The next generation of young adults will be the first to grow up in a society where cash is no longer the default payment method. With most major banks only allowing children to gain access to a current account and debit card from the age of 11, a new crop of digital providers have emerged to give young children controlled access to other payment methods.
Mintel’s research shows that parents often allow their children to start buying items online before they are able to access a debit card. Indeed over a third of parents who have a child aged 10 have allowed their child to spend money online in the last six months according to Mintel’s latest Children’s Online Spending Habits research.
Parents are keen to teach their kids good habits in order to help them gradually achieve financial independence. However, Mintel research shows that they also want to retain an element of control when it comes to their child’s spending. So-called pocket money management services are looking to provide an alternative to the established model, with the likes of goHenry, Nimbl and Osper offering pre-paid card and app facilities for children as young as 6 (or 8 at Nimbl and Osper). Typically these services charge a small monthly or annual fee in exchange for access to a spending and saving service that allows children to make payments in stores or online, whilst giving parents a separate login in order to set spending rules such as where the card can be used.
Teaching financial independence
Digital ‘pocket money’ apps also look to support young people by offering help with budgeting, goal setting and other tools to boost their financial confidence. goHenry, which secured £4 million in crowdfunding in 2016, has also taken to social media in order to engage with parents of young children, as well as taking the opportunity to highlight its ‘task and chore’ feature. This is a setting that allows parents to add household chores to the app for children to complete in order to earn pocket money. One of parents’ main reasons for taking out financial products for their children is so they can help them to learn financial independence, as well as encourage their child to get into a good savings habit. Banks could take inspiration from new providers by giving parents the option of topping up their child’s fund when they complete tasks in and around the home.
Banks and building societies best-placed to engage
One major stumbling block for emerging child saving specialists is that very few parents are aware of such services, according to Mintel research. As a result, opportunities for providers to compete with established banks and building societies are limited. This is exacerbated by the fact that parents often favour products and services offered by providers that they themselves already have a relationship with. This suggests that there is a wider opportunity for larger banks and building societies to build more extensive money management facilities for young children. By making existing savings accounts for 7-11-year-olds more interactive and engaging, providers can boost their reputation among young savers and their parents. On top of this, with 17% of parents saying they picked a saving or investment product for their child because the provider had a branch in the local area, providers with a high street presence could run family-friendly workshops to look to engage with parents and their children.
Paul Davies is a Senior Financial Services Analyst at Mintel, researching and writing UK financial services reports. Prior to joining Mintel, Paul held marketing roles within the Consumer Electronics sector for retailers such as Comet, as well as manufacturing companies including Binatone Telecom PLC. Paul has been a key speaker at Mintel’s Big Conversation events and has presented at McCann’s Digital 360 conference.
