In today’s digital age, it is critical that those in younger generations develop strong financial literacy proficiency at an early age. A study by the University of Michigan found that people are managing money at younger ages, and that children as young as 5-years-old start developing persistent habits with money.
Unfortunately, the rise in consumerism has not historically corresponded to increased financial literacy. In fact, only 34% of U.S. adults were able to answer four or five basic financial literacy questions correctly, according to the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation’s National Financial Capability Study from 2018.
Furthermore, a recent Cornerstone report found that while many individuals in the U.S. lack the basic knowledge and skills required to engage in sound financial decision-making, financial confidence is especially low within the younger generations.
Kids are hungry for more financial literacy resources that will help them succeed in life. Between the rise of TikTok “finfluencers” and gamification of financial education, it is clear that younger generations seek out resources to level up their financial education—and with good reason.
Gen Z has lived through two economic disasters—the 2007-2008 financial crisis and, more recently, the 2020 COVID-19 economic recession, which was Gen Alpha’s first exposure to this level of financial flux. Following the COVID-19 pandemic, 54% of Americans aged 18 to 25 lived with their parents in 2022. Comparatively, in 1940 at the tail-end of the Great Depression, 48% of Americans aged 18-29 lived with their parents, which was the highest measured rate since 1900. Younger generations have reason to worry about their finances and the motivation to elevate their financial literacy proficiency.
Parents play a key role in equipping their children with financial literacy resources to best prepare them for adulthood. However, increasing children’s financial literacy rates should not rest only on parents’ shoulders. Banks and credit unions can share the weight of that responsibility—and see a return on investment, too.
When banks and credit unions introduce their banking platform to kids when they first learn about finances, those kids develop trust and loyalty to the institution’s brand throughout adulthood. Once a bank or credit union has acquired a customer or member, it is far easier and cheaper to retain them than acquire a new account holder. The Cornerstone report also found that U.S. adults, on average, have used the same primary checking account and savings account for 17 years.
By providing engaging, interactive financial literacy resources, financial institutions can help younger generations—and their future bankers and members—prepare for a financially responsible future.
4 Ways to Help Kids Get Their Finances on Track
There are four key ways kids can learn to responsibly manage money in their younger years: through spending, saving, investing, and donating finances. By providing an outlet for kids to practice managing money in these four ways, financial institutions can help kids learn to:
1. Spend their money wisely on things they want. Like most adults, children gravitate toward impulsively buying things they want, when they want. My own kids recently bought $30 cupcakes, which resulted in a conversation about being a responsible consumer by making a few small changes. For example, buying in-person instead of delivery; purchasing from a different, more affordable brand with the same quality of product or service; and buying at the right time to avoid extra seasonal or timely fees.
2. Save for more expensive goods. The piggy bank is not a new concept. A key step in teaching children financial responsibility involves introducing them to the act of saving. By saving a portion of their allowance each week, setting up goal tracking, or using a rewards system, kids can learn how to wisely and consistently save their money.
3. Invest in brands they care about. For children who play with Hot Wheels or Barbie, parents can buy them stocks in Mattel. Then, each week, the family can meet together and discuss how the value of their stocks has evolved. This not only teaches children how stocks grow and shrink, but it also engages them by following a brand they support.
4. Donate to causes important to them. By introducing charitable giving to kids when they first learn about finances, younger generations can be intentional with the way they manage their money and see how their actions affect causes important to them.
Providing kids—and their parents—with a safe, reliable environment in which to practice these four tools is the next step in a child’s financial journey. One way banks and credit unions can support parents in their children’s financial education is by implementing a white-label family digital wallet into their banking platform.
Integrate a White-Label Family Digital Wallet
REGO’s family digital wallet includes financial literacy resources kids can learn from in a familiar, digital-first environment. Furthermore, it gives families the space to practice spending, saving, investing, and donating money in a safe, parent-controlled platform.
REGO’s family digital wallet can integrate into a bank or credit union’s existing platform or app, or they can customize REGO’s standalone, white-label app with their institution’s branding. Whichever option they choose, each transaction is safe and parent-controlled.
As the only certified COPPA and GDPR-compliant family digital wallet on the market, REGO is an expert on children’s banking privacy laws and can help financial institutions navigate the complicated regulatory landscape.
To start offering family banking to parents and their kids, set up a demo with the REGO team.