On June 14th, Save the Children in Colombia hosted the first YouthSave Multi-Stakeholder Meeting (MSM), which brought together representatives from government ministries and agencies, local and international NGOs, and microfinance institutions. The goal of the MSM was to present YouthSave to a broad audience of stakeholders, connect with institutions that work on similar issues, and contribute to the national dialogue on topics such as financial education, financial capability, and financial inclusion – issues that have recently gained increasing attention from the government, NGOs, and other private organizations in Colombia. Members from the public included around 40 representatives from government institutions such as the Ministry of Education, the Ministry of Finance, the Central Bank and Banca de las Oportunidades, organizations such as MercyCorps, Plan, Conexión Colombia and UNDP, and microfinance institutions such as Bancamia and Finamérica.
The MSM featured a panel moderated by YouthSave Executive Advisory Board member Beatriz Marulanda, who framed the discussion by defining financial capability as comprising knowledge and skills, as well as the opportunity to exercise them. Four panelists – YouthSave Country Advisory Board member Ricardo Leon, Maria Teresa Mojica from the NGO Dividendo por Colombia, Elsa Patricia Manrique from our FI partner Banco Caja Social and myself – provided different perspectives on how to increase financial capability among youth.
Following are some of the key points raised in the discussion:
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What should come first, financial education or financial access? Ricardo Leon and Maria Teresa Mojica stated the need to prioritize financial education, while Elsa Patricia Manrique and myself asserted the need to have a simultaneous and complementary process, where both elements were offered and could help reinforce each other. “Learning by doing” is a valid way by which youth can acquire financial knowledge, as long as financial products are simple, accessible and user-friendly. If these conditions are not met, then offering financial products to young people without any type of previous education could potentially have negative effects such as indebtedness.
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How do you build a culture of savings? How can the habit be developed? According to Ricardo Leon, the importance of saving should be communicated such that children start perceiving it as a normal activity in their lives. This includes not only talking about savings in school, but also approaching children and youth in other situations, such as when they go to the branch of a bank. Elsa Patricia Manrique stated that, particularly with savings accounts for youth, there needs to be a combination of “carrot and stick,” so that incentives for saving are offered – in the form of material prices for account opening, raffles that reward frequency of savings – along with disincentives for withdrawing and spending – such as withdrawal fees. Panelists also mentioned that it was important to consider youths’ dreams and goals as the starting point and cultivate those as the main motivational factors that can lead young people to start developing a savings habit.
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How should we address youth vulnerability? One way to address it is through product design, making sure that youth savings accounts have a degree of flexibility that allows users to get their money in case of emergencies or extreme need. The level of flexibility required depends on the characteristics and conditions of the target population. Ricardo Leon suggested that vulnerability could also be managed through the marketing process, by reinforcing the message that the money that goes into a young person’s savings account should only be used to achieve his/her savings goals, but money could be put aside to cope with unforeseen circumstances.
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What about interest rate as an incentive for youth savings? Elsa Patricia Manrique mentioned that even though interest rates for savings products in Colombia are low overall, “Cuenta Amiga para Jóvenes” offers rates comparable to those of adult accounts. She pointed out that it is not so much a low interest rate that discourages usage of accounts, but rather the high fees associated with several bank services. This is why the “Cuenta Amiga para Jóvenes” does not have any management fees. In addition, panelists indicated that, based on the results of market research conducted for the YouthSave Project, the interest rate did not appear to be a primary motivator for account opening or usage. Instead, youth mentioned security and accessibility as main drivers for choosing and opening a savings account.
Colombia´s first Multi-Stakeholder Meeting brought together a diverse range of actors in the fields of financial education and financial access to discuss and share experiences, ideas, and inputs on issues that are critical for increasing youth financial capability. Our next challenge is to continue the conversation in different national and international forums, as well as nurturing it with evidence and results from the YouthSave Project.
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Alejandra Montes Saenz