March 16, 2015
A groundbreaking project examining the attitudes and practices of young people in developing economies toward saving money has led to new findings that both confirm and challenge assumptions about youth saving at formal financial institutions.
The study shows, for example, that if there are equal opportunities to do so, girls will save as much money or more in formal financial institutions than boys. The study, which focused on youth aged 12-18, demonstrates that under the right conditions younger youth (those below the age of 13) will save more than older youth. It also finds that parental involvement in supporting saving by their children is an important factor in determining who saves money, how much, and how often.
The study was carried out by YouthSave, an international development consortium led by Save the Children in partnership with the Center for Social Development (CSD), New America, the Consultative Group to Assist the Poor (CGAP) and The MasterCard Foundation, a founding partner of the YouthSave consortium.
The report released today, Youth Savings Patterns and Performance in Colombia, Ghana, Kenya, and Nepal, outlines findings from a study of the largest known dataset on how teens in developing countries save money. Under this project, more than 117,000 youth in the four countries opened savings accounts. Of these young people, almost 70,000 agreed to take part in the research study; about 48% of them were youth estimated to be living at or below $2.50 per day.
The data enabled CSD, YouthSave’s lead research partner, to detail who is saving and to identify factors linked with savings patterns. This information is critical for practitioners and policymakers who want to increase youth financial inclusion, those interested in innovative development strategies and financial institutions seeking to expand into this market segment.
On the importance of this research for the field moving forward, the YouthSave Project Director, Rani Deshpande, said, “The results afford us unparalleled visibility into the savings behaviors of young people, proving not only that youth will save when given the right opportunities but also shedding light on how financial institutions can most effectively reach and encourage them to do so.”
The research showed that in order to include more girls in the formal financial system, indications are that it may be better to enhance access to formal savings accounts than to increase savings amounts. The research also showed that, in Ghana and Kenya, having parents or guardians as bank account co-signers (as opposed to other adults such as teachers) generally led to higher savings amounts.
Ann Miles, Director of Financial Inclusion at The MasterCard Foundation, said, “This YouthSave report is an important contribution to the knowledge base about what drives young people in developing economies to get and stay on a savings path that will serve them well throughout their lives. We’re looking forward to other reports from YouthSave that will offer similar insight and help policy makers to take the decisions that will benefit youth, their families, their communities and their countries.”
Other key findings of the report include:
• As measured by average monthly net savings, younger youth (i.e., aged younger than 13 years) save more than older youth, in part because younger youth withdraw less than older youth. This result highlights the importance of starting to save early in life.
• Direct outreach from financial institutions to locations where youth congregate (e.g., schools, youth clubs) facilitates overall account uptake.
• About 39% of youth were actively using their account during the last six months of the study. Deposit frequency is highest in Colombia where monthly deposits are part of a programmed savings goal, which suggests the importance of focusing on ways to increase deposits. For example, youth receiving cash incentives in Nepal saved significantly more than other Nepalese account holders.
• Financial institution policy influences the number of accounts opened. In Ghana and Kenya, flexibility in bank policy allowed “trusted adults” to be co-signatories on minors’ accounts. The result was non-relatives opening 56% and 47% of accounts for youth, respectively.
“CSD appreciates this unique research opportunity through YouthSave to work with partners across these four countries to gather data and report on one of the most comprehensive datasets on youth’s savings patterns and performance in developing countries”, said Li Zou, CSD’s Director for YouthSave.
To see the report in full, please visit http://csd.wustl.edu/Publications/Documents/RR15-01.pdf
YouthSave is a consortium project led by Save the Children in partnership with the Center for Social Development at Washington University in St. Louis (CSD), New America (NA), the Consultative Group to Assist the Poor (CGAP) and supported by The MasterCard Foundation.
About The Center for Social Development
The Center for Social Development (CSD) is housed in the George Warren Brown School of Social Work at Washington University in St. Louis. The Center's mission is to create and study innovations in policy and practices that enable individuals, families and communities to formulate and achieve life goals, and contribute to the economy and society. Through innovation, research and policy development, CSD makes intellectual and applied contributions in social development theory, evidence, community projects and public policy.
About The MasterCard Foundation
The MasterCard Foundation is an independent, global organization based in Toronto, Canada, with over US$9 billion in assets. Through collaboration with partner organizations in 57 countries, it is creating opportunities for all people to learn and prosper. The Foundation's programs promote financial inclusion and advance youth learning, mostly in Africa. Established in 2006 through the generosity of MasterCard Worldwide when it became a public company, the Foundation is a separate and independent entity. The policies, operations and funding decisions of the Foundation are determined by its own Board of Directors and President and CEO. For more information on the Foundation, please visit www.mastercardfdn.org.
About New America
New America is a nonprofit, nonpartisan public policy institute that invests in new thinkers and new ideas to address the next generation of challenges facing the United States. To learn more, please visit us online at www.newamerica.org or follow us on Twitter @NewAmerica.