A groundbreaking project examining the attitudes and practices of young people in developing economies toward saving money has led to new findings that confirm and challenge assumptions about youth saving at formal financial institutions. 
The study shows, for example, that girls given equal opportunities will save as much money or more in formal financial institutions than boys. The study demonstrates that, under the right conditions, younger youth will save more than older youth and that parental involvement in supporting their children’s saving is an important factor in determining who saves money, how much and how often.
The study was conducted by YouthSave, an international development consortium led by Save the Children in partnership with the Center for Social Development (CSD) at Washington University in St. Louis, New America Foundation, the Consultative Group to Assist the Poor (CGAP) and The MasterCard Foundation, a founding partner of the YouthSave consortium.
The report released today, Youth Savings Patterns and Performance in Colombia, Ghana, Kenya, and Nepal, outlines findings from a study of the largest known dataset on how teens in developing countries save money. Under this project, more than 117,000 youth in the four countries opened savings accounts. Of these young people, almost 70,000 agreed to take part in the research study; about 48 percent of them were youth estimated to be living at or below $2.50 per day.
The data enabled CSD, YouthSave’s lead research partner, to detail who is saving and to identify factors linked with savings patterns. This information is critical for practitioners and policymakers who want to increase youth financial inclusion, those interested in innovative development strategies, and financial institutions seeking to expand into this market segment.
On the importance of this research for the field moving forward, YouthSave Project Director Rani Deshpande said, “The results afford us unparalleled visibility into the savings behaviors of young people, proving not only that youth will save when given the right opportunities, but also shedding light on how financial institutions can most effectively reach and encourage them to do so.”
The research indicated that to include more girls in the formal financial system, it may be better to enhance access to formal savings accounts than to increase savings amounts. The research also showed that in Ghana and Kenya having parents or guardians as bank account co-signers (as opposed to other adults such as teachers) generally led to higher savings amounts.
“This YouthSave report is an important contribution to the knowledge base about what drives young people in developing economies to get and stay on a savings path that will serve them well throughout their lives,” said Ann Miles, director of financial inclusion at The MasterCard Foundation. “We’re looking forward to other reports from YouthSave that will offer similar insight and help policymakers to take the decisions that will benefit youth, their families, their communities and their countries.”
Other key findings of the report include:
- As measured by average monthly net savings, younger youth (i.e., younger than 13 years) save more than older youth, in part because younger youth withdraw less than older youth. This highlights the importance of starting to save early in life.
- Direct outreach from financial institutions to locations where youth congregate (e.g., schools, youth clubs) facilitates overall account uptake.
- About 39 percent of youth were actively using their account during the last six months of the study. Deposit frequency is highest in Colombia where monthly deposits are part of a programmed savings goal, which suggests the importance of focusing on ways to increase deposits. For example, youth receiving cash incentives in Nepal saved significantly more than other Nepalese account holders.
- Financial institution policy influences the number of accounts opened. In Ghana and Kenya, flexibility in bank policy allowed “trusted adults” to be co-signatories on minors’ accounts. The result was nonrelatives opening 56 percent of accounts for youth in Ghana and 47 percent of accounts for youth in Kenya.
“CSD appreciates this unique research opportunity through YouthSave to work with partners across these four countries to gather data and report on one of the most comprehensive datasets on youth’s savings patterns and performance in developing countries,” said Li Zou, CSD’s director for YouthSave and the center’s international director.
CSD’s Lissa Johnson, who led the savings demand assessment study with collaborating research partners in each country, said: “The financial institutions have made a strong commitment to youth financial inclusion, especially incorporating marginalized youth, and to the learning agenda. Our findings contribute knowledge about who saves, what enables access, and patterns associated with savings.”
Collaborating research partners are University of Los Andes in Colombia, Kenya Institute for Public Policy Research and Analysis (KIPPRA), New ERA in Nepal, and the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana.
The report is one of three to be published this year. The others will focus on results from the YouthSave experiment in Ghana and findings from an integrated case study.
At the YouthSave Learning & Exchange Conference this week in Toronto, Johnson, who is CSD’s director of administration, and YungSoo Lee, who is on the faculty at University of Incheon, South Korea, will present findings from the report with research partners from Colombia, Ghana, Kenya and Nepal. Zou will share the qualitative findings coming from interviews with youth participants. Gina Chowa, an assistant professor at the University of North Carolina School of Social Work and a faculty director at CSD, will discuss results from the Ghana experiment with colleagues from University of Ghana and University of Incheon.
The conference will bring together YouthSave Consortium members, research and financial partners from Colombia, Ghana, Kenya and Nepal, global experts in youth finance, and the MasterCard Foundation.
The Center for Social Development’s mission is to create and study innovations in policy and practices that enable individuals, families and communities to formulate and achieve life goals, and contribute to the economy and society. Through innovation, research and policy development, CSD makes intellectual and applied contributions in social development theory, evidence, community projects and public policy. The center is part of Washington University’s Brown School of Social Work.