Money Smart Kids
Don't Fall for the Kwedit Trap
This site claims to offer kids a safe environment to build money skills -- but it really just makes it easy for them to spend money.
By Janet Bodnar, Editor, Kiplinger's Personal Finance
March 26, 2010
As a regular commentator on teaching kids about money, I can always count on friends, family members and even fellow journalists to clue me in on outrageous behavior guaranteed to teach the wrong lesson. The latest outrage (which was brought to my attention by Kathy Kristof of CBS MoneyWatch and Dan Fletcher of Time magazine) is a new Web site called Kwedit.
"No credit card? No problem!" trumpets the site. Kwedit gives users an “amazing new way” to play digital games and buy virtual goods now in exchange for the user’s promise to pay later -- with real money. And here’s the kicker: Kwedit lets you pay with cash, or by "asking someone else to pay on your behalf."
This is not a joke, although Stephen Colbert turned it into one in a classic send-up on The Colbert Report. Kwedit’s "Kwedit Promise" feature is not for children, the site cautions; it is a service for adults and teens age 13 and older. But 13-year-olds hardly qualify as adults, and some of the games are skewed to a young crowd. One of the participating games, for example, is FooPets, which lets users adopt digital pets and buy virtual products to feed and care for them.
In my view, the real aim of Kwedit is to make it easy for kids to spend money (or, even worse, borrow it) while sugar-coating the transaction with a veneer of financial literacy. “Consider Kwedit a safe environment in which you can build the proper discipline, organizational and commitment skills you will need to take care of your finances and credit in the future,” Kwedit advises.
Even well-meaning journalists fall into this trap. Wrote one, "Kwedit is a way to become acquainted with credit early, while still on training wheels."
Kwipes! That training-wheels metaphor always makes me cringe. As I wrote a number of years ago, "giving your kids credit cards when they’re young is like letting them use drugs early so that they won’t turn into addicts."
I’m glad a cool guy like Colbert felt obliged to weigh in on this so I don’t sound like an old fogey or a broken record (make that an MP3). When it comes to teaching children about money, it’s important to think like a kid -- and 13-year-olds are still kids. They will not be inclined to use a site such as Kwedit to “build money skills and discipline that will last for the rest of your life.” They will use it -- they’re actually encouraged to use it -- to “pass the duck” and get relatives and friends to pay.
The best way for kids to learn how to manage credit wisely is to be responsible for buying real stuff with their own hard cash. Once they’ve learned to pay the bills, instead of ducking them, they’re ready to move on to credit.
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Reader Comments (4)
Posted by: Karyn Hodgens at 03/26/2010 03:37:40 PM
Thank you for addressing this issue, Janet! I think it's important for parents to understand that, even though the Kwedit site may claim that it teaches kids financial responsibility, developmentally, kids this age are not ready for the abstractness of money that paying for things with credit involves. Kids need hands-on experiences with money...real, physical money. And I chuckle (in a not-so-very-funny kind of way) every time I think about their "pass the duck" payment option for kids. Karyn Hodgens, Kids' Personal Finance Educator
Posted by: Danny Shader at 03/26/2010 08:47:13 PM
Thank you for taking the time to write about Kwedit Promise, one of two services we provide to consumers who wish to avoid using credit or debit cards. I agree with your assertion that Kwedit's services make it easier for consumers to purchase goods and services on-line; in fact, that's what they were designed to do. Kwedit Promises are not credit in any literal or legal sense -- they are not contracts, they don't bear interest, there is no obligation to re-pay them, and repayment has no real-world consequences. They simply simulate credit and facilitate payments by people who have the resources and desire to make purchases on-line but lack the mechanism -- plastic -- for doing so. That's how I can feel good about Kwedit Promise while simultaneously agreeing with your assertion that most teens should not use credit cards. To put Kwedit Promise in perspective, in contrast to credit cards, most initial Promise limits are $5 or less -- about half the price of a movie ticket. The materials we've provided at wwwdotkweditdotcom/parents are not intended to sugar-coat our offerings. Rather, we provide basic educational material about credit and credit scores along with links to other financial literacy sites because we believe that Kwedit Promise can provide a safe, simulated environment in which consumers of all ages can be exposed to the concepts of credit before they encounter the real thing in the real world. We think that's a good thing. With respect to the question of whether a 13 year old is a child or not, we rely upon the Children's Online Privacy Protection Act (COPPA), which draws a bright line distinction between individuals who are at least 13 years old, and those who are not. That being said, I would encourage parents to decide what's best for their teens based on their level of maturity. Reasonable people may disagree about the merits of on-line entertainment and Kwedit Promise. I'd encourage those who wish to learn more about Kwedit's offerings to read this blog post (wwwdotbitdotly/aMIIBk) and draw their own conclusions about whether Kwedit Promise is appropriate for themselves and their families. Thank you, Danny Shader CEO and Founder, Kwedit, Inc.
Posted by: Janet Bodnar at 04/02/2010 03:57:41 PM
Danny, thanks for your comments. I agree with you that parents need to decide what's best for their teens based on their level of maturity. But after writing about kids and money for nearly 20 years--during which I've communicated with thousands of families, not to mention raising three children of my own--I've concluded that most young teens,and even older ones, aren't mature enough to handle an abstract concept like credit. As I say in my column (and as Karen adds in her comment), when it comes to money, the more concrete the lesson, the easier it is for kids to learn and the less likely they are to get into trouble when they begin using credit. Janet Bodnar
Posted by: nicotine Hero at 04/30/2010 09:20:45 AM
...Since when is spending money a bad thing? It IS building character because if someone else pays for it, most likely the child with have to pay THEM back. Making promises and keeping them is pretty much good karma in my book. I guess they really mean it when they say there are haters for everything, I never thought someone would waste their time then complaining about Kwedit...So what, the kids play games.. Since when is playing games bad? Kids spend money, they buy candy, toys, or video games, and how is this any different? "Oh, you have to be this old to buy games, just because you pay in a different way." This website is spending their own money, and TRUSTING these kids to pay them back.If the kids fall through, they get in the habit to be responsible.