall rats

Enter the parent-controlled, child-enabled electronic wallet. At iCanBuy, the first such e-commerce product for kids out of the gate, parents complete a form on the site with their information, credit card number, and the names, birth dates, and email addresses of their children. Then, parents determine the dollar amount charged to their credit cards for their children to spend – on a one-time, yearly, monthly, or weekly basis. iCanBuy.com has signed more than 20 merchants to the program, including American Eagle Outfitters, Rock.com, and DesignerOutlet. Each child also has his or her own page on iCanBuy, which is password-protected. There, kids can keep track of how much they spend; put their virtual allowance in an insured savings account through Security First Network Bank (with 2.6 percent interest); post wish lists which relatives and friends can click on to order directly the child’s dream gift; and even donate to various charities. They can also chat with other kids about finances in monitored chat rooms moderated by Talk City.

“The regular mall is not open 24 hours a day, seven days a week, and you certainly can’t go there to learn about managing your finances,” says Gayle Keck, president of iCanBuy.com. The San Francisco-based firm, which has filed for a patent on its business model, is betting parents will opt for convenience and control over their kids’ purchases. For instance, parents can require that they be notified by email before their child buys anything, even as they sit at their computers at work. “Parents we interviewed love that aspect of control,” Keck says. “You hand a kid $20 and you have no idea how they spent that money. At our site, you know.”

iCanBuy, which has five employees, plans to generate revenue from a cut of purchases and limited advertising by e-commerce partners, and will not share or sell any individual information. The site has won approval from TRUSTe, one of the most respected online privacy ratings systems. However, Herman concedes he may aggregate customer information and make it available to its partners in the future, adding, “We want to do the right thing and comply with the legislation.”