Is ThreeJars a good way to teach kids about money?

Are you often caught in arrears on your kids' allowance? Pursued by pint-size creditors? Have those unnerving collection phone calls been traced to a line...inside your house?!

Then maybe Anton Simunovic can help. He says he's built a better mousetrap, www.ThreeJars.com, which aims to teach kids age 6 to 13 how to manage their money.

After parents set up an account and direct the percentage of their child's earnings that should be distributed between virtual jars for save, spend, and share (charitable contributions), kids use ThreeJars to track the debits and credits on the parent-child ledger book online.

Kids may love this idea. "We are an IOU manager, not a bank," Simunovic says.

To withdraw money, kids submit a request online. ThreeJars sends an alert to the parents via email or cell phone text message, and mom or dad disburses the green stuff out of their own pocket. This seems more involved than necessary, but busy parents aren't always physically present to hit up for cash. "From the child's perspective, we operate like an online bank," says Simunovic, a former venture capitalist specializing in technology and software companies.  

Kids can also opt for payment by gift card for Toys R Us, iTunes, Amazon.com, and 27 other retailers. If parents OK the charge to their credit card, the gift card arrives in the mail a few days later. But when we scanned through the various gift cards offered, we found several whose policy is not to replace lost cards, a risk if your kid is the type who frequently can't find his shoes, school books, homework assignments, and other important stuff. Among the tough-luck gift cards offered: Darden (Red Lobster, et al);  Blockbuster; Footlocker; and Chilis. We couldn't find any terms and conditions for AMC Theater gift cards.
 
Gift cards can keep kids from an important teachable moment—comparison shopping for a bargain price—since they handcuff their owners to buying only from the retailer who issued the card. Too, a quarter of the people we surveyed last November still hadn't used a gift card they'd received during the previous holiday season. Simunovic said he also didn't like gift cards' 15 percent rate of "breakage," the part of the card balance that ends up never getting spent for a variety of reasons. So after we spoke, he called back and said ThreeJars would change its policies to enable parents to activate the gift card option or leave it turned off. ThreeJars collects a one- to three-percent commission on gift card sales, but Simunovic says that's not a key revenue source.

The saving tools are also a concern. ThreeJars' regular savings rates of 4 to 15 percent are already high enough above market. But other vehicles—certificates of deposit, parent bonds, and "double ups"—pay housing-bubble-size annualized interest rates as high as 100, 300, and 400 percent.

"Four percent interest across a year doesn't move the dial for a kid. But when $5 grows to $10 in two months, I know that's an unusually high interest rate, but it gets the kid's attention," says Simunovic.

OK, I can see the educational value in supercharging rates to excite kids about saving. But when they're eventually weaned from ThreeJars, even bull market stock returns could look pretty shabby.

Kids can also make contributions to featured causes on ThreeJars or get cash—through parents—from their "share" jar to donate to other charities. Simunovic says the charity option better engages kids in his Web site and gives them a healthier relationship with money. "Kids want to have voice and impact. They want to do it with their own money. That's at least half of what we're trying to achieve on ThreeJars."

Cause marketing is also good for business. Products from toothpaste and shampoo to chips and light bulbs can get a big sales boost when they're associated with a specific cause, according to a study by Duke University and Cone, Inc., a cause-marketing company headed by Carol Cone, a ThreeJars board member. 

I'm not sure whether parents will find www.ThreeJars.com useful or not, and Simunovic won't say how many takers he has for his $30-per-year service, which only launched last September. What do you think? Is it better than the old-fashioned piggy bank?

Visit the Web site and let us know what you decide.—Jeff Blyskal