Virtual Allowance sounds like a buzzword or something out of science fiction, but it’s actually a useful tool for parents to help their children understand the value of money and the responsibility of saving versus spending. Instead of handing over some cash to a child every week and watching them spend it all in one place repeatedly, virtual allowances teach children why saving money is beneficial for them and helps them understand the basic vocabulary of finance. And when only 1% of children save their allowances, there’s never been a better time to help them learn.
What is a Virtual Allowance?
In a typical understanding of allowances for kids, parents will physically hand over some amount of money for them to keep or spend as they wish. The problem with this is that they can spend the money freely once they have it or worse, lose it somehow.
Virtual allowances are like a record of “store credit” that kids have with their parents. Every week, some amount of many is added to this credit and with their parents’ permission, kids can buy whatever commodities they’re allowed to. Ultimately, the parent is still responsible for handing over the cash, check or credit card for the transaction, but after that’s finished, the parent deducts that amount from the child’s virtual allowance.
You can think of it as being the bank for your child– you’re giving them the tools to understand how a checking account works before they have one for themselves.
Pros and Cons of Virtual Allowances
There are several advantages to virtual allowances:
- Kids won’t make any purchases without parent permission
- Kids will understand the value of saving money, especially if they’re watching the numbers climb toward a large purchase they want to make.
- Kids will be better prepared for understanding things like debit and credit cards as well as the value of currency.
- It’s easier, even automatic, to keep track of how much money your children have saved.
However, there are some elements of virtual allowances that parents could find frustrating or detrimental.
- Some parents believe that virtual allowances encourage kids to spend more.
- Since parents are still responsible for the transaction, virtual allowances could mean more requests from children for permission and more time spent calculating allowances.
Tools and Applications
If you do decide that a virtual allowance is right for your family, you’ve got a lot of tools to choose from. There’s always the DIY-method of setting up an Excel or Google spreadsheet of your own and keeping track of things individually, but some parents might find that cumbersome and annoying, especially in the smartphone-saturated world we live in today.
There are plenty of options available to parents when it comes to web-based software and mobile apps for managing allowances. Just about every app we found is compatible with mobile and desktop browsers, but native apps were harder to come by. Here are just a few that we’ve found that may fit your needs:
Kidsbank is among the most feature-rich mobile apps available, but we found the UI lacked polish. It was the most recently updated app we found, so it’s likely to continue being supported for at least a few years. It’s a good fit for families who care about having all their options open and is the only app we found that includes Apple Watch support on iPhone. [$3.99]
PennyOwl has a nicer user interface and a good set of features, and some parents may appreciate the news feed or curated store that kids can spend their allowance on straight from the app. However, it hasn’t been updated in over a year, which could mean compatibility problems in the future. [Free]
Bankaroo has the most polished interface that we found, as well as plenty of video tutorials to help parents and kids get the most from the app. It’s also the best app we found available for amazon devices, in case your child has a Fire tablet they use instead of an iPhone or Android device. [Free]
If you have any favorite tools for virtual allowances, or if you’ve set up something on your own, let us know in the comments!