Children without power – why do we forget this important target group when it comes to finances?

Children are the future. Children are the future. A sentence that is sure to meet with broad approval and from which one could deduce that it is the task of society to prepare children for the future and to adapt them to it. What about this mission in the financial environment? The thesis that this target group still has some potential does not seem so far-fetched. But why is this the case?

The everyday life of our children in a western world is increasingly commercialized: The major change in the childhood of the 20th century is increasingly consumption orientated. Compared to previous generations, the conditions of growing up for today’s children and young people have changed a lot. The accelerated social and cultural change, also due to medialization and increasing commercialization, is progressing inexorably and at too for many. Growing purchasing power and the diverse range of offered goods have led to an increase in the importance and intensity of shopping, not least for our offspring.

Over the last twenty years, this market has expanded considerably and, despite falling or stagnating real incomes, has not affected children’s purchasing power. Nowadays, parents have almost no choice but to invest and spend more money on their offspring. Then it’s time for the parents to save money and to cleverly consider how to put aside a penny or two.

Kinder ohne Macht - warum vergessen wir diese wichtige Zielgruppe, wenn es um Finanzen geht? / Children without power – why do we forget this important target group when it comes to finances?

Financial competence important

In this consumption and performance-oriented world, it is therefore extremely important to have a high level of financial competence. Preparing children for dealing with finances is therefore more important than ever. After all, they must later be able to take care of themselves, think and act independently in order to live a life that makes them fulfilled and happy. They should not have to think about how to pay off their first Fortnite loan for vouchers when they are 18. This requires a financial competence to make sensible and wise decisions. Learning financial competence takes time. It is comparable to learning an instrument. It takes practice, patience and stamina to be reasonably financially competent. Where is the best place to start?

Take the example of pocket money. Pocket money is the best way for children to learn how to handle finances. With an average of 27.18 euros per month, children in Germany, of the age groups six to thirteen, have more money at their disposal than ever before. In the following generation, the financial scope looks also quite rosy. Managing a small amount of money is a good exercise to rationally allocate your money. The children learn that you can’t buy everything right away, but that you have to save for some things first. In addition, pocket money is a useful factor to understand and get a feeling for how to spend a certain amount of money not only for the next extra, but also for everyday necessities. This gives parents a good feeling when children know what certain things cost.

Kinder ohne Macht - warum vergessen wir diese wichtige Zielgruppe, wenn es um Finanzen geht? / Children without power – why do we forget this important target group when it comes to finances?

From a purely factual point of view, the target group of “children and young people” seems attractive for financial service providers. It is sufficiently large (EU-wide it makes up approx. 10% of the population) as well as clearly definable and addressable (according to the Statistical Federal Office from 15-24 years of age), especially with the still very rudimentary segmentation possibilities of the marketing sector (age), and in some cases also quite well-founded.

Contrary to the assumption that children are unaware of money and financial matters, it has been proven that adolescents perceive the importance of money in the family and the omnipresence of financial issues in their everyday family life already at an early age. Much of this is rather implicit. Nevertheless, the importance of money is also present in early childhood and is shaped in the social environment. Here, parents should consider whether they themselves set the lever of “financial education” or whether it is brought to their children from outside.

More special and complex than it seems at first sight

The target group of children and young people is more specific than it seems at first sight. A reduction to age would be too easy. Adolescents live in a different world, partly reduced, but also perceived differently. Much of what works for us is either obsolete or simply different in the context of children and young people.

This creates obstacles for industry and product developers to deal with the topic and the target group. The speed with which young people perceive the world and adapt their needs to the situation is also increasing. A world with long product life cycles and inflexible processes is not designed for this. Young people have agility in their nature. What doesn’t work today can be done differently in 5 minutes. “Try and Error” is part of their life principle.

This also applies to products and services in the financial sector. What does not work immediately is filed away and forgotten again. For example: If a website doesn’t load on a smartphone within 5 seconds, young people are already somewhere else. Teaching this “digital impatience” to large companies is a big business for consultants, but often it simply helps to look around in one’s own family or close environment.

Actually, they don’t want to have anything to do with finance

Addressing a target group that does not want to be addressed per se requires new ways, especially for companies that want to earn money with the target group “child”. Young people are erratic and difficult to grasp in daily communication. They cannot be put into easily replicable schemata and addressed through them. And even if they are, they can’t really do much with “being addressed”. They blend it out.

When we think about products for young people, we have to start with their needs. It would not be worthwhile for any product to address the “customer child” only in short term, they have to “catch and develop” him – something the financial industry is unable to do. In general, the target group is ingenuous. They perceive the environment quickly, but usually without prejudice. They grow up differently than the generation that thinks about the corresponding products for them.

“When we think about products for young people, we have to start with their needs. Why is it that nobody dares to actively tackle this area?”

The decoupling between target group and product developers / marketeers is very large. To get this mind shift into communication is the big challenge for an entrepreneurial approach. Always with the question in mind: “Is it even worth it?”

