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Do you remember your first bank account? Maybe not, but it’s fairly certain you remember the freebies that came with it. When my parents opened a Midland Bank Griffin Savers Account for me, some time in the early 1980s, I went to school the next day the proud owner of a Griffin sports bag, a folder and a plastic card with my name on it . . . which was completely useless as ATMs had yet to reach the wilds of Devon.
But it worked. I am still with HSBC, which bought the Midland Bank in 1992, more than 30 years later. And my loyalty — or inertia — is not unusual. One in four of us are still using the same bank account that our parents opened when we were children, according to uSwitch.
But for those of us who grew up in the 1980s, the freebies acted as a powerful status symbol that we were old enough to have our own money. My Griffin bag was soon outclassed by NatWest piggy banks and Bank of Scotland’s Super Squirrel coin bank.
Thirty years on, the youth banking market is huge — and it’s no longer just about saving up for a rainy day. There are 2.8m accounts held by those under the age of 18, and 750,000 new accounts are opened each year, according to figures from the Nationwide Building Society.
Nationwide is particularly active in the children's market, scooping up 135,000 of those new accounts each year. The building society was the first to tap into this area, offering the very first money box back in 1904 when, in a much earlier incarnation, the board of the Co-operative Permanent Building Society ordered 500 boxes at five shillings each. More than a century later, Nationwide introduced its FlexOne account for customers aged 11-17 who can use their cards to make contactless payments, shop online, and withdraw up to £300 a day from a cash machine. Despite the temptation to spend, spend, spend, the average balance currently stands at £291.
Today’s children are less likely to be fobbed off with a sports bag or a key ring, but the central question remains the same: how to make banking enjoyable.
The challenger banks realise that their youngest customers don’t just want freebies — they also want what the marketing consultants call “experiences”.
Today’s children are much more interested in apps than piggy banks, according to Tom Blomfield, chief executive of Monzo Bank.
“For years [the big banks have] been going round the school playground handing out footballs and pop CDs to get the kids to sign up,” he says. “They are relying on this inertia — that once you sign up you’re not going to switch — but I’m not sure that’s a huge positive for the market.”
Online start-up Monzo, which is poised to launch a fully-fledged bank account in coming months for both adults and children, says kids and their parents will base future decisions on which online banking apps have the “cool” factor and are easy to use.
“If you look at Snapchat [the messaging service],” says Mr Blomfield, “they don’t need to bribe anyone to join; they’ve just got a brilliant product.”
While UK high street banks typically will not issue fully functioning debit cards to children under the age of 11, the market for prepayment cards is expanding.
Children as young as six can get their own contactless payment card via GoHenry, with parents able to load money, monitor and control use of the card via an online app for a monthly fee of £2.49. Other pre-paid card providers include Osper and Nimbl, which has a micro savings feature for children on its app.
Back on the high street, challenger Metro Bank has plumped for a more traditional route. Younger savers are encouraged to join its Magic Money 5 for 5 Club, which offers prizes and lollipops — plus “Magic Money Machines” in branches which can count their coins.
The bank is also active in financial education programmes with schools around the UK. “We believe that banks are at the heart of the local community,” says Iain Kirkpatrick, managing director of retail banking at Metro. “And it’s important to us that children are very much part of that community.”
“[The challenger banks] make it more fun,” says Peter Ballard, co-founder of Foolproof, an experience design agency that has worked with many banks. “It’s about personality in banking. There is a simplicity and a freshness that children don’t get from the big banks — and that is deemed to be more valuable.”
That other great point of difference — obtaining a high rate of interest on savings — is rather elusive today. Unless parents are prepared to shop around, they will struggle to beat inflation.
The best rate on a child’s instant access savings account is the Santander mini 123, paying 3 per cent on balances between £300 and £2,000. The next highest is HSBC, offering 2.75 per cent on balances up to £3,000.
For those able to tie up savings for longer, Saffron Building Society offers 4 per cent on a 12-month regular savings bond, but the maximum that can be paid in is £100 per month.
This is far cry from the childhood days of the parents opening those accounts. UK interest rates touched an all-time high in 1979, peaking at 17 per cent, and remained high throughout the 1980s.
This means that quality of service and ease of use are becoming more important to parents looking for their child’s first account.
John Hibbard, managing director of Devon-based Red Paddle, which makes inflatable stand-up paddle boards, opened an account for his seven-year-old son at Santander, drawn by the fact that it could also be accessed by his wife.
“You can link the two accounts together,” he explains, which means that he and his wife are able to share the banking experience with their son. “He’s aware that he’s got a bank account — we’ll pull it up online and show him the balance — but it’s a totally different experience to when I opened one.”
Hester Grainger, a marketing manager at Berkeley, a communications agency, has two children, Hudson, aged five, and India, seven. She was the proud recipient of a ceramic Wade “Woody” piggy bank from NatWest when she opened her first bank account in the 1980s, eventually collecting a set as her funds grew.
“Looking back, it seems like a strange concept, but it did work,” she recalls. “I remember saving hard.”
She is currently looking for a bank account for her daughter’s tooth fairy money, and is tempted again by NatWest, as its children’s account is accessible with just one pound. For Ms Grainger, the wider point is one of education — bringing children into the savings market early on to make them realise the value of money.
“We want to teach her the value of savings and the importance of money — and that starts with banking at home,” she says.
For her, it is not just about the next app and the online “experience”. Many parents still cleave to the notion that children want something to take home with them.
NatWest, for example, has built upon the experience of its 1980s piggy banks — “now popular with collectors on eBay”, a spokesman explains — with a slight linguistic tweak: it now offers children a PigbyBank.
“We undertook research recently which showed that a traditional piggy bank was still viewed by parents as one of the most popular ways to encourage under 11s to start saving,” the bank says.
The plastic Pigby looks unlikely to become a collector’s item of the future — but with the move towards digital currencies, maybe coins and piggy banks will be written out of children’s savings altogether in the future.
|Provider||Account Name||Gross interest||Notice/Term||Min Investment||Interest Paid|
|Saffron BS||Children’s Regular Saver||4.00%||12 Month Bond||£5||On maturity|
|National Savings Investments||Children’s Bonds Issue 35||2.50%||5 Year Bond||£25||Anniversary|
|Nationwide BS||Smart Limited Access||2.25%||Instant||£1||Anniversary|
|Harpenden BS||18 Club||2.20%||Age 18||£1||½ Yearly|
|Lloyds Bank||Young Saver||1.99%||Instant||£1||Quarterly|
|Bank of Scotland||Young Saver||1.99%||Instant||£1||Quarterly|
|Holmesdale BS||Young Saver||2.00%||Instant||£10||Yearly|
|* Santander 123 mini pays no interest on balances below £100. Interest rates are then tiered: 1% - £100+; 2% - £200+; 3% - £300+. Source: Moneyfacts.co.uk; Compiled: 13/3/17|