Almost 60% of all working-age Americans have no retirement savings. Four in ten adults couldn’t cover a $400 emergency expense in the U.S.* Adults struggle to manage their finances, but they want to see their kids grow up as successful people with good financial habits. At the same time, 49% of parents don’t know how to discuss finances with kids in an understandable and enjoyable way. How could banks help parents ensure their kids' financial future? We explored this challenge with research. It provides insights on how a banking app could impact family relationships, create a good foundation for their kids’ financial future and ensure a successful inclusion of children in the modern digital economy.

*Edelman Financial Engines Survey

Financial discrimination against our children

My 11-year-old daughter goes to school, and each day we give her cash to buy lunch or to visit the store after school. The amount is small, but she gets upset if she loses it. As a parent, I am worried about her safety. What if someone decides to take her money? Since card payments are available everywhere, I decided to get her a card. Imagine my surprise when I discovered that not all banks offer such a service. This made me feel like banks would think that parents should accompany children everywhere up to the age of 16 and pay with their own card.

To my delight, a large bank, of which I was a client, stated that children have a place in the modern digital economy. Although information about the possibilities of children's accounts wasn't easily accessible, I found it. Almost all these bank services are digitized, so I submitted an application via online banking. Soon I received an invitation to visit a bank branch, together with my daughter and wife, to open an account and get a card. I was upset that I couldn’t get it done digitally, but my daughter was delighted by the fact she would soon get her first card.

We arrived at the appointed time. Due to the pandemic, the branch worked in a limited mode, so we had to wait in line for 20 minutes. Then we spent another 20 minutes triple signing a bundle of papers related to opening an account. Finally, the bank consultant went to get the card, but she returned empty handed and said that her manager demanded additional KYC verification. This was despite the fact that they previously confirmed that the card was ready for issue in the branch. In addition, my wife and I had been clients of this bank for more than 10 years. So, we left with nothing, and they promised to call us some time later when all was sorted out on their end.

I remember seeing disappointment in my daughter's eyes. I can only imagine how her first impression of a traditional bank would influence her attitude toward banking in the future. After two weeks, we were informed that the account was opened, and the card could be picked up.

My daughter was so happy when she took this small shiny piece of plastic. For her, it represented a pass into the adult world of opportunities and freedom. As I watched her explore the mobile application and saw her starting to struggle, I wondered - why didn't the bank, with all of its resources and specialists, decide that the same application used by adults would be suitable for children? Wouldn't it be possible to come up with something better?

For centuries, we haven’t forced children to use the same stuff as adults, but finance still discriminates against children. Digital financial services could provide the perfect opportunity to serve our kids, teach them how to handle money and take care of building the right attitude. We just need to rethink financial services... make them "speak" the kids' language.

Addressing the conflict between parenting and finance

It's a statistically proven fact that adults struggle with finances; 44% of Americans don’t have enough cash to cover a $400 emergency. Then, how difficult is money management for kids? Parents try to use different apps to become better at finances and budgeting. At the same time, many questions remain unanswered about how to educate their kids: “What exactly do I tell them and how do I tell them?”; “Isn't it too early to speak about money? Or, conversely, is it too late?”; “How can I teach them to have the right attitude toward money”? In our hectic lives, parents often lack the knowledge, time and skills to address these questions in a manner that would be heard.

This creates frustration and even desperation because parents know that the future of their kids largely depends on the habits taught in childhood, but what do we do and how do we start? Procrastination on this question can have very damaging consequences, as the stats demonstrate.

The success of the result, whenever parents want to teach their kids, largely depends not only on knowledge but the family relationships. It can be a great challenge for parents to make kids listen to them so that they could establish proper habits as a stable foundation for their grown-up life. And, this challenge is behind many family conflicts.

Understanding the huge impact of childhood habits, we explored ways that a banking app could support parents, reduce stress and eliminate family conflicts and help kids to better understand the basics of finances and money management starting from an early age.

