Youth Savings Uptake: Nature or Nurture?

This is the third and final installment of our latest blog series, Understanding YouthSavers, which highlights the findings of CSD's recent report, Savings Patterns and Performance in Colombia, Ghana, Kenya and Nepal. Last week, we reviewed the demographic composition of 11,000 of YouthSave's first account holders and the possible factors behind it. This week, we describe the single factor that appears to be associated with how theses young people are saving-- and it's not demographics.

Youth do not open savings accounts because of a certain household income, or because of a particular gender or other demographic variable. Instead, we find that youth choose to open and save in savings accounts based on the opportunities provided to them. When banks provide an attractive savings product targeted to youth and then reach out to them, making it easy to open an account, the youth respond. For example, in Kenya, Postbank offers account opening services at schools and youth programs as part of its outreach efforts. In Ghana and Nepal, YouthSave partner banks are taking that one step further to offer variations of access strategies such as in-school banking that include ongoing financial education and depository services at or near school.

Findings in the recent YouthSave Research Report, “Savings Patterns and Performance in Colombia, Ghana, Kenya, and Nepal,” suggest the importance of taking the bank to the youth. In both Ghana and Nepal, branches that participate in financial education and depository services have higher account uptake than at branches that do not. Kenya has the highest number of youth savings accounts in YouthSave, and its marketing outreach efforts, primarily directed at schools, include the opportunity for the youth to open an account on the spot.

The strong link between school involvement and account uptake demonstrates a point that was made in the previous blog regarding out-of-school youth. The small percentage – 2.4 percent – of out-of-school youth represented across the four countries might reflect the difficulty of reaching this population. Not only do these youth not receive the in-school banking and financial education opportunities, but the financial institutions’ outreach strategies, which place a heavy emphasis on schools, may not be reaching them.

Varying factors were associated with the amount of money the youth saved in each country. However, the only factor consistent across the countries is the manner in which youth learned about the account. At account opening, in each country except Colombia, the youth are asked how they learned about the product. The financial institutions in each country had different outreach strategies, but included both direct to communities and schools, and mass media. In Ghana and Kenya, for example, youth who learned about the account through mass media were likely to save more than others. It may be that mass media attracted a more diverse population than other outreach efforts. In Ghana, learning about the account through friends and family also was associated with savings, and in Nepal, youth who selected an “other” unspecified way saved more. Although the type of outreach associated with savings differs by country, these outreach strategies seem to play a role in savings performance.

YouthSave has been successful in attracting a sizeable portion of low-income youth, along with higher-income youth through multiple outreach and access strategies. It may be that this combination of strategies, plus those that target out-of-school youth, will more likely ensure maximum participation.

These results offer insight as to possible models that can increase youth financial inclusion. The initial findings suggest that when accessible models are in place, participation will follow. Yet questions remain: What policies and regulations are needed to help the financial institutions more easily reach both in- and out-of-school youth? Will schools allow agents to be co-located? Will mobile technology become a more accessible avenue for all ages?

At this point, YouthSave has developed a market-based model, choosing to work with commercial banks for their potential to scale the product after project end. Over the next two years, we will continue to learn from this extensive dataset about the potential of – and limits to – such a model in terms of outreach, and where efforts should be complemented with policy support to extend safe savings opportunities to more youth.