Dig­i­tal bank­ing for kids

Wave of pocket money apps aims to help chil­dren in an in­creas­ingly cash­less world

The Gulf Today - Time Out - - TRAVEL -

For kids grow­ing up in to­day’s cash­less so­ci­ety, the piggy bank is go­ing vir­tual. Fa­ther of two Roland Hall turned to a Bri­tish startup’s dig­i­tal pocket money app be­cause his kids were still too young to get their own bank cards from tra­di­tional banks.

With pre­paid debit cards linked to the app, Hall’s kids, aged 8 and 10, can spend their al­lowance and chore money by shop­ping on­line or by tap­ping at con­tact­less pay­ment ter­mi­nals in stores. Sounds like a recipe for splurg­ing? Not so, he said.

“When kids have cash they want to spend it quickly. They want to go to the shops and spend it on rub­bish,” said Hall, an IT project man­ager. But an app lets them check their bal­ances on­line, “which ac­tu­ally makes them start think­ing about sav­ing rather than get­ting rid of the money,” said Hall, who also prefers giv­ing dig­i­tal al­lowances be­cause he never car­ries cash.

The app, which is called go­henry and ex­panded to the US in April, is part of a wave of dig­i­tal money apps com­bined with pre­paid cards for kids as young as six that par­ents have ac­cess to.

They are pow­er­ful new money man­age­ment and sav­ings tools that re­place old-fash­ioned piggy banks and ac­count pass­books. Some say they can help en­hance inancial lit­er­acy even as the growth of cash­less pay­ments up­ends tra­di­tional no­tions of money.

Glob­ally, the num­ber of non-cash trans­ac­tions rose 11.2 per­cent to 433 bil­lion in 2015 from the year be­fore and are fore­cast to nearly dou­ble by 2020, ac­cord­ing to the World Pay­ments Re­port by in an ci al ser­vices firms Capgem­ini and BNP Paribas. Bri­tain, Canada and Swe­den are among the world’ s most cash­less coun­tries, ac­cord­ing to a 2017 rank­ing by cur­rency web­site For ex Bonuses, with wide­spread use of “con­tact­less” bank cards that let shop­pers merely tap on pay­ment ter­mi­nals for small trans­ac­tions.

In China, where mo­bile pay­ments rule, Ali­pay and WeChat Pay al­low teens to hold ac­counts. Hong Kong of­fers a kids’ ver­sion of its stored value Oc­to­pus card, based on older tech­nol­ogy.

In the US, the frag­mented bank­ing sec­tor means most cards still need to be swiped and, some­times, re­quire a pin num­ber. Mer­chants in big US cities are in­creas­ingly go­ing cash­less be­cause they can gather more cus­tomer data, which makes it harder for teens with­out bank cards, said Stu­art Sopp, CEO of Cur­rent, a two-year-old US in­tech startup.

“Par­ents are will­ing to pay to solve a prob­lem that banks are not solv­ing” — help­ing young­sters deal with dig­i­tal money, said Sopp.

Cur­rent, go­henry and oth­ers such as Bri­tain’s Nimbl and Osper, Aus­tralia’s Spriggy and Fam­zoo and Greenlight of the US op­er­ate on sim­i­lar prin­ci­ples. They typ­i­cally charge a monthly or an­nual fee for pre­paid debit cards. Par­ents can load money from their bank onto their own ac­count, set weekly al­lowance amounts and spend­ing lim­its, list chores to earn ex­tra money, and block cer­tain types of trans­ac­tions, like on­line shop­ping.

Money is sent to kids’ linked ac­counts, which they can use to set sav­ings goals. The Cur­rent app rounds up each trans­ac­tion and sweeps the change into a sav­ings ac­count. Cru­cially, the apps send in­stant alerts about trans­ac­tions, a fea­ture par­ents love, said go­henry CEO Alex Zivoder.

“You give cash to a kid, how do you as a par­ent know what he will do with this money?” he said.

Hall said his son, Ralph, 8, uses it to save up to buy 70 pound ($92) soc­cer shoes and PlayS­ta­tion video games while his daugh­ter Lilly, 10, saves for shoes or cloth­ing. They both also save up to buy ex­tras on the video game Fort­nite.

He said he turned to the app be­cause “I want them to un­der­stand what the value of money is.”

The apps are mak­ing in­roads amid grow­ing adult un­cer­tainty about how the shift to cash­less pay­ments is af­fect­ing chil­dren’s view of money. In one UK sur­vey com­mis­sioned last year by Pru­den­tial, about 78 per­cent of teach­ers and 37 per­cent of par­ents said it hurt young­sters’ un­der­stand­ing of money.

More than a quar­ter felt con­tact­less cards en­cour­aged them to spend more and didn’t help them de­velop men­tal arith­metic skills as well as han­dling cash, the poll of 501 par­ents found. No mar­gin of er­ror was given.

They’re valid con­cerns, said Rus­sell Win­nard, head of pro­grams and ser­vices at inancial ed­u­ca­tion char­ity Young Money, a char­ity, but he added that apps can help par­ents ex­plain to chil­dren how money works.

“Young peo­ple are see­ing less and less cash trans­ac­tions, which just means that we have to be even more care­ful to talk about what is hap­pen­ing at each of those stages, be­cause it has be­come more ab­stract,” said Win­nard.

Paddy Kelly, an­other go­henry user, says he started us­ing it be­cause he was look­ing for a bet­ter way to help his 8-year-old daugh­ter, Ail­ish, both save money and im­prove her math skills.

She had a piggy bank full of coins but her younger brother kept emp­ty­ing it, Kelly said.

He likes the app’s sav­ings fea­ture, which his daugh­ter has used to set a goal of sav­ing 20 pounds, at 2 pounds per week, with the aim of buy­ing a pet ger­bil.

Alex Zivoder, CEO of Go­henry, a dig­i­tal bank­ing startup aimed at chil­dren, holds up a sam­ple of the pre­paid debit cards that the app comes with, in Lon­don.

Paddy Kelly and his daugh­ter Ail­ish use Go­henry, one of a wave of dig­i­tal bank­ing apps for chil­dren, in Lon­don.

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