How did the idea of Greenlight come about?
Tim Sheehan: Friends and people I work with didn’t really know a lot about how to successfully manage their money. Then I had kids, and as I started teaching them all the things my parents had taught me, I thought it would be wonderful if I could help all parents teach their kids this stuff.
I was noticing that my wife, Kelly, and I weren’t carrying cash with us. We were making all of our purchases with a debit card or credit card, and yet we still had all these reasons we needed to be able to give our kids money, whether it was for an allowance, a school field trip, or maybe a traveling sports team. And so because we weren’t carrying cash, we were always stuck having this problem. I talked to a whole bunch of other parents and they also were having the same problem. And they also wanted their kids to grow up to be smart about money. So I started working on an easy way to instantly transfer money from a parent’s account to a kid’s account — and have a debit card for the kids as well.
What is the main focus of your plan?
Sheehan: Think of it as four accounts all built into one. The first is the spending account, the debit card; the second is the savings account, including parent-paid interest; the third is a built-in giving account so kids can give to their favorite charities; and last is an account that helps teach kids how to invest through researching companies and then proposing an investment to their parents. If the parents approve it, their child can actually buy a share of Apple or Amazon, for instance.
How is Greenlight different from other financial education?
Sheehan: Greenlight is working so well because the kids get to learn by doing and with real money. It’s a real debit card with their name on it, and a real savings account.
The kids learn to decide whether to buy something they really want or need, or to keep saving and buy something else later they may need even more. There’s this concept called compounding interest. Let’s say you have $100 and you earned $5 in interest on that money. The next month you would earn interest on $105. So every month, the balance grows.
How can you tell the difference between buying something you need and buying something you want?
Sheehan: You need food, you need shelter, you need clothing — the basic core things. But most things are actually wants, and it’s OK to have some things that you want. So what I always told my kids is, why don’t you wait a day or wait a week? And if you still want that thing in a week, then let’s talk about it. Oftentimes if you think about it, there’s probably something you would like better and maybe it costs more. And so if you save your money, you’ll have a good chance of getting enough to buy the better thing.
How would you divide the money under the first three sections of your plan?
Sheehan: Maybe 40% of the allowance goes into spending, 50% into savings, and 10% into giving. I’ve seen a lot of that kind of thing, or even 50% spending, 40% savings, and 10% giving.
What would you say is the best way for a kid to earn money besides allowances?
Sheehan: Some of the kids are starting their own businesses. It might be a lemonade stand or selling cookies. My daughters did babysitting. My son raked the neighbors’ leaves. When I was a kid, I mowed people’s lawns.
First I got a part-time job and then during the summer I worked full time. You’d be surprised. A lot of people will welcome suggestions you make to work for them.
What is a reasonable amount to spend on something?
Sheehan: That’s a good question. What percentage of your money do you really want to spend on video games, for example. You could use Greenlight to set a certain amount of money just for video games, and it’ll help make sure you don’t spend more than that amount. But I think it’s good to try to plan out what you want to do with your money. So, if you don’t really have either a need or a specific savings goal that you’ve saved your money for, then you should just keep it in your savings.
But a great thing is to realize how much you’ve saved over time, just because you didn’t have something you needed to buy. You want to have a good plan. Every time you get money, you don’t have to just spend it right away.
Did you like to save when you were a kid or did you like spending more?
Sheehan: I liked spending more. I think most kids do. But the older I got, I was getting smarter about money and realized that if I just kept spending my allowance, I was not going to benefit from the extra amount my parents would kick in if I saved.
But I eventually realized I could buy nice things as opposed to the cheaper things if I saved my money first. And later I remembered reading “The Warren Buffett Way” by the world-renowned investor. And so I went from being a spender and spending all the time to learning to save and even to invest after that.
What would you say to kids who say they have no money to save?
Sheehan: I would say you think you don’t, but you do. And it’s probably because as soon as they get money, they spend it. If they can just pause and promise themselves that if they get money, they’re not going to spend it right away and they’ll start to see it accumulate. If they get $5 for doing chores and save just $1, it’s going to add up. Start by saving up for just one thing and get into the habit.
What is one of the first things you saved for when you were a kid?
Sheehan: I think it was a printer. You’ll laugh at this because this will show how old I am, but I had a Commodore 64, which stood for 64k or 64,000 bytes of memory. Your computer probably has 8 million bytes, or 8 megabytes.
Your website talks about a podcast that you guys started doing called Million Bazillion. Some of the illustrations seem geared toward younger kids. Is that because you want to make it easier for younger kids to understand the spend-and-save idea?
Sheehan: You got it. We wanted to do something for the younger kids, who aren’t really ready for a debit card in a savings account yet. We wanted to help them to start learning about money and personal finance before they could be heavy users of Greenlight.
How much money should parents give kids to start with when they first get a Greenlight card?
Sheehan: It depends on the family and their situation. It could be harder for one family to start with $20 and easier for another. Whatever they can afford is totally fine. Kids are open-minded and they’ll adapt to whatever the parents can afford. The amount doesn’t matter.
When the new investment part comes out, do you think it will be easier for kids to save their money from investments?
Sheehan: It’s good to have money to invest, and investing is just another way of saving your money. The goal of investing is to help the money grow at a faster rate. So even if you only have $2 to invest, that’s fine.
Jordan Block is an iGeneration Youth reporter living in Pennsylvania, USA.