Allowances! Modifying Behavior with Money

This is a guest post by FamZoo dad, Matt Fisher. Matt describes how he has customized the account, allowance, and chore settings in his virtual family bank to meet his family’s needs and match their values.

The Bank of Fisher on FamZooIf your household is anything like mine, various attempts at getting your kids to participate in household chores through allowances have been futile. For starters, I rarely have cash on hand and when I do, it’s usually 20’s spit out by the ATM, which forces me to keep mental track of change owed. I also have trouble providing consistent “dollar values” to chores and tracking their completion, and to further complicate it, I don’t want the kids to spend all their money on Slurpees and Xbox games. (Well, okay, spending it on CoD titles is actually ok with me!) I’d really like them to get a sense of working towards a goal and learning some financial responsibility.

I’m an avid technologist (I’m one of those guys who was on the Internet before the WWW existed) so like so many other aspects of complicated modern life, I figured software could help. With a little Googling, I found a web application call FamZoo.com and decided to give it a whirl. Here are my thoughts on FamZoo and how I’ve set it for my family but don’t interpret this as a formal review — I make no attempt to be complete, objective, or compare to other software.

Setting Up Your Virtual Family Bank

FamZoo, which I subconsciously refer to as Family Zoo (although their url is actually famzoo.com) is a web application that allows families to create allowance and savings plans that are as complicated or simple as they’d like. It allows kids to track what they’re owed in allowance, for all the times parents never actually have cash on hand. Very importantly too though, it allows you to create a checklist of chores with associated payments and deductions, so the kids can get credited for doing their chore and debited if they don’t. Additionally, it allows me to create multiple target accounts of money for them, such as free cash, savings, charitable donations, etc and split their allowance into those accounts to enforce savings. This allows me to enforce traditional methods such as “3 Jars” and the “50/30/20” rules that are suggested all over the Internet.

You can also define multiple income streams for the kids, which I took advantage of to set up a fixed weekly lunch allowance that goes straight into their lunch account. When setting up incomes, you have your choice of methods to use, and it provides a few calculators for common methods. For example, enter your kids’ birth dates, and FamZoo will automatically do the “buck a week per year of age” approach for you. So in net, you can define multiple inputs, and multiple outputs, each with separate rules — this is great flexibility that I took advantage of.

Some advanced features I appreciate include:

  • the ability to control recurring chores,
  • automatically add interest on a weekly, monthly or yearly basis,
  • create targeted savings plans for goals (ie, new cellphone),
  • perform automatic matching of contributions, and
  • the ability to let the kids credit/debit/transfer between accounts.

A note of caution: letting the kids control their own credits and debits opens Pandora’s box! A transaction audit log is provided, but in just 2 minutes my awesomely fast clicking son generated enough confusing unearned transactions that I had to go back and delete them. I’ve included more detail about this issue at the end of the post.

It quickly became apparent that the two most core concepts were: how to structure the accounts, and how to structure the corresponding chore checklists. For purposes of simplicity, and avoiding World War III, I’m keeping both structures identical for both kids.

This is what our account structure looks like:

Bank of Fisher Account Structure

The key goals here are:

  1. set aside their lunch money specifically for that, and
  2. enforce strong savings concepts, and social responsibility.

Emphasizing Giving and Saving with Splits

I’m very proud of our household culture of giving (DD’s 11 year birthday gift request was donations to her favorite non-profit), and I like that FamZoo defaults this Charitable Giving category in. All of the categories are editable, by the way. In fact, pretty much everything you see in the application can be changed and customized.

The kids’ income is provided in two manners, and FamZoo makes a handy diagram that shows the flows:

Bank of Fisher Income Diagram

Their lunch “income” is routed directly into their lunch account. As a description for this account, I added a note that they can keep any lunch money if they make and pack their own lunch, but not if they skip lunch at school. This was a little motivator I decided to use, as opposed to making it a “chore”. Kids don’t like chores.

Their weekly allowance, however, is split across the rest of the accounts to enforce best practices, as such:

Bank of Fisher Allowance Splits to Emphasize Giving and Saving

This is basically a kid friendly modification of the 50/30/20 rules popular with some adults.

