Youth savings: Why the new piggy bank is an actual bank

Youth savings: Why the new piggy bank is an actual bank

Youth around the world want to trade in their piggy banks for the real thing. Photo: <a href=”http://www.flickr.com/photos/rosscrawford1/2738104237/sizes/m/in/photostream/”>rosscrawford1 (Flickr)</a>
Youth around the world want to trade in their piggy banks for the real thing. Photo: rosscrawford1 (Flickr)

The draw of the piggy bank stretches to children of all income levels; the need for security and the promise of their dreams makes kids save.

A new study by Save the Children and the MasterCard Foundation examined the saving patterns of low-income youth between the ages of 12 and 18 in Kenya, Colombia, Ghana, and Nepal. The fascinating result: no matter their income, children save.

Contrary to popular belief, Save the Children found that youth in these countries are already "making" money. Most receive some sort of allowance from their parents for food and other daily expenses. Larger sums are often received for special occasions and some earned from small jobs and chores. While most is spent quickly on short-term needs like food and transportation to school, almost all reported having savings.

What are they saving for? Most say education, followed by emergencies. Where are they saving? In their piggy banks or other informal locations in their houses or businesses. This leads to a huge opportunity for banks, because the main complaint from kids is that their private stashes are insecure. Formal bank accounts solve this and, more importantly, teach kids financial skills they'll need throughout their lives.

But there's a lack of banking options for youth in these countries. Save the Children's study interviewed kids to find out what was holding them back from opening an account and what kinds of features would help them save more and access it when they need it. Results show that as in the U.S., most banking opportunities that exist for youth require parents as co-signers. Many youth fear that if their parents have control, they will use the savings. Some banks have developed a system that keeps parents involved, such as by setting withdrawal limits, but allows youth significant control. Another factor keeping kids from using banks is that it's hard for them to withdraw funds when they need them. The co-signer must be with them to make a withdrawal, and getting to the bank when they money is needed can be a challenge. Youth must obtain a national I.D. to open an account, adding a layer of complexity that doesn't exist with a piggy bank.

On the other hand, most youth respondents didn't mind small fees, as long as those charges were explained transparently upfront. They also reported an interest in trading some access to a percentage of their funds in return for lower fees. Given the ability to access a portion of their savings immediately for emergency use, most kids surveyed were excited about the opportunity to save small amounts over a longer period than is feasible with informal savings methods.

The Save the Children YouthSave program is working to create and replicate successful banking options that solve these apprehensions. The program also aims to educate kids about formal financial tools, like loans, credit scores and savings versus checking accounts. This complementary financial literacy messaging and real-life practice helps kids make constructive use of their accounts. Though kids around the world will continue saving in piggy banks, youth-friendly banking options will create a savvier, more financially secure next generation.

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