Teenage spending is estimated to reach $208.7 billion in 2011, up from $189.7 billion in 2006, according to “The Teens Market in the U.S.” report from Packaged Facts. With Christmas around the corner, a Piper Jaffray & Co. survey shows that teens are most likely to spend their money on clothes, entertainment, and food using an estimated annual income of $4,023. (Packaged Facts)
Of teen spending, 15% is estimated to occur online where a card is usually required and purchases are quick and can be more impulse driven. With youth spending on the rise, credit unions have important questions to answer regarding the marketing of credit cards and their obligation if any to teach financial responsibility.
Initiatives in the Prepaid Market
Many financial institutions are starting to implement prepaid and youth allowance card programs geared towards teens. Prepaid cards are a great way to teach teens how to effectively manage their finances by giving them financial freedom while still under parental supervision. Prepaid cards also provide a secure form of payment that teens can use for their own online purchases, without having to borrow a parent’s card.
Plastyc, Inc, program manager of the Upside Visa Prepaid Cards for teenagers, is taking advantage of the increased time teens spend online by allowing them to manage their prepaid cards using two applications on Facebook. Facebook is a widely popular networking site for Generation Y, with over 40 million users. Cardholders can use the “Upside Balance Checker”, to check the balance of their card and view a list of recent transactions. A second application the “Upside Card Parent Widget” allows the parents of minor cardholders to monitor their activity.
Promoting Financial Responsibility
With teen spending on the rise, credit unions now have an opportunity to target this profitable young market by providing a solution that puts their members first. Credit unions are currently working with CU Succeed and PAYjr to offer prepaid cards that promote fiscal responsibility.
CU Succeed is a cooperative that has a partnership with 20 credit union leagues across the nation. Their purpose is to help credit unions attract teen members as well as to provide them with financial education through print materials and online resources. CU Succeed has teamed up with PAYjr to help several credit unions launch youth card programs.
PAYjr’s Jessica Stroud describes the partnership with CU Succeed this way, “They have an established relationship with credit unions. We are the tool and CU Succeed is the voice.”
PAYjr’s tool helps teach teens how to manage their money and develop good spending habits at an early age. Their youth allowance program allows parents to set up a chore system for their child and monitor their progress online. Children learn the value of working to earn money and parents can place the child’s allowance directly onto a re-loadable PAYjr Visa Buxx card which creates spending limits.
Credit Unions can offer the Visa Buxx card without the Youth Allowance Program, allowing parents to still direct older teens spending. Teens have the option of using a regular branded card or they can upload a picture of their choice to be displayed.
With the teenage market becoming an increasingly important segment of consumer spending, credit unions are presented with a major opportunity. Prepaid cards offer an easy way for parents to monitor spending, but also promote financial education at a young age.