Roadmap to Inclusion: Insights Into Youth Financial Capability
Four Insights into Youth Financial Capability
In 2011 only 17 percent of young adults (ages 15-24) saved in a formal institution in Nigeria, only 9 percent in Tanzania, and only 1 percent in the Democratic Republic of the Congo (World Bank/Gallup Global Findex). These numbers remind us that youth financial inclusion is far from reality in many countries, especially low income countries with rapidly expanding youth populations (as indicated in the Center for Financial Inclusion’s (CFI’s) report “Looking Through the Demographic Window: Implications for Financial Inclusion.”)
Financial Inclusion 2020 (FI2020) at the CFI is building a movement that mobilizes stakeholders around the globe to achieve financial inclusion by the year 2020. As a part of this global campaign, we are focusing on client segments that have specific needs, youth among them. FI2020’s working group on Financial Capability, one of five expert working groups creating a Roadmap to Financial Inclusion, shares insights into the group’s findings on youth and financial services:
1. Incorporate what we know about youth learning and behavior change into financial capability intervention design. Habit information is important - for example, learning to look both ways before crossing a street. Establishing the savings habit early could set youth on a path to lifetime financial capability, according to a report from the New America Foundation. This report outlines the virtuous chain of connections from savings, to asset ownership, which leads to positive emotions and that promotes further sound financial behavior.
2. Providers are well-placed to contribute to youth financial capability building. Providers are uniquely positioned to help young clients develop financial capability. They have access to customers at the teachable moments when information matters most. They already invest in marketing and a range of client interfaces which can be adapted at low cost to provide financial capability messaging, potentially at significant scale. Further, they can design products that incorporate insights from behavioral economics, with features like automatic reminders or rewards.
Panabo Multi-Purpose Cooperative (PMPC), in the Philippines, for example, provides a “Kiddie” account (ages 0-12) and a “Power Teen” account (ages 13-18). Children receive a coin bank upon opening an account; teens receive mugs or key chains. PMPC found that the younger children respond well to rewards, but older youth respond more positively to recognition and the opportunity to serve as “youth ambassadors” at credit union events (Gepaya 2009). Through partnering with schools, PMPC provides training, seminars and fun activities. PMPC has also built an internal framework of management support for youth financial services. Since 2009, PMPC has incorporated an Aflatoun education program and has seen increased participation of youth in the two accounts.
3. Technology provides opportunities to deliver capability-building messages through financial literacy apps and games for youth. I wish I had this game when I was a child: an interactive fantasy kingdom that teaches about finance! At Play Moolah children can make their own decisions and learn about money management. For older youth, there is D2D, where players can play games such as: “Bite Club” (managing a vampire disco club), or “Farm Blitz” (harvesting crops for your uncle’s farm while warding off hungry rabbits who represent debt), according to the Economist.
D2D’s randomized comparison trial of Farm Blitz compared game players with others assigned to read a financial education pamphlet. A follow up survey yielded statistically significant improvements for all, with a regression analysis indicating slightly higher knowledge gains for pamphlet readers. This suggests that financial literacy games have the ability to be nearly as effective as reading a pamphlet, but the added bonus is that the game will attract consumers who are less likely to read a pamphlet (Maynard et al).
4. Countries benefit from national financial capability strategies that include primary and secondary financial education. Support for national financial education strategies is growing, according to the OECD. There is some evidence that the incorporation of a national strategy for financial education has led to increased collaboration among the public and private sectors in Brazil, New Zealand, and the United Kingdom. It also provided the opportunity for projects that would have not been considered without a national strategy. The Czech Republic conducted a national baseline survey on financial literacy and a working group on financial education to inform its strategy, while Malaysia established a number of formal frameworks and institutional pathways, which have the potential to support future financial education or consumer protection initiatives (OECD).
According to the OECD, financial education strategies have already been implemented in Brazil, Ghana, Czech Republic, Malaysia, Australia, Ireland, Japan, Netherlands, New Zealand, Portugal, Slovenia, Spain, United Kingdom, and the United States. Yet, countries need to do much more work on evaluating the impact of these programs.
These insights from the FI2020 financial capability working group are a work in progress, and we are seeking further input. Are we missing an important component relevant to youth? Please let us know!
If you are interested in participating in FI2020, please email Adriana Magdas: [email protected]. Some ways to engage include: providing feedback the working group findings, sharing our findings with your partners, or writing a blog post.