Dollarmites account should be banned from schools, says the Barefoot Investor

THEY may seem like a great way to teach kids how to save, but Commonwealth Bank’s Dollarmites school account could be doing more harm than good.

Teacher and students in kindergarten classroom

EXCLUSIVE

THE Dollarmites account should be banned from schools because it is a marketing ploy by the nation’s most profitable bank to groom future credit-card customers, a Senate inquiry has heard.

The Commonwealth Bank of Australia gives a school $5 per account opened plus commission of 5 per cent of each deposit a child makes up to an extra $10.

There are 273,000 Dollarmites accounts, and in 2014 alone, CBA paid schools more than $2 million.

Dollarmites is pitched as a “club” and offers children a “rewards program”. It includes classroom activities such as a crossword that introduces the concept of credit cards, as well as other financial products.

Letting banks educate children about money was akin to “Ronald McDonald teaching them about nutrition”, Scott Pape told the Senate inquiry examining credit card interest rates.

Mr Pape, who provides personal finance advice under the moniker Barefoot Investor, said children should learn that “just like cigarettes, just like skin cancer, you should avoid these things called ‘debt cards’,” which is what he calls credit cards.

Future customers ... Commonwealth Bank’s Dollarmites account is asking to “Ronald McDonald teaching children about nutrition”, says Barefoot Investor finance adviser, Scott Pape. Picture: Supplied

Financial counsellor Pam Mutton later told the inquiry all four of her children had been invited by CBA to take out a credit card shortly after turning 18.

“They used the engagement through Dollarmites to send them (letters to apply) for their very first credit cards,” Ms Mutton said. “Commonwealth Bank practices cradle-to-grave banking.”

“It’s concerning,” Consumer Action Legal Centre senior policy officer Katherine Temple told the hearing in Melbourne.

Inquiry chairman and Labor senator Sam Dastyari told News Corp Australia “serious questions” had to be asked about what the Dollarmites data is being used for.

“I’m worried a database is being built tracking the history of children as young as five,” Senator Dastyari said.

“I’m worried this is about marketing and getting their products to our kids. The innocent Dollarmites account is not a vehicle to get children using banking products.”

Targeting the vulnerable ... Chair of the Economics References Committee, Senator Sam Dastyari, says he is worried about marketing banking to young children. Picture: News Corp Australia

Bank Australia chief operating officer John Yardley later told the hearing that if it weren’t for lenders, financial literacy would not be taught to young children. However, he said he was “surprised” by what Ms Mutton had said.

Customer Owned Banking Association public affairs head Luke Lawler testified that “there is definitely a benefit of teaching kids about saving”.

CBA did not appear yesterday. It told News Corp Australia: “Our School Banking program and Dollarmites is supported by an overwhelming number of parents and participants, and we’re proud to stand behind it.”

CBA said incentives paid to schools recognised their contribution to administering the program and that it has a strong focus on financial literacy.