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When it comes to banking, most kids learn the hard way just how expensive their mistakes can be — with every sting of an overdraft fee or bounced check. Parents who would rather teach their kids how to manage their money without the risk of fees might consider FamZoo, a virtual family banking program. For a modest subscription fee, FamZoo provides the tools parents need to teach their kids about money management and banking.
Is FamZoo worth the cost?
In this review we cover:
- What is FamZoo?
- FamZoo Fees
- FamZoo Benefits
- Who Should Consider FamZoo?
- FamZoo Drawbacks
What is FamZoo?
FamZoo is a “Virtual Family Bank” that allows parents to teach their kids about banking
without requiring kids to pay fees (as a parent, you will pay a monthly subscription fee).
FamZoo has two versions. The first version is a virtual IOU account that formalizes and tracks money flowing between parents and kids, but is not a bank at all. The second version gives prepaid debit cards to parents and kids that can be used anywhere that debit cards are accepted (including ATMs). Both versions cost the same amount for parents.
In addition to basic banking, FamZoo offers family oriented features. For example, family member can request reimbursements from other family members, and parents can offer loans to their kids and teach them to pay back loans in installments. With parent approval, money moves between family accounts instantaneously. FamZoo allows parents to fund allowances, and it helps kids divide their money between saving, spending, loan repayment and giving. As a parent, you can set a parent paid interest rate to encourage savings.
If you opt for prepaid debit cards, the cards will not allow your kids to overdraft, and parents and kids have access to a website to check balances, to review transaction history and more. Kids can also withdraw money fee free from in network ATMs.
Subscription fee: Parents pay $5.99 per month (or $60 for 2 years with pre-payment) for up to four prepaid debit cards including a parent loading card. If you want more than four cards (for example to separate giving, saving and spending accounts, or if you have more kids), you pay a one-time $2 fee per card. If you lose a card, you can receive a replacement card for free.
Aside from the monthly subscription fee and the one-time extra card fee, FamZoo does not assess any fees, even if you manage to overdraft (which is possible if your transaction “settles” for an amount greater than was initially assessed).
Load fees: Depending on which financial products you use, as a parent, you may pay a fee to load your card. If you have access to Wells Fargo Sure Pay, Dwolla or PayPal, you can transfer money to your FamZoo account for free, or you can fund the account for free via direct deposit from your paycheck. Other loading options cost between $.95 and $7.00 per transaction. The institution where you initiate the transaction charges these fees, but FamZoo doesn’t add any extra fees.
ATM fees: FamZoo is part of the MoneyPass ATM network and withdraw cash at no fee. However, FamZoo warns that the other institutions usually charge a fee for out-of-network ATM use, and these fees aren’t reimbursed.
Parents have control: FamZoo is a stripped down bank that gives parents banking control, but it also has a few mainstream financial benefits. For example, MasterCard Zero Liability Protection backs FamZoo cards which means that they have fraud protection. Like other debit cards, they offer transparency, the ability to freeze an account if the card is lost or stolen, and the ability to track spending. And, each account has its own routing and account number so kids can get their paychecks deposited like it’s a regular bank account.
Helps teach saving and budgeting: The primary benefit of FamZoo is the way helps parents raise financially savvy kids. The software allows you to teach your kids to track expenses, set budgets, and split money into various accounts (a modern version of the envelope system). As a parent, you can add complexity (adding interest, loans, etc.) as your kids mature.
False sense of real-world banking fees: FamZoo puts guardrails in place, so kids don’t get hurt when they fail to manage their money well (they can empty out their bank account, but they won’t pay overdraft charges and they cannot go into debt except to their parents), but parents who use the software also need to teach their kids about banking fees outside of FamZoo. This will be especially important as teens set up their first checking accounts.
Who should use FamZoo?
FamZoo suits parents with kids who don’t yet have jobs or their own bank accounts who want to teach their kids financial principles. FamZoo makes teaching basic finances easy, and if your kids make mistakes, they don’t have to pay outsized fees.
Parents of early elementary through early high school will appreciate the valuable teaching opportunities that FamZoo provides, and parents with older teens and college students can advantage of transferring money with ease.