Are your kids losing interest?

Are your kids losing interest?

Ask your kids if they would like to get their hands on some free money, and we can predict exactly what they’ll say - YES! 

 

But our latest research* has revealed that nearly half (49%) of UK kids and teens don’t know what ‘interest’ is and what it means for their money – and unless we put this right, there’s a good chance they’ll miss out on opportunities to make their money work harder in adulthood. 

 

With many UK kids unable to earn interest on their own savings, young people haven’t made the link between interest and income. This is just one of the reasons why we’ve launched our new Plus membership option, which gives kids and teens the opportunity to earn 4.5% AER variable interest on their savings.

 

The knowledge gap

 

Our research* shows Gen Z and Gen Alpha aren’t clued up on interest, which means they’re missing out on an easy way to top up their pocket money. 

 

  • Over half (58%) aren't aware that earning interest on savings is a form of passive income 

  • 1 in 5 (20%) young people think the Prime Minister sets the UK's official interest rate

 

Louise Hill, co-founder and CEO of GoHenry, says: "There is a knowledge gap around interest, which could hinder young people's future savings and earnings. Knowing how interest rates affect your money is an important part of financial education, which kids seem to be missing out on."

 

As many UK kids can’t earn interest on their savings, they have yet to see the real-world benefits of earning interest. We discovered that:  

 

  • 44% of kids aren't aware that higher interest rates can help you earn money on your savings

  • Over half (58%) aren't aware that earning interest on savings is a form of passive income. 

Let's talk about savings

 

In general, kids aren’t great at thinking long-term. But when it comes to savings, it makes sense to think about the bigger picture. If your child isn’t a fan of saving money that they could spend RIGHT NOW, talking about interest can help them see the benefits of putting a little aside so that interest can help it to grow. 

 

The simplest way to explain it is to tell them that interest is money you earn on your savings – a reward from a bank for storing your money there. This interest then gets paid at a specific rate, called an annual percentage rate (APR for short).

 

A good example would be for your child to have £100 in a savings account with an APR of 5%. Five percent of £100 is £5. This means at the end of the year, they'll have £105, £5 of which has come from interest, not out of their pocket. And the longer they leave money in this account, the more interest they'll earn as, over time, they’ll also earn interest on their interest. This is called ‘compound interest.’

 

"Teaching your children that their savings will grow faster with interest is fundamental to helping them make saving a habit," says Louise Hill. "At GoHenry, we're committed to improving financial education because our research shows that adults who don't learn about money when they are young are less able to save and more likely to fall into debt. More than half (51%) of those who received financial education as a child have up to £5,000 cash savings in an ISA or savings account compared to almost a third (30%) of those who didn't.”

 

Other types of interest

 

Our findings* have also shown that 57% of kids don't know that there's more than one type of interest, 47% of kids don’t realise that interest rates aren’t fixed and can, in fact, change, and 41% need to be made aware that higher interest rates can make borrowing money more expensive. 

 

So it's also vital to discuss various different kinds of interest and how these rates may affect them as adults, from interest rates on credit cards to mortgages and student loans. Also, be sure to tell them that these rates are not always fixed and can go up and down. 

 

How can the new GoHenry Plus Membership help

 

When it comes to earning extra cash, young people are missing out on some easy ways to top up their pocket money, with 6 in 10 UK kids unaware that cashback is a form of passive income too. 

 

GoHenry's new Plus membership gives kids all the benefits of our Everyday membership, plus 1% cashback on all in-store spending, the ability to earn 4.50% AER (variable) interest on savings, and full access to over 80 award-winning money lessons, Money Missions, all for £4.99 per month, per child. 

 

Louise Hill says: "Experiencing first-hand how interest works is a vital part of financial education, which we can now offer through the Plus membership. We are excited to be adding this to our offering and look forward to seeing how our customers make their money work harder!"

 

 



*The research was conducted by Censuswide with a sample of 1,004 UK children and young adults aged between 6 to 18. The survey fieldwork took place between 12/10/23 - 16/10/23. Censuswide abide by and employ members of the Market Research Society based on the ESOMAR principles and are members of The British Polling Council.

 

GoHenry is not a bank. The GoHenry card is issued by IDT Financial Services Limited, a principal member of Visa Europe. IDT Financial Services Limited is a regulated bank licensed by the Financial Services Commission, Gibraltar. Registered office: 57-63 Line Wall Road, Gibraltar. Registered No. 95716. All communications should be sent to GoHenry Ltd, Stirley House, Ampress Lane, Ampress Park, Lymington, Hampshire, SO41 8LW. If you no longer wish to hear from us please unsubscribe. Read our privacy policy & terms and conditions.

 

GoHenry Interest Savings is provided by Bondsmith Savings Ltd, Bondsmith Savings Ltd is registered in England and Wales, No 13223331. Registered office: 124-128 City Road, London, EC1V 2NJ. Bondsmith is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011, Firm Reference 955601, for the issuing of electronic money.

 

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Written by Anita Naik Published Nov 23, 2023 ● 3 mins