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They can be valuable resources to help parents teach children about money — but may encourage risky behaviors, some experts say.

A new crop of mobile money apps are promoting themselves as part of the solution to a stubborn problem: a lack of financial savvy, particularly among young Americans.
The apps offer slick educational videos and tools while enabling children and teenagers to save and spend — and even invest in stocks. The apps pair with plastic debit cards designed with kids and teens in mind. They’ve caught the attention of researchers and financial advisers who say the tools may help engage and enlighten young users, even as they worry that the apps, without close parental involvement, may encourage bad financial behavior.
Numerous reports have noted that financial literacy in the United States has resisted improvement for some time, even though more states have begun requiring schools to teach it. An analysis published this month by the Milken Institute, a public policy think tank in Santa Monica, Calif., deemed the lack of sound financial knowledge among both young people and adults to be a “worrisome” barrier to economic advancement.
Yet while many Americans lack the knowledge necessary to make smart decisions about money, the Milken report said, digital tools have the potential to be a “catalyst” for financial education, particularly among young people, who are avid users of apps.
Young people may tune out dry concepts they hear in a classroom, but the apps convert information into colorful, interactive graphs. “The tool makes it very real,” said Oscar Contreras, an economist at the Milken Institute and one of the report’s authors.
Financial technology, or “fintech,” start-up companies are embracing the financial literacy trend, seeing a way to sign up customers early by offering personal finance instruction along with spending and saving tools.
Copper, for instance, bills itself as “the only bank that teaches teens about money,” and offers brief, peppy videos and a financial literacy quiz that teens or their parents can take. A sample question: “Suppose you have $100 in a savings account earning 2 percent a year. After five years how much would you have? (A) More than $102; (B) Exactly $102; (C) Less than $102; (D) I honestly don’t know. (The desired answer is A, because of the effect of compound interest — a bedrock financial concept.)
Engaging tools and clear information are key, said Eddie Behringer, Copper’s co-founder and chief executive. The rise in student debt coincided with the explosion of smartphones, he said, suggesting that “increasing digital access doesn’t always translate to financial literacy.”
Rachel Pendergrass, a teacher and softball coach at Columbia High School in Huntsville, Ala., said she found Copper last spring while searching online for updated lessons to use in a personal finance class she was teaching for the first time.
“I didn’t feel like teaching them to write a check was very relevant to them,” she said.
Copper provided introductory letters that Ms. Pendergrass sent home to parents, who could approve their child for the app, which links to a digital bank account and a debit card — or not.
Most were receptive, she said, because they liked the idea of being able to easily send their children money: “It was all voluntary, not an assignment.” In the classroom, Copper’s “cheat code” videos, which offer quick lessons on topics like “What do banks actually do?” and “What is an I.P.O.?,” helped inspire discussions.
Step, an app that is intended for teenagers and has about two million users, declares on its website: “We want to make learning about money fun and interesting.” Step’s website offers trendy videos and short articles like “Outfits that slay: The ultimate guide to thrifting show-stopping, back-to-school looks.”
“Most schools don’t teach kids about money, and most families don’t talk about money,” said CJ MacDonald, Step’s founder and chief executive. “It became very clear there was a gap in the market.”
Step offers a secured credit card rather than a debit card. With secured cards, users make a deposit that serves as collateral; they can spend up to the amount of the deposit, and build credit when using it.
The card provides “training wheels” so users can transition to real credit cards when they are old enough, Mr. MacDonald said. (The minimum age to open a credit card is 18, but people younger than 21 face tougher criteria to qualify.)
Greenlight began as a tool to help parents manage children’s chores and pay them an allowance or give them spending money, since people increasingly don’t have cash on hand. Now Greenlight, which debuted in 2017, has more than four million accounts and has added features including cash back on its debit card, and an option that lets kids invest through a brokerage account opened in a parent’s name.
Kids of any age can research, buy and sell stocks — including fractional shares — as well as exchange-traded funds. The app including the investing option costs about $8 a month, but there’s no extra fee for trades. To trade, the child must request approval from the parent through the Greenlight app.
Tim Sheehan, Greenlight’s chief executive, said the investment option was a logical step after children learned the basics of saving and spending within their means. The option includes access to research from Morningstar, and offers short videos that explain investing concepts, like a price-to-earnings ratio.
While the apps appear promising, they make some financial education advocates wary. Lennette Coleman, president of the FoolProof Foundation, which promotes “healthy skepticism” about financial products, said it felt “irresponsible” to allow children, who may not have fully absorbed lessons about the necessity of working to earn money, saving it and spending it wisely, to invest in stocks. If apps make a game out of investing, she added, children may be more engaged — but they may also be more likely to take risks.
“There’s a lot of nuance in the stock market,” she said, “and they don’t understand those nuances.”
Tim Lambrecht, director of education at Budget Challenge, a program that uses simulations to teach students about bill paying, budgeting and investing, said that apps could get teens excited about investing, but that most emphasized buying individual stocks and skimped on information about long-term investing in index funds in tax-advantaged accounts.
“That sends the wrong message,” he said. “You have to invest for retirement; you can’t save enough.”
Here are some questions and answers about financial literacy and money apps:
Fees vary. Some apps, like Step and Copper, don’t currently charge monthly fees, but make money from “swipe” fees — fees paid by merchants when customers use their card. Greenlight charges a flat monthly fee, starting at about $5 for the basic app and rising up to $10 for a version offering the investment option and other perks.
Most apps offer federally insured savings accounts through partner banks, but pay little or no interest on the balances. Greenlight said it was now paying 2 percent on savings, for balances up to $5,000, on some accounts. It also lets parents set their own custom rate, allowing them to match whatever their child saves.
“Apps are now just part of the financial ecosystem,” said Michelle Arpin Begina, a financial planner in New Jersey, so parents should become familiar with how the tools work.
The apps can be beneficial, helping young people to visualize their spending habits and nudging them to save money and pay bills. But investing, in particular, needs close parental oversight, she said — so parents should be prepared to spend time discussing buy and sell decisions with their children before signing them up for a trading app.
A parent who is very interested in stocks may find it a great way to start conversations about money. But having multiple children constantly asking for approval of trades could become overwhelming for some busy parents. Before opening an account, Ms. Begina said, “have a strategy.”
Definitions of financial literacy vary; some researchers consider it the ability to understand basic tenets of personal finance, like compound interest and inflation, while others define it more broadly to encompass attitudes about money and financial decision-making. The U.S. Financial Literacy and Education Commission, created nearly two decades ago, describes it as the “skills, knowledge and tools that equip people to make individual financial decisions and actions to attain their goals.”
The Milken Institute report argues that because the rapid adoption of digital financial tools carries new risks — like fraud and data privacy issues — financial literacy must include “the knowledge and skills required to use digital financial services effectively.”
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