I feel like this is good structuring. The kids are pushed into saving a healthy amount of their money, but the majority of it is still in a general account that they can spend at will (much more generously than they’ll experience as adults!) I really like the ability to enforce these splits. While teaching the concept of money and earning is important, I think it’s really important to our economy to reinforce the concept of saving cash.

Chores With a Light Touch: Focusing on Opportunities

The chore management is just as important to me, though. We’ve never had a strongly regulated household for a variety of reasons, including less disciplined parenting than we would have liked as well as other really legitimate reasons. Therefore, I didn’t want to take too heavy a hand on chores. Nobody likes chores, and the more intelligent the kid, the more challenging it is to motivate them with menial work. I do want to leverage the “automatically make or lose money” capability of FamZoo, but not for everything. Plus, using the automatic credit/debit feature means interacting with FamZoo every time a chore is done, or risk automatically losing that pay.

With this in mind, I decided I do want a few things to be punched off every day, but that the majority of chores and behavior modifications should be treated more as opportunity, not requirement. So, I built a system of fixed allowance each week using the age method. This is a common suggestion on how much allowance to give, and the site will automatically calculate it for you based on your kid’s age.

Chores are scheduled on a regular basis, and include a credit and a debit. I don’t structure the credits and debits the same though. When the chore is completed and they log in and tick the box, that amount flows into their accounts according to the weekly allowance split. In other words, chore credits are automatically divided between general spending, long term savings, short term savings, and charity. A chore debit, however, is automatically incurred the day after an uncompleted chore is assigned, and comes directly from the child’s general spending account. In other words, the kids automatically lose money for not doing chores, and they lose directly from where it hurts — their spending. You could debit multiple accounts via splits as well, but I predict that the kids will view the enforced savings negatively, so deducting from there doesn’t really have much impact in terms of behavior modification. FamZoo does a great job of letting you decide which account, or which split method (you can define multiple split methods if you’d like) to choose when building a credit or a debit.

Gamification Meets Chores: The Regular, Super, and Ultra Bonus

I have only a few chores — small, daily, easily accomplished things that will get them going and get them motivated. Everything else is either a bonus, or a penalty. Penalties are straightforward — behave poorly in some manner, and lose money directly from your general spending. Bonuses are structured in three ways:

  • A Regular Bonus which is a small amount of money that’s split.
  • A Super Bonus is a larger dollar amount that goes directly into their spending account.
  • An Ultra Bonus is geared at the toughest behavior modification, is high dollar, and goes directly into spending.

Yes, I’m trying to make this look and feel like a video game.

The actual checklist looks like this:

Bank of Fisher Chore and Bonus Chart

I have additional bonuses for things like:

  • Eating a salad as a meal
  • Skipping dessert
  • Spending a day without electronics (This one is high dollar!!)

The Kids Will Be Paying for More

Some of these dollar amounts may look unreasonably high, but remember, I’m trying to create some serious behavior modification here, and I do enforce savings. Part of all this plan is that the kids are going to start paying for things I’ve traditionally paid for out of pocket, such as their cell phones, ongoing video game charges, riding lessons, electronics etc. With that considered I don’t think it’s unreasonable.

Day 1: Introducing FamZoo to the Family

The kids reacted very well to the “few chores, but many potential bonuses” philosophy. At first DD was very glum when I started showing her the site, but when she realized that she only got penalized for a few basic chores, and the rest was all upside, she cheered right up! (Heh, I didn’t mention all the Metric 2 comp and mandatory cross-product goals yet...no wait, that’s MY job.)

DS reacted well also, agreeing that the few chores I did ask each day were pretty basic and easy. The chores were simply:

  • don’t leave clothing lying around,
  • walk a dog every day,
  • take out the trash.

Easy peasy, and that was the goal.

Reported a defect: First of all, there’s a defect in changing chores from repeating chores to non-repeating. Basically it won’t work, and you’ll have to delete the repeating chores and key it back in. I already notified the FamZoo development group, and like a true software startup, one of the developers responded within an hour, on a Sunday night of a holiday weekend. Ah, startups, how I love to miss thee.

