Financial Apps for Kids?
Dear Ms. Smartphone: I am running out of ideas for Christmas gifts and thought about giving my niece and nephews something different. On TV I saw an ad for a company called Greenlight that helps young people save money online and choose stocks. Myself, I have a few dollars in the stock market and think this might help them learn a thing or two about it. When I mentioned this gift idea (a financial app for kids) to friends in my book group they were aghast! BTW, my niece is 8 and my nephews are ages 10 and 13. Nancy, Marlboro
Dear Nancy: I’m not sure what book your club is reading, but could it be “Flash Crash?” The book jacket says investor Navinder Singh Sarao was a preternaturally gifted trader who amassed $70 million from his childhood bedroom….until! No spoilers here.
Financial apps for kids, called fintech, are new to me since I gave my kids a cash allowance! So, I looked up Greenlight, the company you mentioned. Note that their web site is off-putting: it requires that you enter a mobile number and verifies it before it lets you browse around.
Greenlight describes itself as a one-stop financial app for families with a $4.99 monthly subscription (Dec. 2021). Here’s the kicker: With parental (or aunt) approval, kid can trade stocks on the app starting at $7.98 a month. That must be profitable because CNBC reports this seven year old company is now valued at 2.3 billion!!
But, important to note, Greenlight is one of many sites that set up online financial accounts for kids and purport to teach financial literacy and investing. This recent Wired article helps you sort out other players.
On the one hand, your gift sounds like a timely idea. We are all buying more things online and storing digital cash in places like Apple Wallet and Google Pay. In an earlier post, I share a Wall St. Journal article reporting that cashless exchanges have “costs”: Those using credit cards are less likely to remember how much they spent, take less time deciding what to buy, are more willing to pay high prices and make a greater number of purchases. So, as currency changes, setting up a digital savings account may be valuable. Children need to learn about financial literacy.
Buckets of Money?
But, I also have two objections and these might be specific to the company you mention. First, the site recommends that a child’s account be apportioned into four buckets: money that kids spend, money they save, money they give away (for charity) and money they invest. These buckets, while enviable, are adult-centric, not for tiny beginners. I am assuming your nieces and nephews are not millionaires. Why give to a national charity, when there is so much to be done locally? The real donation, the one that kids learn from and that that makes a difference, is to give their time and labor to a local cause, and do so in person. Isn’t it more meaningful to help out at the local animal shelter and care for pets in need, than say give $1.00 a month to an animal relief fund?
The second issue I have, again, it may be specific to this site, is that young kids are too young to start investing in the stock market, particularly using their smartphone. We have already seen how flash investments through RobinHood and other phone based online trading sites have had their financial ups and downs, as well as their toll on mental health. And, here, investors must be age 18 or older to begin trading.
Minding the Portfolio:
The most knowledgeable investors, even the savant Mr. Sarao, learn their trade by studying the financial markets, perfecting their timing, and becoming experts in valuations before they jump in. Giving a ten year old a smartphone and a trading account creates an opposite dynamic- one that mimics a slot machine or lottery. And, significantly, minding their portfolio and keeping a watch on the ups and downs of the market will also induce a child to spend more time on their phone, and less time doing something else offline. We hear thatt teens check their phone up to 150 times a day, but the sky’s the limit for a newly minted teen with a newly minted brokerage account!
So for this holiday season, yes it’s a novel idea to help your nieces and nephews learn about financial markets and introduce them to fintech apps. Perhaps ease them into into the digital world with a simple online savings account? Following that, ask them what companies have a product they personally like to play with and think will continue to grow. Roblox maybe? If that company make sense to you, and you do the homework, make a joint investment in their name.