Would you give your teenager an online bank account? | Money

VSash is far from being king for teenagers. And as society moves away from paper and coins, banks and tech companies are stepping up competition to get kids ages 13 to 17 to manage their spending online.

Last week saw the launch of an account for teenagers from gohenry, a prepaid card provider that allows children to manage their money within controls set by parents.

The online account tells parents when, where and how much their kids are spending and sets tasks to earn pocket money. It’s the latest product in a busy market – and there are other apps out there that offer similar functionality to gohenry.

How to spend it

In the same way gohenry, other companies such as CockSilver, agile and Osper operate applications and prepaid cards. They all work the same: money is loaded onto the cards, and parents and child can monitor how much they spend through the app. Money can be divided into various “pots” to allow savings; spending limits can be applied and blocks placed at places, such as places where there is alcohol or cigarettes on sale, or at gambling sites.

Parents can restrict spending and use of ATMs, and limit exactly where cards can be used – online, on Main Street, and at ATMs, for example. There is a monthly charge, up to around £ 3 per child. Gohenry says 720,000 children are using his existing app – which targets 6 to 18-year-olds – mostly in the UK, with some in the US. The new account, specifically for teenagers, offers the same functionality as the existing account but allows employers to pay wages on the card.

Banks have their own line of checking accounts for children, although they usually start later than 11-year-olds.

Some, like the Barclays Young Person’s Account, start at age 16. Usually parents have to open the account for those under this age and there is no easy overdraft so they can’t fall into the red. But if the card is used on board, they may be liable for withdrawal fees.

A review of market accounts by consumer group Which one? named Nationwide, Metro Bank and Co-Operative Bank as the top performing Main Street banks.

When is it too young?

Many parents may fear that the new independence of a teenager with their own bank card, even with limits, will lead the child to quickly spend their money on online games or impulse spending.

Greg Davies, head of behavioral science at consulting firm Oxford Risk, says contactless cards can cost teens without realizing how much is left in their account.

“We never see or feel psychologically that the money is leaving us, and it can easily lead to uncontrolled spending for short-term whims,” he says. “It’s a problem for all of us, but likely to be exacerbated in adolescents, for whom impulsivity is often higher, and focus on long-term habits lower.”

However, the various limits and monitors that apps can offer can teach kids to spend, Davies adds. “If there is enough functionality beyond what you would get from a bank account when it comes to education, expense management tools, overspending boosts and prompts, etc. ., then there is certainly a case for them, “he said. .

Educate without paying

MoneySavingExpert Martin lewis said that financial education has a huge impact on the future well-being of young people. In 2018, he donated £ 325,000 so that 3,400 state-funded secondary schools could get 100 free copies each of a financial equation textbook.

An investigation of the Money and pension service showed that children from low-income families were much less likely to receive an education about their finances at home. But providing financial education doesn’t necessarily mean parents have to spend nearly £ 3 per month per child on an app.

The Money Advice Service suggests that one way to start educating children about budgeting is to use three containers – one for immediate expenses, one for savings, and one for a rainy day fund. As the child grows, this idea can be transferred to the bank, where he can have a few accounts for the same needs.

When children begin to use cards for their expenses, they should be fully aware of the limits. From April this year the spending limit for contactless has been increased from £ 30 to £ 45. Monzo and Starling Bank offer contactless debit cards for 16 and 17 year olds.

“It is essential that when children use their cards, they realize that the money they spend can go down faster than they realize. Plus, if a card is pinched or handed to a partner, it can run out very quickly by people spending just below the contactless limit, ”says Martyn James of the Resolver complaints website.

A key part of a teenager’s financial education is enabling them to develop into a mature way with money, Davies explains. “The key is a secure environment – limits on the amounts available to spend, the size of individual purchases and spending within given time frames,” he advises. “And make sure that there are tradeoffs and that these are visible and that they have to choose between things: if you buy this now, you can’t buy this other thing too; or if you buy that smaller thing now, you won’t be able to save for the bigger and more important thing that you might otherwise get later.

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David A. Albanese

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