Day 2: Working So Far

Today I logged in as an adult and deleted the automatic debits that occurred, since I wanted to give the kids a warm in period . By reminding them gently through the course of the day that they did have some chores to do, and that there were some big bonuses available, I got them to pick up laundry, take out trash and recycles, do dishes, and even spend a couple hours cleaning the house with me. DS even emptied all the trash cans and took the trash to the curb, willingly, cheerfully, quickly, for possibly the first time ever. His best friend was over all day for a lan party, which definitely had him in better moods though, so I can’t tell how much was the incentive plan, and how much was having his friend over.

A Warning About the Child Permissions Setting

As mentioned earlier on, I discovered another aspect of the software, which prompted me to change some settings. You can give the kids the ability to credit, debit and transfer funds between accounts themselves. This actually works as designed; if you check that box from within an account setting they can indeed add and remove funds, and transfer funds. The glitch is that they can literally add $500 to an account if they wish. You have the option of creating email or text based alerts (which I did to confirm operation), but this essentially gives them a complete backdoor to gaming it. Less clever kids will do something like add 500 dollars — easily detected through basic auditing or notifications. Clever kids like mine however, will quickly learn that adding a few bucks here or there, justifying it with a “oh remember I did this but forgot to log in and check it off” will quickly spam the human auditor (Mom or Dad) and a-skimming they will go.

Clearing the Child Permissions check box in the account settings will prevent this possibility, but unfortunately also prevents them from transferring funds between accounts. I’m fine with this, as I really want them obsessing more about earning the funds than re-allocating them since I’ve already defined their allocation splits for them, and when they do want to, say, move a bunch from general spending into charity or long-term savings, I look forward to the conversation

I think a good future design, however, would be to separate transfer permission from the credit/debit permission with the requirement that the parent be able to designate to-and-from relationships — this would also have to be many-to-many, so that I could allow transfers from savings or general spending into long-term savings. I think it would also be a creative design to allow credits and debits to be request based. Rather than notifying that the action occurred: FamZoo would send an email or create a message queue in the interface notifying the parent that the child requested to credit or debit. The parent could permit the action from the message queue in the UI or by responding to email/text alerts.

I don’t like the idea of my kids getting to gunk up the transaction log. Please note this is a very real risk. My son, within about 45 settings of logging in, had rapidly created a complex set of transactions that I actually had difficulty reviewing and reversing. But then, you know my boy, he’s an intelligent and evil as his old man... That is, of course, all hear-say!

A Few Other Caveats

The kids also can’t “print a check out” like other apps (that let them print a check to be cashed by Mum or Dad, and automatically debit the system). I’m fine with that too — again, I’m really trying to encourage focus on the earning and the behavior modification.

Another glitch I found is that chores without an associated due date (which are the majority of mine) do appropriately appear as having no due date, but they disappear when punched off and can’t be reused. In other words, they’re still temporal, despite not being assigned to a specific day. DD had punched a bonus yesterday that she wasn’t able to punch today because it was gone. The solution to that was to change all the bonuses from “No Due Date” to a daily recurring, so that they showed up every day. Since these are bonuses, with no penalties for missing them, the fact that they expire every day have no bearing.

Final Thoughts

I would love to see some more behavioral modification features like bonuses and “constants” included in FamZoo. It’s already very feature rich, and I think it’s prime for extension into other clever areas. This is, in fact, a piece of software I would love to work on myself. It’s fun. It’s well designed and executed to date, but I can already identify meaningful ways for it to grow.

This was a guest post by FamZoo dad, Matt Fisher.


Prepaid Card Family Pack Featured in TIME

FamZoo featured in TIMELast Friday, our soon-to-be-released prepaid card family pack capability received some truly wonderful coverage by TIME’s Dan Kadlec. Dan was kind enough to spend quite a bit of time with me walking through a very detailed online demo of the pre-release family packs that we’re currently testing internally with FamZoo and TransCard families. Check out his write-up here: How to Master the Allowance Question and Prepaid Cards in One Shot.

