The research on young people’s savings points to early access to basic financial services to improve young people’s life outcomes, including things like improved financial and educational outcomes. Just to give a few examples, research by William Elliott and colleagues finds that young people who have their own savings accounts are significantly more likely to attend and graduate from college. Some of my own research finds that young people are significantly more likely to continue saving later in life when they have access to savings accounts early in life. Given the apparent importance of young people’s savings for improving their life outcomes, financial institutions have a role to play in including young people in basic financial services.
Yet financial institutions that actively pursue and cater their products to young customers are rare. Young people are not always seen as savvy money managers or capable of saving apart from their parents. These beliefs about young people play out in major economic theories of saving, which tend to leave out young people entirely because they assume young people are acquiring debt as opposed to saving. Although rare, financial institutions that cater to young people do exist. Perhaps one of the best U.S. examples is the Young Americans Center for Financial Education located in Denver, Colorado.
The Young Americans Center for Financial Education has accomplished what researchers and policy makers dream about. They operate the Young Americans Bank – an FDIC-insured bank designed specifically for young people. Just for clarification: this is not a bank designed for adults and whose products and services have been adapted for or made available to young people. This is a bank designed completely with young people in mind. In fact, you have to be age 21 or younger to open an account at the Young Americans Bank.
Here are some examples of the types of products and services they offer: basic or traditional savings accounts with a minimum initial deposit of $10, certificates of deposit (CD), basic or traditional checking accounts with debit cards, online banking via the internet, and small loans to pay for things from school books to bikes and cars.
History of the Young Americans Bank
The Young Americans Bank opened in 1987 and is pleased to celebrate its 24th birthday tomorrow – August 6th. (That’s right – they’ve been around for 24 years! Just to provide some context, that’s about three or four years before asset-based social policies were introduced by Michael Sherraden and about 15 years before the Saving for Education, Entrepreneurship, and Downpayment [SEED] Initiative tested the idea of Children’s’ Development Accounts [CDA’s]). In the first month of operation, over 2,000 savings accounts were opened. Since that time, the Young Americans Bank has served over 471,000 young people nationwide and has expanded to three locations. They also have a Youth Advisory Board comprised of young people who provide their insights to the Board of Directors while learning about philanthropy and leadership.
There is a good deal we are able to learn from the Young Americans Bank that can inform both research and policy. The America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act , for instance, proposes to create savings accounts and encourage financial education for every young person in the U.S.; however, this proposed legislation is sometimes met with questions. What will these accounts look like? Where will young people get the money to save? How will young people access their accounts to make deposits? How will they receive financial education? A notable feature of the Young Americans Bank is that it falls under the larger umbrella of the Young Americans Center for Financial Education. The Young Americans Center operates the bank, works with teachers to provide financial education curriculum, offers financial education classes, and educates young people about business and entrepreneurship. This means that the Young Americans Bank is embedded into an infrastructure that provides young people with the support to save, earn money, and learn about financial decision making. The following provides information on how the Young Americans Bank has responded to some of these questions, and the answers may be informative for future research and policy on young people’s savings.
What types of Savings Accounts are Available to Young People?
There are currently over 15,000 savings accounts at the Young Americans Bank with an average balance of $550. As mentioned, these accounts can be opened with a minimum deposit of $10 and no monthly service charges (as long as a deposit or withdrawal is made once every three years). Young people can make up to four withdrawals per month without restrictions and their savings earns interest on a quarterly basis.
Where do Young People get the Money to Save?
The Young Americans Center for Financial Education sponsors activities, such as financial education classes, business competitions, summer camps, and an entrepreneurs’ marketplace in which young people can buy and sell their products or services. Young people can earn money through most of these activities, which can then be deposited into their savings accounts. The Young Americans Center also sponsors a business competition, where young people ages six to 21 submit entrepreneurial ideas for a chance to win a top prize of $1,000 and be mentored by a prominent business professional from the local community.
How do Young People Access their Accounts?
Just like a typical bank, young people can access their accounts at the Young Americans Bank in person, by mail, or online. These different points of access mean that young people can have some control over their accounts. In other words, they do not always need to wait until their parents make errands to the bank. They can send their deposits in the mail or check their account balances online.
How do Young People Receive Financial Education?
There are a variety of ways young people can receive financial education at the Young Americans Center for Financial Education. They offer free Saturday classes, summer camps to learn about the free enterprise system and global economics, tool kits with accompanying workshops that teach how to start a business, and an active marketplace to test out some of their ideas. Not to mention that they can open a savings account at the Young Americans Bank, which allows them to put into practice the things they are learning about saving.
For additional information:
or visit their websites:
Recent NAF Papers on Young People’s Savings
- Savings and Assets over the Life Course
- Accelerating Financial Capability among Youth
- Frequently Asked Questions about Youth Savings Accounts
- Savings-Linked Conditional Cash Transfers
ASPIRE Act Introduced in the House
Questions and Answers about ASPIRE
A Nudge to Financial Stability and Literacy
Banking on the Future: Building an Infrastructure around Children’s Savings