Creating Financially Capable Youth: Is There an App for That?

Leading up to the release of the New America's latest Global Assets Project report -- Beyond the Buzz: The Allure and Challenge of Using Mobile Phones to Increase Youth Financial Inclusion -- on September 12th, YouthSave is hosting a blog series that highlights the paper’s findings. This the third and final installment.

The Buzz: Mobile phones can be an amazing tool to influence knowledge, skills and behavior among youth, particularly earlier in life.

What does it mean to be a financially capable youth? According to the Center for Financial Inclusion, Financial capability requires access to appropriate financial services, combined with the ability, knowledge, skills, attitudes, and behaviors necessary to make sound, personal financial decisions.

One’s stickiest behaviors, those most resistant to change, occur early in life. Ensuring financial capability early in life – particularly during adolescence, a time of transition and in which youth often make serous life decisions – could be critically important in counteracting the psychological barriers that notoriously inhibit positive financial behaviors, and thereby make saving and other positive financial behaviors an instinctive process, instead of a tedious and reflective one.

Given the pace at which mobile technology is advancing, and bottom-of-pyramid youths’ proclivity and adaptability to such products, leveraging mobile technology to influences knowledge, skills, attitudes and, of course, behaviors – such as implementing certain nudges, such as reminders, commitments and peer pressure, automated and default controls, and incentives, all transmitted over the mobile phone – could help accelerate the pace of financial capability among low-income youth.

In comparison to traditional curriculum based financial education models, mobile phones can deliver faster, cheaper and more personalized financial knowledge to young people through such tools as text messages, mobile games, and other interactive tools. And practitioners are increasingly excited by the possibility: Multiple respondents to the 2013 Pulse Taking Survey proposed applying SMS to mobile financial education, using text messages as nudges to impart information and elicit financially responsible behavior. 61% of the survey respondents said that SMS text messaging hold s the most promise to accelerate youth financial access right now.

For instance, PAMECAS’ Ndortel product in Senegal, which was rolled out in 2011 and offers savings accounts and loans to youth between 12 and 24, sends its young customers SMSs to encourage saving. And there is big hope for big impact: In Colombia, YouthSave is currently conducting a yearlong, randomized controlled experiment to measure the effect of SMS-based financial education on saving rates among youth account holders with research partner, Universidad de Los Andes. The 10,060 children participating in the experiment, all of whom have accounts with YouthSave’s Colombian bank partner, Banco Caja Social are divided into three treatment groups and one control group. The three treatment groups receive either financial education SMSs or simple savings reminders SMS at different frequencies. The control group receives no messages. The study aims to determine whether SMS effectively promote saving among youth and to what extent the content and frequency of the messages matter.

Buzz Kill: “Earlier in life” is a hard place to begin. Plus, on the whole, we still don’t know when, where and how youth access and use mobile phones.

The ability to create a financially literate, confident youth through simple interactions on a simple mobile phone has tons of allure, but two big, ugly limitations remain.

First, if the idea is that nurturing financial capability among low-income youth earlier in life will maximize its long-term benefits, then doing so via mobile phone is exceedingly difficult. As we’ve discussed, youth under 18 in the vast majority of countries cannot legally own a SIM card. While that does not mean they do not have SIMs and phones through other means, it does present limitations in the ability to know exactly who is being delivered what information. Also, youth under 18 enjoy certain protections that – while hopefully mitigating against risks of certain abuses or bad information shared to vulnerable populations – limit our ability to easily collect data necessary to understand youth and their interaction with phones and/or finances.

Which leads me to the second limitation2: Those trying to develop mobile financial products and services for youth and adults alike lack sufficient data on their target demographic, both broadly and specifically related to mobile phone access and usage. In general there is so much we still don’t know about youth access to and usage of mobile phones in different contexts and therefore are limited in our ability to craft scalable and effective financial capability interventions. Which youth have phones? When and why do they use them? When and where are they considered communal vs. individual assets? As one survey respondent put it: “SMS will only be helpful if managed well (i.e. include a feature that is able to track whether youth receive the text messages for example)…. The challenge is that many youth may not even receive these messages because they rely on the phones of their parents/guardians who may not pass on the message.” Without such data, it is difficult to create and pilot appropriate and sustainable products because the designers do not know the needs and restrictions of youth.

The allure of using the teaching and influence tool that is already in the hands – at some point and time for so many youth – begs for solutions that allow us to collect data and evaluate outcomes and impact. Otherwise, scale of financial capability enhancing tools may remain distant goal.