When is the right time to get your child an Eftpos card?
Those of you who have read my blog for a long time have been on a journey with me as I teach my daughter, now 11 years old, about how money works. Like every parent, I’m just making it up as I go along and I’m slowly working on her education around how money and life interact. So far, I’m pleased with how things are going and the time has come for her very first bank account.
Hearing me drone on about money in a positive way, investing and avoiding debt has rubbed off on her for sure and now I reckon she has a basic understanding of:
How to make money
How to invest money
How to spend money (yeah, she has certainly nailed this one)
You may recall the blog I wrote for my teenage nephew when I helped him set up a banking system?
His only question was “does it have payWave”? Well, because he was older his banking set up was slightly more complicated than what I am proposing for my daughter because this will be her very first banking experience and I want to keep it simple.
She deals strictly in cash.
Like most young kids she currently works on a strictly cash basis and she actually said it herself that she likes cash because she knows exactly how much she has and she worries that if it’s in a bank she won’t really be able to count it. Currently, we pay her pocket money in cash, she divvies it up into her various investing and spending piggy banks and her banking system is always sitting there on the shelf ready and waiting for the next transaction.
Last week her extremely generous Auntie paid her to do some jobs for her and she was given a $50 note for her hard work (I know! I was stunned too but if you think that you can get a kid to work for half a day and pay them only $2, then you and I are sadly out of touch). She was delighted to have that $50 note I can tell you but our rule is that she has to save 50% of everything she makes (personally I think she should save at least 75% but she negotiated me down dang it), meaning $25 needed to head straight to investing. Therefore, there was a sea of piggy banks, notes and coins all over the living room floor as she worked out how she could move money from “account to account” so she could retain the $50 note in her spending jar while sticking to our rule. This was true “math in action” and I got a sense of being a half decent parent when I watched her try to work it all out. Thankfully she had the good sense not to cut the $50 note in half...
Another thing to note is that even at this young age money is already flowing in and out of her life, via pocket money, via jobs that she does for others, via birthday money and “being spoilt by grandparents” money. By ‘removing’ half of all of this into investments it's just remarkable how bit by bit her balance (or net worth) builds up relatively quickly and in real time we get to play out the phrase “it’s not timing the market, it’s time IN the market”. Many adults could do well to emulate this strategy themselves.
But why does she need a bank account? Why now?
A few things have been going on that have made me think that it’s time for her to have an actual bank account with an Eftpos card. The thought of her taking a $50 note to the shop to buy a $1.70 ice cream (shout out to the Kiwi Milk Bar in Alexandra for having $1.70 ice creams) is a bit alarming. She is typically not a child who loses things, but there is the chance that it could fall out of her pocket on her way to the Milk Bar and I know she would be devastated if this happened. She also went ice skating recently and for her and a friend, it cost $31. She took cash but she told me that there was an issue at the counter with the change she was given and it got me thinking that if she had paid by Eftpos and received a receipt then this wouldn’t have been a problem. And of course, every time I have to pay her pocket money I have to find the cash to do this, which is pretty much the only time I handle money myself these days. Being able to transfer money online will be helpful to me too.
I would have been happy with Kiwibank or TSB. But because I bank with TSB already, it was the logical choice. Once again I spoke with/emailed Madie (not her real name), the same lovely woman who helped my nephew set up his accounts.
A note to parents here, we all have bank bias and although I’ve not researched this theory, it seems obvious to me that you will sign your child up with your own bank. So PLEASE just make sure your own bank is a decent one before you sign your kids up to what will be a relationship of many many years.
TSB has a Youth Account aimed at children between the ages of 7-17 and it has the following:
A versatile all-in-one savings and transactional account with no monthly management fee.
Interest earned monthly and paid quarterly (currently 1%).
Access to your money through EFTPOS, ATMs.
Accounts can be set up under a parent or guardian or in the child’s name.
Statements are issued in the name of the child.
One EFTPOS card issued per account to either the child or the guardian.
Access to Online and Mobile Banking.
I want to keep it extremely simple so that she can understand and feel comfortable using an Eftpos card, therefore I am simply opening her up one bank account (I can easily add others as time goes on). It is in her name, using her IRD number, but I’ve used my contact details so that I can help her when required. I don’t really care about the interest rate on offer (1% hahahaha) because this is spending money, the balance will be low and she is investing in other places already. What’s more important is that the account is fee free.
We opened the account over the phone and by email.
Because there is no TSB branch in our area we had to get a copy of her birth certificate and passport verified by a Justice of the Peace (JP) but a quick google search found Bill who was just one street away. This was a necessary step because of anti-money laundering regulations.