We wanted to find out if financial education and adaptation is possible through kids' own experiences in an attractive, interesting and enjoyable way for the whole family. 

What we discovered

All the parents who were interviewed agreed that explaining money management is very important. It is helpful in forming kids’ values, mindset and attitude toward money. Below, we have compiled the nine largest struggles of families identified during the research.

1. Parents lack proper knowledge and experience about finances

Parents want their kids to be smart and analytical in finances, but parents don't have enough practice and knowledge on how to cultivate these characteristics in their kids. Such a lack of knowledge is often passed down through the generations.

Sixty-six percent of parents have some reluctance to discuss money matters with their 8- to 14-year-old kids, and 21% of parents are very or extremely uncomfortable discussing money with kids, according to T. Rowe Price’s annual Parents, Kids & Money Survey.

2. Conversations about money mostly happen when kids become teenagers

Parents think that finances are a complicated topic to explain to younger kids. The research shows that a large number of parents initiate conversations about money when kids become teenagers.

Fifty percent of young adults didn’t have money conversations until age 13 or older with their parents, and 30% didn’t have money conversations until age 15 or older, according to T. Rowe Price’s annual Parents, Kids & Money Survey.

3. Disagreements about priorities and the use of money

It is a challenge to find a balance between kids’ desires and parents’ expectations. Kids feel angry and dissatisfied with the parents' decisions. 

Kids mentioned that they spend allowance mostly on entertainment or snacks, but, at the same time, they save money to buy something they desire.

All the parents interviewed want their kids to save money and consider it to be an important habit for their kids' future. Parents mentioned goals they want their kids to start save money for: gaining new knowledge, experience, books, entertainment with friends and saving for future needs.

4. Kids perceive money as something abstract and delightful

All of the interviewed kids understood that they need money to buy something and that parents have to work to earn it. Most kids know that they have to save money if they want to buy expensive toys or games. Younger kids perceive money as something abstract, and they don’t realize what an effort it is for parents to earn their salary and manage all expenses. They think it is enough to go to the ATM and just get money whenever they need it.

To see kids' emotions and associations about money, we asked them to create a drawing. From observing the drawings, we can see that kids understand the connection between the bank and money. They perceive money as something that is stored in the bank and has to be secured by police, in a large building that isn't so easy to enter. Kids draw themselves with a happy face and smile when they hold money in their hands because they can imagine all the desired things they could buy! If they would only have as much money as Scrooge McDuck.

5. Difficulties in creating an adequate perception of money

“Buy me that!”; “Why can’t you buy this for me?” Do these questions sound familiar? Many parents buy desired items for their kids just to prevent disagreements or to ensure that kids feel equal to others by having the same trendy items.

Parents tend to fulfill kids' wishes to compensate for the time they can't spend with kids because of the long working hours or because of divorce or for other reasons.

All parents want to be the “good parent.” As a consequence, kids expect to receive everything they want, they are demanding more and can become extremely spoiled. Parents mentioned that they follow good intentions buying things for kids, but, at the same time, they are afraid of creating the wrong perception of money.

6. Families spend less time together

Families in the U.S. spend only 37 minutes of quality time as a family on weekdays, according to a study commissioned by Visit Anaheim.

The time that the family spends together strengthens a sense of community, and kids learn to solve problems, make compromises, make positive choices and have better results in school. The more time a family spends together, the more kids learn from their parents, building their perception of a family.

7. Parents do many things instead of letting kids do it themselves

The parents of children of Generation X (currently aged 41 to 61) and millennials (currently aged 27 to 41) are more involved in their kids' lives than previous generations. The current kids’ generation - Generation Z (currently aged 12 to 18) and Generation Alpha (currently aged 0-11), experience more protection, attention, and care from parents than ever before. Millennials have children later in life than previous generations and fewer children per family. That leads to having more time and money to spend on their kids. Not surprisingly, current kids have the highest standard of living, and they grow with large expectations from others, expecting everyone to do things for them. As a consequence, parents have difficulties assigning chores in their family harmoniously and involving kids in household tasks.

