EXCLUSIVE: “Parents don’t teach kids about money… apps do!” – Stuart Thomas in ‘The Fintech Magazine’

In the UK, kids’ finance is a hotly contested market, and not before time, says tech writer and podcaster Stuart Thomas

As a child, money had no real tangible meaning for me. This consequently meant I had a bit of a tumultuous relationship with finance as a young adult.The aggressive children’s advertising of the 1990s drew me into ads for toys like Stretch Armstrong, Mr Frosty or ProYo Yo-Yo’s, and, as if by magic, my parents would eventually acquire one for me. Which is all well and good, but I didn’t have any concept of how or where these came.

It would be unfair to pin the entirety of this lack of financial preparation on parents; our education system seems largely to abscond from preparing children for ‘real life’. I spent my school years learning about Pythagoras theorem, photosynthesis and the Russian Revolution of 1917.

Instead, I wish I’d learned financial management, how to submit a tax return and save to buy a house, because funnily enough, my extensive knowledge about the Russian revolutionary Vladimir Ilyich Ulyanov, has been little used since I left high school in 2005. According to Santander, I’m not alone.

Still today, only 38 per cent of children and young people in the UK say they’ve had some financial education at school, although it’s been a compulsory part of their secondary curriculum since 2014 – although life-long solid financial habits start to be formed much earlier than that.

As a young adult, I often lived to the bottom of my bank account, emptying it before the end of the month. I can’t help but feel that had I had the correct teaching and tools available as a child, then it might have provided a stepping stone to earlier financial successes in life. Indeed, one study showed that financial education for kids can boost their earning prospects as young adults by 28 per cent. During the time that I was becoming more financially independent, there was a rapid change in financial technology.

In the space of around five years, people went from managing their entire accounts on a little book of transactions that the teller would stamp every time you visited the building society, to logging onto a website to manage your fortune (or lack of) from the palm of your hand. Kids’ savings accounts have been around for years, but there’s been an explosion in financial education apps linked to saving, investing and transacting, with varying degrees of parental control, depending on the age range. And that’s been driven, in the UK at least, by the fact that nearly two-thirds of children own their own smartphone by the age of 10.

“I spent my school years learning about Pythagorus, photosynthesis and the Russian Revolution… instead, I wish I’d learned financial management and how to submit your tax returns”

Unfortunately, from my investigation, many of these apps and services are of a questionable quality, with missing features or outdated interfaces, although there was one that by general consensus was better than all the rest – a UK app called GoHenry, now available in the US, which was founded by parents.

SETTING THE STANDARD

In 2012, GoHenry set out to empower children, from the age of six right the way up to 18, to master money management. It provides them with a tonne of features and benefits that I just didn’t have growing up, and it tailors which features are available, based on the user’s age group and parents’ choice. At its core is a fully functioning prepaid debit card that can be personalised with the user’s name and design.

Money is deposited into GoHenry by the parents and then released through weekly or monthly allowances, which teaches children about budgeting. Parents have the ability to set limits on how much can be spent per week or per transaction and monitor their child’s spending. Like many neobanks for grown-ups, it provides instant payment notifications, which pop up on the child’s phone as well as a parent’s.

My favourite GoHenry feature is the task and reward system. Parents can create lists of available chores and a monetary value attached, and when these tasks are completed, GoHenry automatically transfers that amount directly into the account – great for teaching children the connection between work and earning money, and something I didn’t have until my first paper round at 15 years old. Indications are, though, that kids today are much more savvy than I was. The 2023 annual Pocket Money Index report from NatWest’s Rooster Money showed that their income has kept pace with inflation over the past year, partly boosted by more side hustles, such as babysitting and selling used stuff, while income from tutoring their peers rose an incredible 102 per cent in 12 months to £16.95 per job!

GoHenry doesn’t have all of the features I would want.

One obvious omission is the ability to create a secondary reward system that isn’t based on money to help teach the youngest users, in particular, the importance of accruing and saving. It’s unreasonable to expect a child to save up the £3k for flights and entry to Disney World, but if there was the option of earning something like ‘family tokens’ they could contribute towards these bigger goals.

As young adults, my generation transitioned from using a red building society bank book to full digital management in less than five years. Our kids are likely to be the first to transition from a hybrid to a fully cashless society – and if that’s the case, they need to be prepared now.

BABY SAVERS TO TWEEN TYCOONS… SIX OF THE REST

HIGH STREET BANKS

In this category, NatWest’s Rooster Money account stands out. The app, which is aimed at children aged three and upwards, and its prepaid debit card for those aged six to 17, help to teach youngsters the fundamentals of spending, saving and earning. Key features include budgeting tools, a virtual Star Chart to reward younger children for good behaviour, the ability to set rewards for scheduled chores, a virtual money tracker and specific pots – Spend, Save and Give – to help kids put money aside for designated goals.

Meanwhile, Santander has been taking a lead on financial literacy for kids with a high-profile campaign and its 123 Mini Current Account can be opened before they can crawl, let alone walk. The contactless debit card is restricted to 13-year-olds and older, but the account comes with no monthly fees and can be managed online and via an app. It also includes an interactive online calculator that can be used by youngsters, and by their guardians, to learn about managing money.

NEOBANKS

Revolut <18 is the challenger’s lightweight banking service for six to 17-year-olds. Like GoHenry, it gives them a free-to-open account, which in this case is linked to their parent’s/co-parents’ Revolut account, with a customisable prepaid debit card that sends spending notices to their phones. <18 users can pay in any currency, just like the grown-ups, as well as withdraw cash at ATMs. They can also use the ‘Revolut Me!’ messaging feature, an easy and secure way to receive payments.

Starling won Best Children’s Financial Provider at the British Banking Awards last year for Kite, its account for six to 16-year-olds. Its Kite cards (made from recycled plastic) are free, but the basic account does come with a fee (£2 per month). Otherwise, it shares many of the same features as Revolut <18, such as a secure link so friends and family can send money to a child and parental controls on spending.

And, of course, neobanks such as Monzo and Starling have extended lightweight versions of their adult accounts to 16 and 17-year-olds. Monzo even bills its offering for older teens as ‘a Monzo account with (almost) everything you get as an adult’.

NON-BANK APPS

Gimi is one of the first open banking solutions aimed at this market, which is also positioned as a white-label solution for banks. Children are empowered via the app to actively engage with money in their account, either derived by payments for chores, pocket money or ad hoc deposits, and also review purchases and learn from any mistakes.

Developed in the Nordics and rolling out in Europe, it aims to educate 10 million children in personal finance by 2025. It boasts an in-app financial advisor called Piggy and The Superskills Adventure – a teaching tool that allows children to travel between planets in space and discover a different financial topic at each destination.

Savings Spree is a fun app for children aged seven and above that takes kids through several rounds of money games to teach them smart financial habits.

Created by Money Savvy Generation, and free to download, there are six rounds of activities in total, which are presented in a game show format and hosted by the Money Savvy Pig. The ultimate goal, via progress through these games, is to show children the different ways they can use their money, namely: saving, spending, donating, or investing.

This article was published in The Fintech Magazine Issue 28, Page 26-27