By Nina Hendy
Generation Alpha kids are opening their first bank account with a few taps on a screen, circumventing the need to ever step inside a local bank branch.
A new generation of digital apps give children and young teens a taste of their first bank account and debit card from as young as nine. To build engagement, apps are gamified to teach money-bucketing techniques and saving goals as digital banks step in to build financial literacy rates among children.
Amber Daines’ son Zeke Ungar, 15, has had a Spriggy account for pocket money since he was 11.
NAB runs debit card Spriggy, while CommBank launched Kit late last year. Both are dubbed pocket money apps, giving modern children the chance to experience modern-day banking and saving.
Sydney’s Zeke Ungar, 15, has had a Spriggy account for pocket money since he was 11. His mother Amber Daines paid $20 a month into the account for extra snacks and savings for something he wanted.
Income from his first job as a qualified soccer referee is now paid into his Spriggy account. “We set up a savings section for him to put 50 per cent of all he earns, and any birthday money gifted to him, while the remainder is spent on clothes or food out,” Daines says.
“Digital money is all kids know these days. The reality is cash isn’t something they need to know. Digital tools like savings goals being reached with little icons can reward them in a way they relate to.”
Young people...aren’t fazed about having their savings locked up in a bricks and mortar bank.
Dom Pym, Up founder
Children’s banking is a space that the banks have had to navigate carefully after the industry watchdog came down hard on the Commonwealth Bank’s Dollarmites Club in 2018. It was deemed to unfairly targeted young children, exposing them to sophisticated marketing tactics.
Kit comes with a pre-paid card with merchant controls and real-time notifications. The app is gamified, enabling young users to build an avatar, and complete quizzes and quests to improve their financial literacy.
The app is open to children as young as five up to 14, though the most highly engaged are 9 to 11-year-olds, with 58,000 customers, Kit managing director Yish Koh says.
“We’ve taken quite a different route by making this about financial education, facilitating conversations between parents and kids,” she says.
Young people don’t use cash these days, and Kit sees its role as bridging the education gap to improve financial literacy. “Kids can see what’s happening with their money and what they are saving towards in the app,” Koh says.
Digital bank Up signs up around 1000 new customers a day, and is on track to have a million customers this year. Most new sign-ups are aged between 16 and 20 years of age.
Up co-founder Dom Pym says young people can set up their bank without speaking to a single human or stepping foot inside a bank branch. “Young people just don’t tend to have tangible money anymore, and they aren’t fazed about having their savings locked up in a bricks-and-mortar bank.”
Up Bank founder Dom Pym.
In the past, customers have been more concerned about what the bank building looks like. These days, in the age of apps and software, customers care more about what others are doing, looking to early adopters prepared to give digital banks a shot.
“In the next 10 years, every single Australian of banking age will either have a mobile banking app, or will have grown up only ever using a mobile banking app, which is pretty fascinating to think about,” Pym says.
Pym says Up competes more with world-leading platforms like Google, Facebook, Snapchat and Instagram more than the big four banks. “When young people are using world-class apps every day, they expect their banking app to be that good too. We’re competing with the energy, time and passion that people put into these other world-leading apps,” Pym says.
Although digital apps tend to lose young people to traditional banks by the time they enter the job market and certainly by the time they are ready for their first loan. Up hopes to arrest these departures, entering the home loan market as a digital home loan lender in 2022.
Meanwhile, the impact on how young people think about and manage their finances is rapidly changing as a result. A report from Monash University pointed to the rapid rise of buy now pay later schemes and cryptocurrency for changing the financial landscape, which hasn’t all been good.
The report, which called for better digital financial literacy to support the new realities of young people’s financial lives, suggests that schools could play a better role in providing students with access to financial education.
Young people are also shopping online more than ever before, and potentially commit to ongoing payments with the click of a button, a MoneySmart report found.
Many young people report experiencing hidden costs, signing up for ‘free’ products that turn into paid subscriptions and shopping on scam websites where the products do not live up to their expectations.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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