Kids are the Future of Banking. Let’s Stop Ignoring, and Start Empowering.
When the new Jordans drop, or Apple releases the next generation of Airpods, parents of teenagers are convinced, in droves, to open their wallets. Sometimes, literally. When kids need to borrow money from mom or dad, the options are usually to hand over cash or give up a plastic card with a high credit limit. And the cash option is starting to fade because the COVID pandemic has accelerated its disappearance.
The problem is that kids and teenagers are indeed consumers, but often don’t have a source of income on their own. They need access to money, somehow, in order to make purchases. According to Statista (using 2019 US Census Bureau data), there are about 42 million kids in the US between the ages of 10 and 19 years old. This group needs a set of financial products that can fit into their lifestyle, seamlessly giving parents some oversight without scraping away too much independence.
There is an even bigger issue here that often gets brushed under the rug when mom hands over a card. Kids typically do not have any formal training on “money” including how to earn it, spend it, save it and invest it. In a world where student debt has climbed to $1.6 trillion, and US credit card debt sits at $807 billion, it’s crucial, now more than ever, to teach our kids the fundamentals of money. We expect our kids to grow up and become independent, make wise financial decisions and save and invest for their future, but we don’t provide them with the necessary tools to help them achieve those goals. Personal finance is not in the high school curriculum alongside math, physics and biology.
If this portion of the population is so underserved, why haven’t the traditional banks stepped up and created a full suite of modern products specifically designed for kids? The answer is simple: because they don’t need to. Besides acquiring customers from other banks or attracting new immigrants as clients, the youth segment is one of the dominant sources of new customers for incumbent retail banks. However, most kids, when opening up their first account, select the same bank as their parents so the incumbents get those customers for free without having to invest in new products.
As a result of this neglect, new, tech-forward family banking platforms were formed. With new developments in financial infrastructure, tech startups have built banking services that are specifically designed for the needs of young people.
Till*, Greenlight and Step are examples of modern-day banks that focus on serving kids and families. These startups have recognized that kids and parents need a solution to collectively interact with money. They’ve built user-friendly experiences accessible from an iPhone. They have introduced practical methods to teach kids the basics of personal finance and familiarize them with being financially autonomous.
We need to erase the idea of saving in a piggy bank, or stashing Grandma’s birthday cash in a jar. The real world has evolved into instant credit availability, digital peer-to-peer transactions and automated investing. The next generation needs to understand and navigate this new world of finance, starting with a family banking platform that will expose kids to these realities.
Today, we are at an inflection point because the tech-savvy Generation X (those born between 1965 and 1980) have kids who are teenagers or will soon enter their teenage years. The GenXers have stopped carrying cash and are hip enough to want modern financial products for their kids. This new family banking concept will become so obvious that, in five years, we will look back and consider the old methods the same way we think about dial-up internet: ancient history.
It ain’t about the Benjamins anymore!
—
By:
Karim Gillani, General Partner, Luge Capital
Peggy Mangot, Operating Partner, PayPal Ventures
Till is currently hiring for roles across all functions
Please apply here: Till Careers Page
*Disclosure: Luge Capital and Peggy Mangot are both investors in Till Financial