8. Digital-native lifestyle

Kids like to explore new features and have fun using devices. The time kids spend daily on devices has increased during the last few years.

The average daily screen time is up to 5 hours a day for 8-12 year-olds and 7.5 hours for teens, not including the use of screens at school or the rapidly growing use of computers for homework, according to Common Sense Census: Media Use by Tweens and Teens.

Time spent with devices in their hands is entertainment for kids, and parents face a challenge to take kids away from their screens and involve them more in family life and household tasks, spend more time together and teach them responsibility.

9. Kids have different device usage habits as adults

The current generation of kids typically have their first experience with devices before they are a year old. They can't speak or walk yet, but they know how to watch their favorite cartoon on YouTube or play a game. They have a good understanding of how things should work and interact online and have high expectations for the services they use. Just as with everything else in life, kids and adults are different regarding their behavior using devices.

In the image below, you can see the main differences in behavior between kids and adults when they use online services.

A kid's banking app should improve family relationships

As we discovered during the research, money matters and financial education is a difficult topic in families. More than 60% of parents have difficulties discussing these matters with their kids, and 50% of young adults had such conversations in the family only when they were older than 13. The earlier we teach our kids specific skills, the greater the possibility that they will use and adopt them when they grow up.

Kids learn numbers and basic calculation when they start school and are in their middle childhood (6-12 years of age). At this age, parents start to think about financial education for their kids or consider their first banking card. We decided to create an appropriate digital solution that would help to ease financial issues for families when their kids are 6 to 12 years of age and taking their first steps into the world of finance.

We found out during the research that kids have different goals using devices than adults─they want entertainment. Is it possible to create an engaging banking app for kids? The kids we interviewed enjoy games, and we wanted to combine gamification elements and education in a single app.

When kids are engaged and interested in learning something new, the release of dopamine in their brains increases. The feeling of pleasure motivates kids to keep learning and exploring.

At the same time, we had to take into account that kids as the users of the app differ from adults by their age characteristics, mental and physical abilities and experience with banking and other services and devices.

We discovered that relationships and the overall quality of life for the parents and kids are topics that concern family members.

Families have disagreements about money matters, and they can't find the right way for them to solve that. This has a huge impact on the future of kids.

We realized that we have to expand the horizon of banking apps by focusing not only on standard banking features and functionality but also on connecting finances with relationships between family members.

Defining kids’ banking experiences

The success of the product doesn't depend on the number of features included in the app but on the value, experience and emotions users get from everyday interaction with the product. The kids banking app has to make parents and kids' lives easier and solve their problems, evoking more positive emotions.

We summarized insights from the research and interviews with families to find out why kids and parents would use the app to manage their daily finances or pocket money. 

We need kids to perceive banking as something understandable and enjoyable with a sense of adventure to make them feel confident and responsible about finances when they grow up. The greatest challenge in this project for us as adults was to step into the shoes of the kids and view the world through their eyes and experience.

We knew from our experience and interviewing the parents that they need to know their kids' account balances and be instantly informed about their performance and any requests from them to help their kids when necessary. At the same time, the kids banking app could serve as a guide for parents to gain new insights and advice from the community - posts and interaction with specialists and other parents.

Following are the possibilities and features the kid’s banking app could provide for parents:

•  Good financial and everyday habit creation for kids

•  Overview about kids’ progress

•  Adjustable daily tasks to teach kids responsibility

•  Additional tasks to let kids start earning money

•  Common views on money matters in families

•  Personalized insights and ideas on how to improve family life

•  Community to get answers related to finances

Afterword

Financial institutions have the ability to become an important part of the whole family by sharing knowledge and integrating young kids into the world of a digital economy. This is an excellent opportunity for financial institutions to create positive associations and emotions with their brand. Kids are future clients of financial institutions. Some day, they will grow up and make their own decisions about whether to open a new account somewhere else or continue to be a part of an already known brand for them.

Check out my blog about financial and banking UX design >>