Digital banking apps that extend services to younger kids such as Greenlight, Current, Step, and Till Financial have secured massive funding rounds recently. With this news, it’s apparent that “kids” and “children” are being somewhat generalised into one category of fintech. The reality is – there are different offerings in the space that make sense for different ages and parental comfort levels.
EarlyBird is one of the newer players in the childhood investing space. The platform’s differentiator is that parents (and the village it takes to raise a child) can collectively start long-term investing in the child from the youngest of ages, while other apps are waiting for kids to be of age to spend money.
Jordan Wexler, Co-Founder & CEO at EarlyBird, feels that we’re at the point where parents need to start to consider their “ideal mix” when it comes to the fintech tools & apps they use to save for their children, teach them financial literacy, and also get them started with spending when it’s time. For example, parents can get started with EarlyBird when their child is born and then in the pre-teen years incorporate an app like Step to begin digital banking. This is similar to the “old school” trajectory of starting off with a 529 account then adding a standard savings account and later a checking account.
What has been the traditional company response to financial technology innovations nationally?
First, it’s important to know why EarlyBird was started. I began thinking about investments as an alternative to physical gifts when a new baby arrived in my family. I found myself head over heels and spending hundreds and hundreds of dollars on just the most ridiculous stuff. I wanted to have a larger impact on her life and give something that was actually meaningful and useful. That’s how I got the idea to simplify the process for parents who want to launch custodial investment accounts for their kids.
At our core, we really want to help families invest in their children’s financial future and make it easier and less confusing for parents to establish custodial accounts. There are a few other fintech apps that do this to some extent, but we are aiming to combine the investment account itself with a platform that allows for social features and a gifting experience. When a friend or loved one contributes to a child’s fund, they can also share a quick video message of why they are doing so and what it means for the child’s future. This provides parents with a much-welcomed assist when it comes to educating kids on money and good financial habits.
How has this changed over the past few years?
Fintech startups that target younger audiences are becoming more and more popular. Crunchbase data shows that in the past five years, investors infused at least $535 million into 89 known deals with fintech startups that described themselves as offering savings platforms for children, young people and parents. Of that, $344 million was raised just in 2020.
What EarlyBird is specifically changing is that we’re bringing a unique offering to the market. Before launching our app, there was no simple way to gift a financial investment to the children we love. We’ve introduced a completely new concept that allows families to gift meaningful investments and mark major milestones with gifts that give children a headstart in life.
Is there anything that has created a culture of change inside the company?
We’re big advocates for financial literacy and have truly incorporated it into EarlyBird’s product offering. We believe that stories connect generations. The stories children hear from people they look up to can shape their perspective for years to come. Being able to record a video alongside gifts presents the opportunity to share stories about saving for your first car, travelling the world, paying for a wedding, etc. Families can pass along their knowledge and leave a lasting legacy. The videos stay in the app forever, so the kids can always look back on them!
Also, we’re really maximising our efforts to help parents educate their kids on financial literacy through various partnerships. We recently teamed up with the financial masterminds at Benjamin Talks to engage our community with highly-curated and unique content around financial literacy and money. Our missions are deeply intertwined, both committed to providing parents and children with the appropriate resources to ensure safe and informed financial education from a young age.
What FinTech ideas have been implemented?
EarlyBird is built around fintech! Through the EarlyBird mobile app, parents in just a few minutes can create a custodial account, also known as a UGMA (Uniform Gifts to Minors Act) account. These accounts typically allow a parent, aka the “custodian,” to invest in stocks, bonds, mutual funds and other securities on behalf of the minor child. When the child comes of legal adult age, the investments become theirs. Once an account is set up for the child, parents can then invite other family members and close friends to contribute.
EarlyBird is a Registered Investment Advisor (RIA) and partners with wealth management and financial planning experts to curate our investment offering. We offer parents a fixed portfolio model, where we recommend expertly crafted ETF-based portfolios made up of both securities and bonds, based on the age of the child, your investment goals, time horizon, risk tolerance, and other factors. There are 5 fixed portfolios that a user can choose from ranging from conservative (100% bond based ETF’s) to aggressive (100% equity-based ETF’s).
What benefits have these brought?
EarlyBird helps families with long-term, low-risk investments. The intended benefit is that when the child reaches legal age (typically 18 in most states), they’ll have $15K-$30K in savings and a beautiful library of videos and memories from those who invested them over the course of their childhood. With that savings, we’re hoping kids can have the flexibility to follow their dreams whether that be going to college, travelling the world, buying a house, or letting the investments continue to build for the next 20 years.
Do you see any other industry challenges on the horizon?
Looking ahead, we’re seeing more opportunities than challenges. Obviously, the past year or so has been tough for everyone, but with the uptick in virtual parties and holidays, EarlyBird filled a gap for an ideal virtual gift. We’re starting to enter this “new normal” and our hope is that we can continue to elevate the gifting experience and become the “go-to” gift for children.
Can these challenges be aided by FinTech?
We want to continue to introduce new offerings, expand our gifting as a service model, and simplify the payment process. All of these upcoming milestones can definitely be aided by fintech! We’re looking forward to being part of the continued innovation in the industry.