Managing money is a daunting task everyone faces. Whether it is setting budgets or preparing for the future, no matter how old you are, it is not easy, but a number of apps are springing up looking to help by educating kids on finance.
The world of savings and investing is tricky and there is a lot to get your head over. While it’s an important life lesson, financial education is not really taught in schools. A report from AXA Investment Managers found that just 47% of kids are learning some form of financial education at school. This is leaving the majority of people forced to enter adulthood without a clue on how they should be using their money. With the strain on the inflated housing market and basic pensions not always ensuring enough money in retirement, this can leave a lot of people in a worrying position.
Children that have received financial education have adapted their way of life and make more financially conscious decisions. The research from AXA claimed that 60% of the children to be taught about their finances, actively save their cash. On the reverse, 60% of those who have never received financial education, do not save anything.
John Ellmore, founder of financial product comparison website Know Your Money, said, “In our increasingly cashless society, it can be challenging for children to understand the value of money and learn that there isn’t an endless supply available to spend.”
Over the past several years there have been a handful of FinTechs looking to help children realise the bank of mum and dad does in fact have a withdrawal limit. Typically, these types of children-focused FinTech apps are comprised of a mobile wallet where they can store their money and track their spending.
Greenlight Financial Technology is a prime example of this. The child receives a debit card and supporting app, all of which can be monitored or topped-up by parents. The child can use the card to make purchases, earn more money and allowance by completing parent-set chores or targets, and earn parent-paid interest on savings. Users can also use the app to monitor their spending and savings to encourage them to build healthy financial habits and stop them spending cash as quickly as possible.
These FinTechs are also attracting the attention of the investors. Greenlight closed a $54m Series B last year, while fellow kid-focused money management platforms Jassby and FamPay secured $5m and $4.7m in funding this year, respectively. UK challenger bank Revolut is also looking to take advantage of the rising appetite in the space. The bank recently launched Revolut Junior, a mobile app designed for children between the ages of seven and 17, with the aim of improving their financial literacy.
Ellmore added, “This can help children to see that there isn’t a “magic money tree” that will give them more money if they run out, and that they are solely responsible for making sure they have enough money to buy the things they want.”
The world is moving away from a cash-based society and more to digital money. The coronavirus and fear of spreading diseases and viruses through money is only accelerating this shift. With this, it will become harder for children to see money is not endless and is not just a number on a screen.
Dan Scholey COO of money management platform Moneyhub, said, “The days where children would be sent a cheque for their birthday are disappearing, instead, pocket money is set up as a standing order, or credit cards are given as an eighteenth birthday gift.” Children have been around technology their whole lives and are more adept at it than a lot of adults, so combining technology and money management is a natural fit. Back in the day, saving up for a new game or album involved putting money in a piggy bank. However, the allure of candy might be more appealing in the instant than putting it in the moneybox. Digital apps can give reminders for their goals and show them how close they are to achieving a goal.
The research from AXA claimed that children engaged with their finances are more frugal with their money management. Around 45% of respondents stated they preferred to save rather than spend, with 37% claiming to do more chores or take on a job to get more money. Going even further, 17% said they sold their things to boost their savings.
Dan Scholey said, “Banks should be looking to offer more services for children, but they’re currently not in the best position to do so. Instead, other organisations like the Scouts are stepping in to teach children life-lessons in money. There’s an opportunity for these services to evolve, and more financial platforms to offer tools that set children on a steady path for a thriving financial future. It would be a mistake to underestimate children’s ability to understand and engage with finances. What’s more, the earlier they have to prepare, the better in the long-run.”
Adults are not much better
Bad financial education is not just an issue for children. Many adults are still clueless on their personal finance. A recent study from Israel’s Bank Leumi worryingly claimed that more than 90% of British consumers believe they are uneducated about personal finance. Most adults are clearly uneducated about their finances, meaning they have likely missed out on a lot of years where they could have been saving money.
Dan Scholey said, “When thinking about getting children more educated on finances, it’s useful to think about it backwards. Speak to a retiree and you might find that there are lessons in money they wish they knew earlier in life. Could they have saved more had they started earlier? Would they have a bigger pension pot if they had known about pensions from childhood? Often, people don’t start taking control of their finances until they have to, at which point they’ve missed out on years, if not decades, of building up savings for a property, retirement, or a rainy day.”
It looks like the duty of financial education is falling on banks, with 47% of respondents looking towards banks to help them, the research from Bank Leumi shows. The report went on to state that 24% of consumers in the UK even feel like they have been misled by financial advice from their banks. This is not hard to believe, following the various reports of mis-selling, such as the PPI scandal, a lack of trust in what financial institutions claim is naturally going to happen for some.
Financial institutions are not negating their older customers and many are offering improved savings and investing services; however, this is not widespread and can still be confusing for those with no previous education in finances. Speaking in relation to the research from Bank Leumi, Louise Hill, the co-founder and COO of pocket money card for families gohenry, stated that adults clearly want similar educational tools some companies are offering children. It’s best to teach things from a young age and with the introduction of apps like gohenry and Greenlight the future generations may not have as much stress with finances.
Pepper CEO Michal Kissos Hertzog said, “Consumers want their bank to be much more than just a safe house for cash; they want more help with their money – just like they don’t use Spotify as their music storage only, they want to discover new artists through customised data.
“The UK’s financial literacy gap is preventing many Brits from making the best possible financial decisions and digital banks have a real opportunity to empower consumers to make better money choices.” He added, “With a flexible digital core, there’s no reason why traditional banks cannot provide such services and more, enabling customers to take charge of their finances.”
Copyright © 2020 FinTech Global