Personal finance

What parents need to know about P2P payment apps as Venmo adds teen account

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As new peer-to-peer payment app options emerge for teenagers, experts say it’s an opportunity for parents to teach their kids how to use these financial tools wisely — and educate them on how to avoid common pitfalls.

Venmo on Monday unveiled a new teen account that allows parents to open a linked account with select features for teenagers ages 13 to 17 years old. While some teenagers already use Venmo, individual accountholders must be at least 18 years old (or the age of majority in their state), per the app’s user agreement.

This isn’t the first peer-to-peer payment app to expand to teen users. Cash App, Square Cash and Apple Wallet also offer features for teens, albeit with parental supervision. PayPal, parent company of Venmo, still requires users to be at least 18 years old (or the age of majority in their state).

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The Venmo teen account includes a debit card and can be funded by a parent’s Venmo account through any linked sources. Parents can monitor their teen’s payments and friend requests, as well as control privacy settings.

Apps are ‘convenient,’ but woes can be ‘difficult to fix’

Peer-to-peer payment apps, also known as P2P apps, are widely used throughout the U.S., used by 64% of adults, including 81% of those ages 18 to 29 years old, according to a 2022 report from Consumer Reports.

Teresa Murray, a consumer watchdog at the U.S. Public Interest Research Group, urges caution when using P2P apps. “There are real consequences if something goes wrong,” she said.

U.S. PIRG examined nearly 9,300 complaints received by the Consumer Financial Protection Bureau between April 2017 and April 2021, and uncovered a pattern of issues among several P2P apps with digital wallets, scams and customer service.

“People use these P2P apps because they’re convenient and they’re easy,” Murray said. “But it’s very inconvenient when something goes wrong.”

“It’s difficult to fix it, and people just don’t realize that up front,” she added.

Nearly one-quarter of users have reported sending money to the wrong person, a 2022 survey from LendingTree found, while 15% have been victims of scams.

“We have a zero-tolerance policy on our platform for attempted fraudulent activity, and our teams work tirelessly to protect our customers,” a PayPal spokesperson told CNBC. “We encourage customers to always be vigilant online and to contact customer service directly if they suspect they are a target of a scam.”

Protecting teens from common P2P payment issues 

Whether your teen is using Venmo or another P2P app, Murray said it’s important for both parent and child to be familiar with the possible risks.

For example, she suggests that users fund P2P accounts with a credit card rather than a checking account because there a greater protections under the Truth In Lending Act and Fair Credit Billing Act if something goes wrong. And if you do link to your bank account or a teen’s, keep the majority of your cash elsewhere.

Murray also suggests only paying “people you know well” via P2P apps and asking them to send you a request via the app before making a payment for the first time. “Once you have completed a transaction, it’s done,” she warned. “You’re not getting your money back.”

Teens should also make transactions private, add extra authentication to access the app from their phone, and be vigilant when sharing their device with others, she said. They may also thwart scammers by never sharing authentication codes with anyone.

Talk to your teens about money 

As your teen learns about budgeting and payment apps, experts urge parents to discuss these topics at home.

“The best tip I can offer is to keep that communication going with your teen about money,” said certified financial planner Desiree Kaul at Main Street Planning in Satellite Beach, Florida. “As long as your child feels comfortable asking you questions, they will always have someone to turn to when they want an answer.” 

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