The U.S. is in the middle of a personal finance crisis. According to the Nation Foundation for Credit Counseling’s 2020 Financial Literacy Survey, 62% of U.S. adults have carried credit card debt in the last 12 months, more than 1 in 4 don’t pay all of their bills on time, and nearly 60% find it difficult to address their debt while dealing with unexpected financial emergencies or a reduced income.
That’s why financial literacy is such a critical growth area right now. The need for financial education is acute, yet it is accessible to very few Americans as of 2021. Standard & Poor’s found that only 55% of U.S. adults qualify as financially literate and less than 17% of students were required to take personal finance classes in high school. A quarter of parents admit that they never or almost never talk to their kids about money.
The fintech category runs the gamut from investment platforms like Yieldstreet, to challenger banks like MoneyLion, to payments providers like Zelis and Billtrust, who are all members of our current and exited portfolio. But there’s still more to come, as the category continues to expand into more consumer-facing verticals like financial wellness and family fund management.
That’s why we recently invested in gohenry, a Visa- and MasterCard-backed debit card and money management app designed exclusively for 6-18 year olds. One of the first entrants in the Family Financial Management (“FFM”) market, gohenry includes full parental controls while also enabling children to earn allowance, set savings goals and spend their money in-store and online (and even withdraw it from ATMs), ultimately teaching them the value of money and good budgeting habits.
As we accelerate toward a cashless society, gohenry is introducing financial literacy as part of a fun, interactive experience complete with gamification features, customization options and more. For us at Edison, we’re excited and gohenry ticks a lot of boxes, combining the power of financial literacy for the whole family with an underserved market segment (kids under 18), an ongoing U.S. expansion and a recurring subscription model.
I recently spoke with Alex Zivoder, gohenry CEO, about the importance of teaching kids about financial wellness and setting them up for success long-term. Here are the top takeaways from our conversation:
Teaching responsibility: Learning to spend responsibly takes time and real experience -- your average seven-year-old usually isn’t going to understand that when the money is gone, it’s gone, until they’ve lived it themselves. This is why building the habit of waiting to make purchases -- saving up for the big things they want -- is such an important step on the path to financial wellness.
Financial education that's flexible. The fact is, there's nothing in common between what today's children are experiencing in terms of money and what their parents experienced when they were kids. Today, the purchasing behaviors of an 8-10-year-old are vastly different from 10 years ago, equally disparate from those in the 10-13 year-old segment, and even more pronounced in kids between the ages of 13-15. That's the challenge and the opportunity for companies like gohenry: understanding the financial needs of kids in every stage of growth, and providing a tailored solution that's user-friendly and anchored by a foundation of ongoing financial education and wellness.
Evolving challenges and opportunities: The shift to a cashless society is coming fast, and COVID-19 has contributed to that acceleration. At the same time, children today live their lives online. They learn online, they entertain themselves online, they build their personalities online and more. Money is a key ingredient in all of these things in today’s digital-first society, so they need to learn how money works in the digital and the real world at the same time.
Want to listen to the full recording? You can access it here.