Pioneering Study Finds Poor Youth Can Save for Their Future

YouthSave, the largest research experiment of its kind in the developing world, has shown helping youth build savings can significantly increase their financial capability and may also improve other youth development outcomes, such as cognitive functioning, education, and health behaviors. Through the project, more than 130,000 young people aged primarily 12-18—half living under the poverty line—collectively saved over $1M over three years. In addition, approximately 44,000 youth received direct financial education, 48,000 individuals were reached through community-level events, and an estimated 660,000 were reached through mass media.

Ann Miles, Director of Financial Inclusion and Youth Livelihoods at The MasterCard Foundation, said that at the time the project was launched, “many thought that low-income young people couldn’t save money. YouthSave found out that they can.” She added, “The Foundation believes that all young people deserve the opportunity to build assets, gain financial knowledge, and develop sound financial habits. It is our hope that the knowledge generated in YouthSave will find a wide audience. We also hope that many others will be inspired to expand quality financial services to young people, and to build the industry knowledge base along the way.”

Created in partnership with The MasterCard Foundation, YouthSave was led by Save the Children with the Center for Social Development at Washington University in St. Louis, New America, and the Consultative Group to Assist the Poor. Between 2010 and 2015, YouthSave investigated the potential of youth-focused savings accounts as tools for youth development and financial inclusion in developing countries.

Conducting pre- and post-tests to evaluate effectiveness of financial education activities in Colombia, Kenya, and Nepal, researchers found statistically significant improvements in participants’ values related to saving, attitudes towards banks, and knowledge about the more technical aspects of saving and budgeting. In Ghana, YouthSave conducted a “gold standard” randomized controlled trial of the opportunity to open a savings account on youth development outcomes. Participants demonstrated a higher sense of security of educational aspirations compared to nonparticipants, and reported an increase of 17 minutes in their out-of-school study time. The project had mixed effects on health attitudes, but participants showed positive results on perceived barriers to condom use and an increased awareness of susceptibility to and severity of HIV.

YouthSave also identified multiple ways in which account features can affect savings behavior among young people. Not requiring an initial deposit may facilitate uptake, but is associated with higher rates of account dormancy. Accounts with features that encourage parental involvement were tied to greater savings accumulation; and younger children had a greater average monthly net savings than their older counterparts. Sending youth behavior nudges to save through SMS messages was associated with an increase in net account balances.

Researchers found that bank policies and regulations had a direct effect on the extent and nature of youth financial inclusion. To ensure widespread access to formal youth savings services, an enabling regulatory environment is critical. In Nepal, where the age of majority is 16, 42 percent of the account holders owned and operated their accounts. In Kenya, flexibility in the partner bank’s policies allowed “trusted adults” to be co-signatories on minors’ accounts, a regulatory policy already allowed in Ghana. In Kenya and Ghana, non-relatives were co-signatories on 56 percent and 47 percent of accounts, respectively.

For financial institutions, YouthSave assessed the business case for offering youth savings products and services. The program concluded that youth savings are compelling for a financial institution’s medium- to long-term strategy, but there may not be an immediate business case for these low-margin products. Over a longer time horizon, offering youth savings accounts could usher benefits related to capturing a future client base early on, the possibility of cross-selling to young people’s networks, and fulfilling corporate social responsibilities. Nevertheless, youth savings programs will likely require internal or external subsidies in the short-term, especially to reach the most marginalized youth.

“Helping young people build savings can not only improve their individual-level outcomes but also help achieve national-level financial inclusion,” said YouthSave Project Director Rani Deshpande. “But extending the benefits of savings to all youth, including the most marginalized, will take the concerted collaboration financial institutions, nonprofits, government, and donors.”

To learn more about YouthSave, visit: https://www.newamerica.org/youthsave/

For YouthSave in brief, visit: https://www.newamerica.org/youthsave/key-findings-from-the-youthsave-project-in-brief/