We celebrate our youth and their achievements and reflect on the goals of “eradicating poverty and achieving sustainable consumption and production” for the youth of this generation. To achieve these goals, a culture of saving money consistently over time will be important.
How can financial institutions, policy makers, and parents encourage the youth to save? A six-year project (2010-2015) across four countries, YouthSave, led by Save the Children and Washington University examined this question. Recently, I attended the project’s dissemination event in Accra, Ghana and learned about how, as part of the project, a bank partnered with middle and secondary schools to offer formal savings accounts to students 12-18 years of age.
Many Ghanaian students are saving money informally in their schools because they either lack national identification documents or cannot find an adult whom they trust to be the primary signatory to a bank account. Some entrepreneurial students act as “susus” collecting cash from their classmates on a daily basis and safe-guarding it. Since they often keep one day of savings as a fee for this service, this can be a costly way of saving.
As part of the YouthSave project, HFC Bank offered Enidaso accounts – youth-focused savings accounts – to students in middle and secondary schools to provide an alternative to such costly informal services. Opening and servicing these accounts in the schools increased uptake and usage of the accounts. The schools are important channels for the bank to offer this service. And their development as channels depended significantly on collaborative relationships between the bank and the schools’ headmasters and teachers as well as incentives and outreach events in the schools.
Yet, many Ghanaian youth, especially those of a low-income background, expressed concern that they did not trust their parents or teacher to be the primary signatory of the account. In other countries such as Colombia, the regulations permit youth to open bank accounts independently. A key finding of the project was that lowering the minimum age for opening and operating a savings account would further improve access and usage of this service among the youth. In Colombia, such accounts can be opened at 7 years of age without an adult co-signer.
For the majority of Ghanaian youth who opened accounts during the project, financing their own education was the main goal for the use of their savings. They aimed to save money to pay their future school fees when their parents could not. For low-income youth, a savings account can be an especially important tool in positively influencing and even driving their educational aspirations. At the dissemination event in Accra, a young lady shared her experience in using her savings to pay her school fees for her final year of secondary school when her parent could not afford the fees. This enabled her to continue her education and eventually open a business.
The business case for banks to offer youth savings is not short term. Banks interested in serving the youth must perceive the business case of developing long term customer relationships. This approach can result in the youth becoming “customers for life”. Over time, the youth can become very loyal customers for a wider range of financial services such as payments and loans. Learning to save is the first step in that process. Many youth express loyalty to banks which accompany them in taking this first step.
The YouthSave project is rich in lessons for financial institutions and policy makers. As a parent, I realized how important it is for me to set an example and develop an appreciation among my children for saving money as a life tool. I am inspired by the young lady in Accra who shaped her own destiny by saving to ensure that she finished secondary school. She has shown us how to take matters into our own hands and use one of many tools to eradicate poverty: save for education.