April is financial literacy month. It does not bode well for financial literacy. When a calendar month gets dedicated to a cause, it is often because that cause remains easily forgotten during the rest of the year. Personal finance is not consistently taught in schools, and I agree with Jason Alderman that that needs to change.
But another change needs to occur, and that is a greater sense of responsibility on the part of the financial services industry that works with younger customers. Younger consumers are constantly connected, and the Internet and mobile phones offer ripe opportunities for new financial services targeting minors and students. So online financial service providers need to be especially conscious not just of their bottom line, but of their role in instilling right and wrong behaviors.What should be the rules of engagement and standard of ethics when serving young and possibly minor users? Here are my recommendations:
- Never go around the parents of teenagers: not only is it morally wrong, it would not allow to build a viable business in the absence of legally enforceable contracts.
- Be transparent about pricing and frugal with fees: young people do not have a lot of spare money, and will revert to cash in a blink as soon as they detect they're being "monetized" to use some unappealing industry jargon.
- Provide the same rules for disputes and problem handling as with older customers, no more, no less. The industry is starting with a deficit of trust in the eyes of young users, and cannot afford early missteps.
- Build controls and safeguards without over emphasizing them: young users want to be responsible and will reject products with obvious training wheels.
- Deliver services that can be used in the brick-and-mortar world: even though teens and students are "always on", they spend less then 20% of their money online.
People learn best by doing. But people need good tools and services to learn good behaviors. As with everything intended for newer generations, quality needs to be inspired by proper ethical and creativity standards.
We financial services entrepreneurs need to roll up our sleeves and implement some standards when working with teens and students. It's the right thing to do, and it's good business.