Children as young as six are showing strong financial capability, according to a new study.
The finding by Kit – a new kids’ money app built by Commonwealth Bank – was contained in its inaugural Australian Money Matters Report, which surveyed more than 4,000 families across Australia.
According to the report’s authors, the future generation could be better equipped to manage money than their parents, with children as young as six years-old regularly talking about money at home, earning and budgeting.
The study paints a more positive picture than the latest HILDA survey, which found adults struggled to answer basic questions about money – with each age group experiencing a decline in financial literacy. Kit’s report, however, shows that children (6-18yrs) are bucking the trend and showing signs of strong financial proficiency in key areas:
• Kids are regularly talking about money at home, with 8-in-10 parents and carers reporting to have had such conversations in the past two weeks.
• Well over half (64%) of Aussie kids apply spending strategies when making purchasing decisions and almost 9-in-10 (87%) buy things with their own money, as opposed to their parents’ or carers’.
• Kids’ ability to financially plan for the future also showed encouraging signs, with 74% of children saving their own money. Furthermore, 6-in-10 (59%) kids are earning money on their own
“The findings could mean several things. The high scores could suggest that parents are really beginning to understand the importance of teaching financial literacy to their kids; it could also mean they want to avoid their kids making the same financial mistakes they did,” Yish Koh, managing director at Kit, said.
“The rise of gamification and easier access to digital payments has also led to concern for parents, meaning they may have reached a tipping point and are prioritising their kids being savvy with money.”
Measuring the impact of pocket money apps on kids’ financial capability
Before Kit had even named its app, which launched in May 2022, it engaged leading professional services organisation, Ernst & Young, Australia (EY Australia) to develop a youth financial capability framework.
The framework was used to both identify Kit’s focus areas for building kids’ financial capability, and measure the impact of Kit on kids’ financial capability. These indicators, which formed the focus areas of the Australian Money Matters Report, are the ability to talk about money; be informed, empowered and conscious when spending money; plan for the future; and safely and productively participate in the ‘earning’ economy.
Kit then engaged the Behavioural Insights Team (BIT) to independently develop an evaluation protocol referencing these indicators, enabling Kit to measure the impact of its app on kids’ financial capability.
“The findings are incredibly exciting and indicate we’re setting strong foundations to achieve our mission of improving the financial capability of kids,” Koh said.
“We said when we developed the app we wanted to hold ourselves accountable and measure the impact of our technology, particularly in the initial stages.”
Koh said the company is “extremely encouraged” by the results.
“We’re only just getting started. I truly believe that starting at the grassroots, improving the financial capability of kids, will help future-proof the financial standing of people in Australia in years to come.”
Dr Bowen Fung, Lead Researcher at Behavioural Insights Team, said one of the key drivers of children’s financial capability is financial socialisation, which basically means learning about money through conversations with family and other adult role models.
“It’s important for Kit to have tools and features that make it easy for parents and carers to talk with their children about money in an engaging way. Our evaluation suggests Kit is contributing positively to this aspect of financial capability.”
Case study: Rosa Tu, Perth
For Rosa Tu from Perth, using a pocket money app has been a source of immense pride – with her 12-year old daughter showing financial capability beyond her years. “Our daughter absolutely loves using Kit as it gives her true financial independence, particularly as the app allows her to keep track of her finances in real time and understand how to earn and save. She has been playing chess for a number of years and now plays in tournaments against adults where she receives prize money. I am so proud of her, as she recently donated $100 of prize money to a blood cancer charity and 30 cm of her hair. This is largely due to her giving nature, but also Kit’s ability to help her visualise what she has earned, and build the financial capability to know how much she wants to save and what she wants to donate.”
Case study: Prabh Kaur, Victoria
Prabh Kaur, a mother of two from Victoria whose 8-year old and 12-year old daughters use Kit, says the app has dramatically improved their financial independence. "We were looking for a solution for our two children for a long time,” said Prabh. “They had an account through a bank but they were too young to have their own physical card. I could transfer money every week, but they couldn’t properly use it themselves. We found Kit and it has been amazing. My kids have their own virtual account and prepaid card so they can check their balance and earn money independently by doing chores, like hanging out the washing and stacking the dishwasher. As parents, we love it as we can easily transfer money and set spending limits."
CBA Executive General Manager of Everyday Banking, Kate Crous, said: “The Group has a long-standing commitment to youth and financial education. Kit came from a real need for an evidence-based experiential learning app for kids that helps them develop good money behaviours from a young age.
“In the current environment, Aussies of all ages are faced with the complexity of money management, including the impacts of cost of living and the rise of fraud and scams, it’s more important than ever to improve the financial capability of our young Australians. The results demonstrate that Kit can help develop good money habits from a young age.”
The original version of this article appeared as a media release from Kit.