UPDATE: FamZoo prepaid cards are now shipping. Find out how to order your family pack here.

Naturally, when presented with a radical departure from current practices in the teen prepaid card industry, many people are skeptical. Count one “Tenacious Jim” among the skeptics. Jim left the following comment on the article:

Funny Famzoo shows no link to the terms and conditions. Sometimes those don’t show up till the sign up page but there is nothing there either.
That is usually a sign that something isn’t right. They are hiding something or a link to the accounts terms and conditions would appear somewhere.
They are not a bank. Are funds FDIC insured by a Bank? What are the associated fees for ATM usage, for transactions etc. None of this is mentioned. The list of partners shows no bank listed.
Dan mentions that the card can be loaded by a Bank account for $3 or so (he apparently cannot remember an exact number) and says that is the last fee you’ll see. However what happens the next time you load money? Ooops, there is that $3 fee popping up again. Dan forgets to mention that ACH transfers between banks (again what bank is behind FamZoo?) take 2-3 business days so when junior needs the latest game that night he has to wait for 2-3 days. A transfer between accounts at Bank America would be instant.

Jim raises some good, pointed questions. Here’s my response:

Jim, skepticism is good a good thing, so I respect your concerns, and let me do my best to address them. First, we’re still testing the product prior to its launch in the next 1 to 2 months, so that’s why we do not list the issuing community bank and the cardholder terms on our site yet — nor do we have a link to order the family packs just yet. What we do have is the ability to reserve a spot for one of the first 1,000 family packs which will be offered to subscribing members of FamZoo at no additional charge to what our subscribers are paying today for our current Virtual Family Bank offering. Our current pricing starts at $5.99/month if you pay recurring monthly, or you can pay in advance for up to 2 years for just $60. Family Packs will be available at FamZoo.com (we’ll be working with a specific issuing bank which we’ll announce when the family packs are available), and they will also be available in co-branded form through a variety of community banks.
As for fees, the goal is to subsume as many fees as possible into a single predictable monthly fee and eliminate random usage fees. The one area that is tricky is loading the “funding card” from external sources. We can’t control what some banks will charge. E.g., Wells charges me $3 to transfer to my funding card (3-5 days), but I can do it for free via Dwolla (but it takes longer). We’re expecting that our partner community banks will offer that service for free when transferring from one of their bank accounts. That said, our whole design goal is to make those external loads very infrequent. On the other hand, the very frequent transfers between parent and child cards within a family pack for allowance, chores, parent-paid interest, penalties, etc are all completely free and immediate. That’s because they are card-to-card transfers within our control. As long as you keep your funding card reasonably well stocked, you can shoot the money to junior’s card to buy his “latest game” immediately — but I recommend you make him save up his earnings for it first!

As I said, Jim raises excellent questions, and we hope you won’t hesitate to contact us with more. Just comment below or hit the Contact Us link on our site if you’d prefer to communicate with us privately.


The Prepaid Card Family Pack: Multiple Cards, One Flat Fee, Good Money Habits

Is your child ready to make purchases directly? (Under your watchful eye, of course!) Have you ever considered getting your child a real bank account, a prepaid card, or even a credit card, but then been discouraged by:

  • unpredictable high fees,
  • the potential to run up debt,
  • the lack of family and kid friendly features,
  • the focus on spending versus developing good money habits, or
  • just the plain hassle of getting started?

Bill and Payton Flashing Cards from Family Pack #1If you’re nodding your head to any of the above, we’ve got something really cool for you to consider. It’s something that addresses all of those issues. It’s designed from the ground up specifically for the family — not the individual, not the teen, but parents and kids working together as a collaborative unit on good money habits. It’s the FamZoo Family Pack of prepaid cards. We developed it with our partner TransCard, and it integrates seamlessly with your existing FamZoo virtual family bank.

NOTE: See our recent Family Pack coverage in TIME by veteran personal finance journalist and author, Dan Kadlec.

The family pack consists of “funding cards” that belong to one or more parents and “dependant cards” that are associated with one or more children. Kids may optionally have multiple cards for different categories of spending, or for building up savings, or for making charitable donations. The cards in a given family pack are linked together by a common group identifier — a novel new (patent pending) concept that has been integrated deep within the TransCard prepaid technology platform.