An anchor point can be the pocket money as mentioned above. Both from the perspective of financial products and in terms of an educational approach to money. The amount, regularity and approach to use are important. Children learn best through experience when it comes to something that gives them real experiences. Since children can only understand money and learn how to handle it through experience, it takes time to learn. Because only what children experience themselves will shape them in the long term. The older the children are, the more money, energy and time it costs them to learn how to handle money properly. In adolescence, views, behavior and character are already very consolidated and children will find it difficult to accept advice and tips.

Diverse possibilities

There are many ways to connect young people with the topic of finance and payment per se.

On the one hand, payment is implicit in the purchasing process. Payment products or payment methods must be made suitable for the target group. No hiding behind legal hurdles. Why does a 15-year-old still have to order her pizza using her parents’ PayPal account? The bank account is the last bastion of banks that is difficult to capture – at least “overbanked” markets like Germany.

Kinder ohne Macht - warum vergessen wir diese wichtige Zielgruppe, wenn es um Finanzen geht?

Why is there no digital account opening process for accounts for young people? On the contrary, it is sometimes made more difficult by bureaucracy. Or who is really motivated to submit their birth certificate for opening an account, as is still common practice at one of the leading digital banks in Germany?

The topic of shares and investments can also be approached in a very playful way and with a targeted approach to young people: “Gamification” has long been a buzzword in marketing and product development. Where does it stick in the context of finance? The stock market game of the savings banks cannot be the only one. And saving, a product that is certainly difficult to sell in the target group of young people, also has some catching up to do in the context of banking. Here it almost screams for a World Savings Day 4.0.

The constant medialization is the origin and certainly the reason for many needs. This is a wonderful place to start and find access to the target group. Content and context are the key. The hurdle of usage must be as small as possible. What does that mean in the context of young people? Certainly, they don’t want a long registration processes linked with a visit to a bank branch. Because we are talking about a generation that lives “digitally only” and every product must work for this user group in context. Interestingly, these criteria are not so far away from the paradigms preached in modern product and market development.

Lack of alternatives

Young people are already tackling hurdles to use financial products – due to a lack of alternatives. Let’s take a simple example, the Playstation voucher cards: the process of acquiring them is complex. And he or she under the age of 18 (because only then are they allowed to buy them) must be inventive. In the end, this problem is usually solved by violating law and order or with the help of a kiosk owner. But is this really necessary? Aren’t there easier ways to bring together customer and product in context in a fully digitalized infrastructure?

Also, how young people pay for all their goods is usually always linked to the functions of a family account such as PayPal, Visa, Mastercard. In our industry we then speak of “Value Added Services”. Improving the current status quo does not seem to be that difficult. Why is it that nobody dares to actively tackle this area?

“Why is it that nobody dares to actively tackle this area?”

There is not a lack of budget for young people – but there is a lack of practical handling

As already mentioned, young people and children have a not irrelevant budget at their disposal. Even though a change in values is now taking place in the 15+ generation, the “fast fashion” trend applies to shopping – i.e. buying a lot for fast money. Most young people have so far paid less attention to quality and production conditions. How do you address this generation? The role of the YouTuber and Influencer? The brand plays a central role, but what role does technology play?

For my children, the Internet is like electricity from the plug socket. Even the youngest children can use tablets intuitively. And my youngest is certainly not afraid to talk to Alexa. A payment method like a Crypto Wallet (with Bitcoin or something similar) will probably be completely normal at some point.

The VR banks are trying it out with the digital piggy bank. And at some point, World Savings Day – powered by Raisin/Weltsparen – may come back to schools. But is that enough? I would say: NO.

Kinder ohne Macht - warum vergessen wir diese wichtige Zielgruppe, wenn es um Finanzen geht? / Children without power – why do we forget this important target group when it comes to finances?

In our industry we talk a lot about networks, platforms or ecosystems. We discuss “who owns the customer” and are afraid that the GAFA’s (Google, Apple, Facebook, Amazon) will take everything away from us. But there is something lying fallow here that nobody cares about: The next generation of customers, which we tacitly leave to the big tech companies without fighting for them ourselves!

Repetitive, Google, Facebook and Apple manage to create a lockin very early on and to approach this forgotten target group per excellence. Not only in the context of finance, but even bigger. To put something to rest: till this day, even the big Americans have not yet succeeded in addressing young people via the anchor “finance”. The PayPal-Kids/Youth variant is still a long time coming. But it is coming. And what do our local banks do when they don’t even get to see the customers anymore? Speaking of which, where is my Knax magazine?

Kilian Thalhammer
Kilian Thalhammer Mehr als 15 Jahre im Bereich Payment/ FinTech/ eCommerce & Loyalty machen Kilian zu einem Experten, wenn es um ernsthafte Fragen der Produkt-, Strategie- und Geschäftsentwicklung geht. Nach seiner Tätigkeit als Director Solutions bei der Schweizerischen Post kam... mehr


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