[TOP STORY] Changing children’s relationship with money

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SIMON BROWN: I’m chatting now with Dr Thomas Brennan, a co-founder of Franc, also the CEO there. Thomas, I appreciate the early morning time. Getting kids to become more money-savvy, saving and investing – everyone agrees it’s a good idea. I think a lot of folks [wonder] how we do it. Kids want to go and swim in the pool when it’s hot, and have suckers and the like. But a large part of it is just involving them in [what is] truthfully a little bit of a tedious process of managing money as a family.

Dr THOMAS BRENNAN: Yes I think it’s very important, and I think the important factor is to know that kids are not stupid. It’s not about delayed gratification where putting money in a piggy bank is going to equal the same amount of sweets at a later point in time.

You really have to educate children to know that money has the potential to grow. That’s really what we want to do, so it’s sort of a savings account 2.0 for children.

SIMON BROWN: It is. It’s a savings account. There can even to a degree be some equity in there. But it is across everything. You make a point in an article you wrote before Christmas: it’s [about] involving them in the family outings and budgeting for holidays and sort of getting them on board, which works in two ways, I suppose. You make them smarter. Now they understand why they can’t have seven ice creams, because there’s a finite amount. It’s those sorts of things which need to be instilled into them.

Dr THOMAS BRENNAN: Agreed. And I think the important thing for us is realising that having access or an awareness of what is happening with your money is really fundamental. Obviously, with the Franc app you have that convenience in your pocket. You don’t need to kind of get a statement and try to understand what’s going on. You can literally just open the phone and the child can see what’s happening with their savings, so they can understand that [after] putting some money aside from their pocket money – or whatever the case may be – [it] actually is growing. They can see that growth potential.

I think that’s the trigger moment, that sort of education moment where you change the relationship with money. And for children that’s fundamentally important, especially to do it as young as possible.

SIMON BROWN: I take your point on that. It’s the technology. It’s almost making it fun. I’m reminded of when I was very young – we’re going back to the eighties – I had an Allied [Building Society] blue savings book, or whatever they call it now, and [I’d] go to the branch every month and deposit my R1. At the end of three years I got R40. It was slow, it was tedious, it was boring. With technology they can almost overdo it, but it becomes that fun component. It’s not a gamification, but it almost is in a way.

Dr THOMAS BRENNAN: Agreed. We’ve actually taken it to that next point.

We have actually gamified saving. We call it a ‘boost engine’, and we try to encourage people to stick to their sort of regular contributions and deposits. The way it works is [that] every week there’s an opportunity to play and to earn some money. So if you make your deposit that week, for example, you’ll enter into a lottery and you could double your deposit.

It’s not talking extraordinary amounts of money … it’s not playing the Lotto. You’re actually trying to create a habit out of savings. That really is in the child and the individual’s best interest.

SIMON BROWN: One of the challenges I imagine that you had is around fees, because we are going to be talking small amounts here. These kids aren’t going to be dropping thousands of rands. A lot of the financial system is designed for bigger amounts, and therefore in small amounts fees can really hurt. How have you managed that challenge?

Dr THOMAS BRENNAN: Well, fundamentally that’s what Franc has overcome. Obviously we are doing that by using technology. We don’t have a sort of expensive distribution system. People can really just go to the app store, download the app and get going. And by virtue of leveraging that technology we can offer lower fees. So we just charge a simple sort of 1% all-in fee. That’s on money invested. And so for the child’s accounts, if they have a R100 sitting with us, for example, they’ll be paying us R1 per year. We don’t want to obviously undermine earnings because, as you know, higher fees take away and eat into returns. We want people to invest with us for the long term, obviously, and see their money grow with time.

SIMON BROWN: The last point that you made in the article you wrote, as I said, was really also around role-modelling – because that’s hugely important to kids – and finding folks whom they can almost look up to in terms of how they manage their money. In an ideal world that’s the parent, but even just broader than that, because kids do want and do indeed look up to and engage with adults.

Dr THOMAS BRENNAN: Indeed. And I think a reality that parents have to face is that this is happening more and more now on social media. Obviously we want positive role models instead of sort of negative role models. You don’t want to see – whether that’s young adults or university students – going to kind of crypto exchanges and trying to use technical analysis, double their money in a week which, sure, may happen, but the odds are equivalent to the Lotto. So you really want people [to think] no, this is actually my savings habit. This is where I started. I chose this strategy because I’m thinking long term. And here’s been the growth of my money over time, and my commitment to this goal. That’s a positive role model, and we really need to empower children to be able to play that role for others coming the generation after.

SIMON BROWN: Yes. I’ve been spending some time on TikTok. There is some dodgy stuff happening there in terms of, as you say, how to double your money by the weekend.

We’ll leave it there. Dr Thomas Brennan is co-founder and CEO of Franc. I appreciate the early morning.

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