As the aphorism goes, “If it ain’t broke, don’t fix it.” But if it’s no longer meeting needs as it once did, maybe it’s time to enhance it? This sentiment couldn’t ring truer for the “youth account.”
Youth accounts have been a staple offering at most community banks for ages. The opening of that first account has almost been a rite of passage for older children and teens. It can provide an opportunity for them to learn how to manage money and become financially responsible, under the watchful eye of their parents.
However, Gen Z’s needs are expanding as they age and browse financial options beyond their parents’ bank. And since this generation, born between 1997 and 2012, currently represents $44 billion in spending power, attracting and retaining this segment as loyal customers has become a vital value proposition for community banks nationwide.
Educate them early to build loyalty
Because of financial instability fears rising from the pandemic, ICBA’s research on Gen Z shows that 43% expressed interest in learning to save money and 38% wanted to learn more about managing their expenses. That’s why financial education could be vital for Gen Z customer retention.
Benchmark Community Bank in Kenbridge, Va., understands the value of early financial literacy for young people and has made a commitment to it for Gen Z’s long-term benefit. The $1.2 billion-asset community bank offers progressive accounts for young people, along with complementary educational tools, all of which will support these individuals at key stages in their life.
“Cementing concepts about the value of money and how it plays a role in so much of how people function at any age is not something children can cover in a two-week school session, and it [will] stick with them,” says Helen Person, vice president and director of marketing and public relations at Benchmark Community Bank. “Our online Money Smart financial education program, Banzai!, covers everything from learning to run a lemonade stand to planning for retirement and the times when life throws curveballs.”
A great digital experience is key
In addition to financial education, Gen Z seeks enhanced digital capabilities. Because they were exposed to technology from birth, Gen Zers favor more mobile and digital-friendly experiences at their banking institutions. In fact, 60% would switch banks for a better mobile app and digital experience.
“The entry point for banking now is changing,” says James Peil, partnerships and business development for REGO Payment Architectures Inc., a fintech that won the Banker’s Choice Award at the 2024 ThinkTECH Accelerator Showcase for its Family Digital Wallet product.
“It’s not 18 and above. It’s not even 13 and above,” he continues. “It’s actually starting when children get their first smartphones, and that’s when parents and children start the journey of looking for applications that help them with family finances.”
Community banks with premium mobile and digital services that support traditional youth accounts can gain an early foothold on the next generation of bank customers.
Products like REGO’s Family Wallet—which easily integrates with a community bank’s existing banking app or can be a stand-alone, bank-branded app—allow banks to provide a comprehensive digital banking experience to younger customers with minimal effort and investment.
Person believes this to be true as well. “The pandemic produced a student population much more dependent on electronic devices and transitioned our children to using online apps for savings accounts,” she says.
“While our traditional programs geared toward the youth work, we are now exploring a more versatile, incentive component combined with multichannel engagement to encourage adoption in a post-pandemic world to build a valued, trusted relationship with their hometown bank that carries with them the rest of their lives.”
For Gen Z, banking is a thoughtful choice
But it’s not just the education and enhanced digital experience Gen Zers seek. According to publications like Publicis Sapient and Fast Company, Gen Zers look for socially conscious financial institutions.
At $570 million-asset Range Bank in Marquette, Mich., community is at the heart of what they do. To give back, the community bank developed the Range Bank School Debit Card, which rewards schools with a donation each time the card is used. As of press time, Range Bank has given more than $12,000 across 15 schools this year and nearly $85,000 to local schools since the program began in 2015.
The bank also participates in the 1st to Finish Program, a universal, automatic, long-term savings account for local students beginning in the first grade. Through an initial deposit and donations throughout the life of the account, children earn savings that will be available to them upon graduation.
“Starting children saving early is so important to their financial success,” says Rachel Simonsen, chief operations officer at Range Bank. “Many of these children may otherwise not even have a savings account for various reasons, and with these accounts, donations can be made by the school, guardians, relatives or other community members.”
In support of its community, Benchmark Community Bank offers the $mart$tart Community Commitment Scholarship Program, 10 scholarships that are awarded annually to local students who demonstrate academic involvement and commitment to their communities through extracurricular school volunteer efforts and community involvement. To date, the bank has awarded more than 80 scholarships.
While traditional youth accounts have attracted the younger generations in the past, Gen Zers are not lining up to open accounts with banking institutions that won’t go the extra mile to fulfill their needs.
Traditional accounts still work, but successful community banks will find ways to enhance their products and services to support this growing and increasingly financially powerful customer segment. The next generation of bank customers is here, and they will be critical to the ongoing success of community banking.
