Three Quarters of American Children Keep Their Money Outside Traditional Banks. It’s Time to Invite Them In

In a focus group of parents we ran this year, a mom in Florida told our researchers about the moment her 10-year-old’s attitude to money changed. Her daughter had assumed every trip to a store meant something new, so when she wanted a “40th Squishmallow to add to the 39 she already owned”, the answer was simple: It came out of her own account. “Oh, I only have so much,” was the realization. That moment is happening in homes across America, and the money involved adds up.

Alongside the focus groups, we commissioned YouGov to survey nearly 4,000 children across the U.S., UK and Hong Kong for our Kids & Money report, the American results are the ones I keep coming back to. U.S. children between 8 and 15 are sitting on an estimated $28-$30 billion of their own money, and 72 percent of them keep it outside traditional banking. Once you apply Census Bureau population estimates, that works out at roughly 23 million children.

Key insight: Those are 23 million future checking customers whose first money habits are forming in shoeboxes and piggy banks and, increasingly, in apps built by fintechs that would very much like to keep hold of that relationship until adulthood.

Families are also now opening 530A accounts, the new federal investment accounts for children, mostly without going anywhere near the bank they already use.

British banks have already decided this really matters. In June, Barclays agreed to acquire the UK business of Acorns-owned pocket money app GoHenry, for a reported $240 million. That deal came around five years after NatWest bought Rooster Money, and NatWest has reported that 97 percent of young Rooster customers have stayed with the bank into adulthood.

Most retail banks would give a great deal for retention like that among customers they paid full price to acquire – in fact, most retail banks can only dream of retention figures like this. The cheapest customer a bank will ever acquire is the child of a customer it already has.

When Should Today’s Children Open Bank Accounts? Earlier Than You Think

Of course, we might traditionally expect younger children not to have a bank account yet, but our data shows that by the age of 15, more than half of American children still don’t keep their money with a bank. The American market is wide open, and it won’t stay that way for long.

A teenager whose first card comes from a fintech has no obvious reason to walk into a bank at 18. Inertia has protected incumbent banks for decades but doesn’t work with customers they never had. So, what do they do about it?

Greenlight, perhaps the best-known children’s debit card in the U.S., is offered free to customers by a growing list of banks and credit unions, U.S. Bank among them. It is the quickest option, but it comes at a cost. When a bank offers a partner’s app as a perk, the partner is the one on the child’s phone, and probably the one holding both the deposits and the spending data that shows how the family actually uses its money. That is exactly the insight a bank needs to know: when to offer a first checking account, a student card or a car loan.

Key insight: The two routes that leave the bank in control are buying and building. Barclays and NatWest bought the app outright, while Chase and Capital One built youth products of their own. Either way, these banks own the brand, the relationship, the data and every cross-sell that follows.

The Household Is the Unit

What I think our data and the British deals show is that this isn’t about simple ‘kids’ cards’. It is about capturing the money that flows through the whole family: the allowance, the check from a grandparent, the parent topping up a card the night before a school trip and sometimes, money moving from teenagers back to adults. For as long as I’ve been in this industry, banks have organized themselves around the individual account holder, while the household has quietly been the real unit all along.