When Seeking to Financially Include Youth, Parents Matter

Much ink has been spilled about the saving habits of adults, but what do we know about how and why children save money? It’s an important question, because one-third of the world’s population is under the age of 19. Statistics show that children who save money are more likely to set goals for their future and do better in school, and less likely to engage in risky behaviors.

Pramod, a 13-year-old living in Bhaktapur, Nepal, is one such child. He used to spend his lunch money playing cyber games and his time cutting school. Now, he saves his money in a bank account instead and dreams of joining the army and buying a house. Mercy, another 13-year-old, hails from Naivasha, a market town northwest of Nairobi in Kenya. The main industry where she lives is agriculture, but Mercy wants to become a lawyer so that she can help people who are suffering. Since 2012, she has been saving in a bank account to help with her school fees.

Even though most people would agree that child welfare and saving money are critical concerns, making policy for youth financial inclusion (broadly defined as achieving full, safe, and appropriate inclusion of children and youth in the financial services and products) is a tricky matter—especially in developing countries. Social norms and financial conditions vary from country to country and consensus about what strategies will be most effective remains elusive.

Nonetheless, initiatives like YouthSave—a project I work with at New America that has developed, delivered, and tested savings products accessible to low-income youth—continue to work with banks in countries like Nepal and Kenya to increase flexibility around youth account ownership and control. While youth want control and independence over their own bank accounts and the funds therein, they also need guidance, financial education, and age-appropriate protections. From allowing trusted adults to cosign on accounts instead of parents to providing youth with the means to check their account balances independently, banks in the developing world have been working to give young customers what they want.

But in Nepal, Kenya, and the other countries (Ghana and Colombia) where YouthSave has partner banks, research shows a much more complex picture. As it turns out, children and adolescents save more when parents co-sign on their accounts. Teenagers of course wanted more autonomy, but their efforts to save are more successful when their parents are involved.

For banks that are looking to offer products to young people, not to mention anyone who works on youth economic development issues, these findings support the idea of a more nuanced approach. Despite the relative autonomy that youth may desire, demand, or enjoy in any given context, parents cannot be ignored; in fact, they may be critical to giving staying power to potentially poverty-reducing strategies and programs.

And, importantly, involving parents in their children’s savings accounts may well have positive impact on the parents’ lives as well. Where banks take a holistic and inclusive approach to the financial products they offer for young people, some parents have also begun to participate more actively in saving.

With parents as partners in youth economic development, the financial outlook for the family overall looks brighter. As Martin Mwaura, an associate program manager at K-Note, an NGO that delivers financial education to youth account holders, puts it: when parents realize “that ‘we can do better when we have a bank account,’ then it also means that by extension they are going to support the young people after they open their account.”

For young people like Pramod and Mercy, this means a lifeline between the present and their aspirations. Not only is it more likely that money will be there to help cover future shortfalls for educational expenses or to seed a micro-enterprise, it is also true that children and families are jointly investing in and shaping the future in a concrete way. And, for families living on an economic precipice, this means building resilience for the next generation from the start.