Here’s why school banking programs like CBA’s Dollarmites are under review
Corporate watchdog ASIC wants to make sure school banking programs are benefiting Australian kids, not just the big banks.
Australian school banking programs like Commonwealth Bank's scandal-plagued Dollarmites are set to go under the microscope, with financial regulator ASIC launching an official review into the sector. These programs, and in particular Dollarmites, have been under increased scrutiny this year by consumer lobby groups and industry regulators, with calls for the programs to be pulled out of primary schools.
CBA's Dollarmites program gives primary school children a savings account with the bank, and rewards kids with tokens whenever they make deposits at school towards the account. The tokens can then be used by the kids to buy from a selection of rewards and prizes, with the bank saying it's a way to encourage good savings habits. Commonwealth Bank does pay schools for signing up to the program.
ASIC will look at these programs in their entirety to understand how they're operating and how they're marketed to schools in the first place. The regulator is particularly interested in uncovering whether or not these programs are in the best interests of primary school children, rather than simply benefiting the big banks that run the programs.
"Transparency around school banking programs is important. ASIC wants to understand the motivations and behaviours around school banking programs to ensure they ultimately serve the interests of young Australians, and to enable school communities to have an understanding of the potential impact of these programs," said ASIC deputy chair Peter Kell in a statement this afternoon.
Another big part of the review will focus on the kids bank accounts that are opened for primary school students as part of the programs. The regulator will analyse how students use these accounts not only while they're at school but also throughout their later lives.
Teaching kids financial literacy in a cashless society
The regulator stressed the importance of financial literacy being taught from a young age in its statement today, saying, "It is essential that young people develop the knowledge and the skills they need to engage effectively with financial products and services. Attitudes and behaviours around money can be shaped from an early age and education is a key component to support stronger financial capability and to better prepare young people to manage financial decisions throughout their life."
But with cash becoming less and less common, how beneficial is it for Australian kids to be depositing physical cash into an account that they have little visibility over? Co-founder of Spriggy, an app for families to teach kids how to manage their money, Mario Hasanakos says there's little value in teaching students how to handle notes and coins in an increasingly cashless society.
"We need to teach our kids about money in a way that matches how they'll ultimately use money. And let's not kid ourselves, that's digital. The rapid success of Spriggy has been driven by solving an acute problem for parents; how do you teach kids about money when it’s becoming invisible?"
"It’s awesome that the government is making financial literacy a very public and high-profile issue. It takes a village to raise a child, and help comes in many forms, with many perspectives. Financial literacy in schools is a critical part of this. The ASIC MoneySmart program offers excellent resources for teachers without input from the banks, where motives rightly are questioned," said Hasanakos.
ASIC's review should be finished by mid-2019, which will deliver the regulator's expectations of the school banking programs going forward.