Parents: New app reinvents how you give allowance and teaches kids to save

First things first. Nickel replaces your traditional paper allowance with no drawbacks that plague many digital payments solutions (Apple Pay). With Nickel, kids get a physical prepaid, reloadable MasterCard debit card to call their own. The allowance you set is auto-loaded onto the child’s card every week or month. The Nickel card works like any other card, both online and in brick-and-mortar stores. However, kids cannot take cash from the card, so no ATMs or cash back at the store.

While it’s a physical card universally accepted, the real magic is in the app for both children and parents alike. The important thing to know is, the parents remain in control the whole time. They can transfer additional money to the card (e.g., extra chores completed), put the card on hold if it’s ever lost (or if the child loses spending privileges), and even track their child’s spending, day by day, or grouped by a retailer.

However, Nickel is much more than a trackable digital allowance. Thanks to the virtual Nickel Pocket component, kids can decide to take money off their card, storing it for future use. The incentive? Parents can reward them by providing interest on the saved money after a period of time. That rate can be high enough to be meaningful and motivational.

When money is in the Nickel Pocket, your children can’t use their card to spend it. And interest is only available once that money has been pocketed for at least 30 days. After that, Nickel automatically transfers an interest payment to the child’s regular Nickel account. Interest continues accruing, with interest payments made each payday.

I’ve been using a prerelease version of Nickel. In just a few weeks, my 9-year-old daughter has (slowly) learned the importance of saving money. And thanks to Nickel, I know how much money Samantha spends on iTunes.

Nickel is simple to join. Within the app, you’ll be asked a few questions, including your mailing address, bank card information, and the name of each child. Your child’s Nickel card arrives in a few days. In the meantime, you can schedule a payday (weekly or monthly), allowance amount, and interest rate. These options are changeable at any time as is the ability to make manual payments such as rewards for good grades.

Once the card arrives, it must be activated through the Nickel app.

You can sign up for a free Nickel account online and through the app. After 60 days, the Nickel service costs $5 per month per child. There are no additional fees, and you may cancel the service at any time (replacement cards are $5 but each family gets one free replacement card per month.) There’s also no line of credit or finance charges and no credit check is required.

Check out the fun video below to see what Nickel is all about. A link to their website is below.