When using a family pack, parents periodically load up their funding card(s) from an external source with relatively large sums through a variety of card load options ranging from GreenDot’s Reload @ the Register to automatic payroll deposit to online transfer from a partner bank account. These funding card loads may or may not incur fees depending on the arrangement or partner, but the intention is for these loads to be very infrequent relative to the parent funding of the child cards.

A FamZoo Family Pack of Prepaid Cards

Money flows from the parent to the child cards though frequent “micro” payments and incentives defined and controlled by the parent. Examples include a scheduled allowance payment, a savings interest payment, a matching contribution, payment for a completed chore or odd job, a reimbursement, an ad hoc transfer, etc. These frequent micro-payments flow from parent card to child card within the same family pack via card-to-card transfers with no fees.

Money can also flow without fees back to the parent from the child. Examples include “bill payment” for the child’s portion of a shared family expense (for example, the child’s portion of a cell phone data plan) or even penalty assessments by the parent (for example, a $1 fine for not completing an expected chore or a penalty for going into debt with the parent after a scheduled “bill payment”).

The prepaid card accounts are seamlessly integrated with FamZoo’s existing IOU accounts (also patent pending). Each child’s prepaid card account has a corresponding builtin IOU account. If the parent funding card has insufficient funds to make a micropayment (like for a recurring allowance payment), the shortfall is automatically recorded in the associated IOU account as a debt owed by the parent to the child. When the parent ultimately loads more funds on to the funding card, any IOUs to the children are automatically repaid.

Conversely, if a debt is owed by a child to the parent, subsequent parent payments go toward paying off the child’s outstanding IOUs first before any additional money flows to the child card.

The family pack product is a superset of FamZoo’s existing Virtual Family Bank offering. It includes support for standalone IOU accounts for younger kids (independent of prepaid card accounts), interactive educational personal finance tools for budgeting and goal tracking, and mobile access via iPhone/Droid or text messaging.

What about fees? Teen prepaid cards tend to get a bad wrap in this department with youngsters inadvertently racking up charges for seemingly benign actions like balance inquiries and ATM transactions. Not so with the family pack. Parents hate those unpredictable fees, so we’ll be offering the family pack for one flat monthly fee. No “hidden” usage fees for your child to unwittingly rack up. Nada. None. Zippo. The only additional fee you might encounter would be for periodically loading up the parent funding card as described above — but that’s up to you because there are free options like Dwolla available too.

Sweet Deal on a Family PackSo how much is that flat monthly fee per family? We’re not completely sure yet for the long run, but here’s a super sweet introductory deal for our first 1,000 families only. If you are (or become) a paying subscriber of FamZoo, we’ll throw in the family pack (first 1,000 families only) for no extra charge beyond our regular subscription fees which currently range from $5.99 per family if you pay month-to-month all the way down to the equivalent of $2.50 per month per family if you prepay for two years in advance. That’s an absurdly awesome deal — no doubt about it. The usage patterns of our first 1,000 family pack families will allow us to determine a viable flat monthly fee to charge for subsequent subscribers going forward, which will undoubtedly be higher. Note: we reserve the right to terminate this introductory offer at any time, even prior to reaching the 1,000 family mark if we deem appropriate.

How do you get your family in on this deal? Just contact us and let us know you’re interested in reserving a spot as one of the first 1,000 family pack families. We’ll add you to our list. By the way, it’s OK to change your mind later and you don’t have to be a current FamZoo subscriber to reserve a spot, so if you have any interest whatsoever, you should stick your name on the list now.

UPDATE: FamZoo prepaid cards are now shipping. Find out how to order your family pack here.

When will the family packs be available? Any month now. We’re applying the finishing touches as we thoroughly road test the cards in the real world with the families of FamZoo and TransCard employees. You can take a peek at some of my early experiences with my son here.

We’ll notify the first 1,000 families on our list as soon as we’re ready to go.

UPDATE: FamZoo prepaid cards are now shipping. Find out how to order your family pack here.