She filled out the account application documents in her neatest handwriting and we emailed all the documents back to the bank, Madie set up the account straight away and then spoke to my daughter over the phone and went through it all with her. This was a big deal for a shy eleven-year-old I can tell you because she is of the generation who either likes to email or text and not, god forbid, actually SPEAK on the phone! Because this is the real deal and she is signing up to a legal agreement, they wanted to be sure that she understood this. To be completely honest, she “mostly” gets its, but that’s what I’m here for, to explain the rest. Most excitedly she had to choose her first PIN number. She had been prepared for this and had been practising with a number that felt good to use because chances are she will have it for many years to come. Making one up on the spot would have been the wrong way to go about things.
We envisage her having enough money in her account to buy ice cream, go ice skating, or buy something for her room. I think she should buy her Mum and Dad a coffee too. In reality, the needs of an 11-year-old are small. However, the wants are large!
She wanted to know how the money will get into her new account so I got her to give me money from her ‘spending’ piggy bank that sits on the shelf. I then went into my online bank and transferred that same amount of money to her new account and it arrived there immediately and THAT put a smile on her face. I then showed her how to log in and out of her bank and within the first 30 seconds, she had changed the avatar of herself not once but twice. In all my years of banking its never occurred to me to have a photo of me on my banking app and the thought still does not appeal if I’m honest...
The first Eftpos purchase was...
When her Eftpos card arrived in the post a few days later we were both pretty keen to go and test the system, so off we went downtown. My daughter is a real planner, she likes to know what to expect in a situation, so I talked her through “how the deal would go down” at the counter so she was prepared and ready.
But first we went to the cash machine so I could show her how that worked, she could test her PIN for the first time and check her account balance and then we went to her favourite shop in town because she said “the ladies are so nice”, PaperPlus. After careful consideration she handed over her purchase, a KitKat and an eraser for school, she got out her card, swiped (no payWave for her just yet), selected her account and entered her new PIN.
Viola! Success! Me and the nice PaperPlus staff gave her a cheer!
When we got home she went back into her online account and sure enough $4.98 had been taken out.
What did she learn?
There were just so many layers of learning in this opening of a single bank account:
She filled out documentation and visited a JP to have it signed
She learned how money moves in and out of a bank account
She spoke on the phone to someone important that she didn’t know
She chose her first PIN number and learned that this is top secret
She learned how to log into her online account and that this is also confidential to her
She is learning to transition from physical money to an Eftpos card
She has taken ownership and responsibility for maintaining a bank account
Next steps are that I will let her decide if she wants to be paid in cash in the future or directly into her bank account because she has had her own banking system for a number of years now, that she has developed and that she understands and I don’t want to throw all of that away. So I’ll continue to offer her a choice of how she wants to be paid. It’s just a way of getting her to transition away from cash and begin to feel comfortable using an EFTPOS terminal or an ATM if she wants to experience getting cash out. It can be her decision on how fast she transitions to online banking.
It is the job of a parent to teach.
I’ve always believed that it’s Jonny and my job to teach her about money and finance and it’s always an open-ended conversation in our whare. We signed her up to Sharesies: Sharesies for Kids and she experiences investing on a weekly basis now because she has to put the money she saves somewhere productive.
And because her Mum blogs about how to handle money she already has a lot of other investing going in the background which I talk about here: How I Help My Daughter Invest
She has been in KiwiSaver since she was born and here are my thoughts on KiwiSaver for kids: KIWISAVER FOR KIDS: Is this the best investment too?
In time, as she gets a part-time job and starts to get money actually paid into this new account by people other than her parents, we will add other accounts to her banking, but for now, I’m just keeping it extremely simple. She has her own login details to her account, so at any time she can check her balance before she spends and one of her first questions to me when I proposed her getting an Eftpos card was “Mum, what if the money runs out when I AM shopping” to which I responded: “well my love, you will feel the intense humiliation of having your card declined and you will have to return the goods to the shelf because you have spent more than what you have earned and you don’t ever want to do that”.
Yeah, poor wee thing, her Mum does tell it to her straight!
Because we have been putting in the groundwork with her financial education over the last couple of years this is an easy next step and she was excited about it. I have absolutely no concerns about her having her first bank card because I know that she understands enough about money to handle it well.
And finally, for those with older kids check out this post for how to help your teenager set up bank accounts: How does a teenager create a strong financial future?
I would love to hear your own thoughts and experiences about how you have introduced your own child to banking, feel free to share them in the comments section below.