While we are slowly moving towards a future where using hard cash will be obsolete, it is indeed a wise idea to start using E-payment cards for pocket money. We need to keep up with the times while we follow our children into the future.
I was sitting at a friend's place the other day when his daughter returned from college. She seemed upset and broke into tears while telling us that her wallet was stolen while travelling back from college. Unfortunately, she had received the monthly pocket money from her parents the previous day. This incident made us ponder on alternatives available to hand over pocket money to children. After a long discussion over coffee and weighing various options, E-payment cards seemed the most suitable alternative.
While most of us are already holding multiple credit and debit cards, the question arises as to why add to the list and open another channel for spending? If the idea is moving towards a cashless payment solution any card can help, right? Well, we are discussing pocket money for kids here and there are two important things linked to it.
One being, it is a limited but substantial amount, and secondly, it is paid for a specific period, which means it has to be carried and kept safely all the time. E-payment cards address both the things with ease. Let's see how.
1. Cash free, stress free
Majority of the parents allot monthly pocket money to their children. Especially when the child is staying away from home, at a hostel or boarding, this amount is on the higher side. While this cash is stacked away in the wallet, there is always a lingering risk of theft.
Taking care of the cash only adds to the stress for the child. Alternatively, E-payment cards can be used wherein this risk is minimised. The specified pocket money amount can be linked to the card and children can use it stress free.
2. Children prefer online shopping
Online shopping is on the rise and with attractive discounts on brands, this is the buying trend among youth. Among the numerous e-commerce portal options, many are new. While making a purchase on these portals it is indeed risky to share credit/debit card details.
Card details must always be shared only on trusted websites since the risk of security being compromised online is very high. To facilitate such purchases without being exposed to fraud risks, E-payment cards come to our rescue. The risk we are exposed to, is reduced since the card is linked to a limited amount and the details shared do not provide an unrestricted access to our funds.
3. E-payment card over debit/credit card
Frauds related to debit/credit cards are on the rise. Though we can choose to share card related information at will, it is still difficult to gauge whether the information could be compromised. And when children handle these products, the risk increases multifold. Alternatively, E-payment cards offer a safer option wherein it allows one the flexibility of using a card without the need to share debit/credit card or account related information.
4. Introduction to financial planning
When pocket money is given in the form of cash, access is easy. Trivial expenses add up and before the end of the month the reserves dry up. Additional pocket money is requested and because the amount is not large, parents too give in to this demand. The result is that children fail to plan their finances.
Instead when they have a card which is already loaded with the pre-decided pocket money amount, impulsive spending is restricted as well. The habit of accessing the wallet for hard cash for trivial unplanned expenses is controlled resulting in smart spending. This shift in attitude helps the child in the long run.
5. Quick access to funds during an emergency
Considering that when children stay away from home, extra cash for emergency becomes a part of their pocket money. However, this cash is generally not carried in the wallet. E-payment cards solve this problem by proving an easy access to money required during an emergency.
Without actually carrying the money, it can be put to use quickly when required.
6. Expenses can be tracked
Handing over a card to children instills in them a feeling of independence. However, it does take time to realise the responsibility that independence brings along. Until that time, children need to be guided and corrected. When an E-payment card is used, expenses can be tracked.
This will help parents have information about their child's spending habits. At a very early stage, parents can intervene and stop unacceptable expenses and correct the spending habits.
Pocket money through E-payment cards takes off the stress of handling and tracking cash while passing on the required benefits. Though hard cash in hand is still essential for local travelling or buying a snack, a large part of the expenses can be handled using E-payment cards. This cash, though small in amount, needs to be kept handy separately since the card does not allow direct access to cash.
Photograph: Mike Mozart/Wikimedia Commons
The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.
