Teaching Kids to Save

March 25, 2011

The American Bankers Association (ABA) wants it members to focus more on teaching kids to save. The banking trade group has challenged the industry to open 15,000 new children's savings accounts in honor of the 15th anniversary of Teach Children to Save Day on April 12. Nearly three dozen banks had joined the challenge as of last week.

According to the ABA Education Foundation, which is spearheading the program, children who have savings accounts in their own names are seven times more likely to attend college than those who don't.

The Teach Children to Save program connects bankers with students for hands-on savings education lessons. Drawing from an extensive set of resources (e.g.: scripted lesson plans, promotional materials) that correlate to national teaching standards, and their own life and work experiences bankers aim to motivate students to become lifelong savers.

Additional public resources (e.g.: money manuals for parents and tips for college students) are available for download at a Web site operated by the ABA Education Foundation.

"At the end of the day, we hope these lessons will inspire students to make savings a regular part of their lives," said Laura Fisher, Executive Director of the Foundation.

U.S. Savings Rates Remain Low

Blame it on the economy. Blame it on the banks. Blame it on poor role models. Whatever the cause, the fact is that Americans don't put much into savings accounts.

According to a Harris poll earlier this year, 27% of Americans have no personal savings and 34% have no retirement savings accounts. Only one in three Americans under the age of 30 has a personal savings account. (See this previous post for more data and analysis.)

And although grass roots efforts like Teach Children to Save are admirable, it's just one small step in what may prove to be a long and arduous journey. After all, about one in four American households today has no (or very little) interaction with regulated financial institutions, according to the most recent data from the Federal Deposit Insurance Corp. (FDIC).

Developing World & Savings Clubs

In the developing world, where even fewer adults have access to formal financial services, microsavings programs have become key to fostering financial inclusion. Yet, many of the world's unbanked, especially in the developing countries, prefer non-traditional methods of savings, like savings clubs.

That's a key finding put forth in a new report from IFC, a World Bank member. Titled - Deposit Assessments in India - the report details the supply and demand, regulatory and operational demands for microsavings options for the poor and unbanked in India. It's available for download at the IFC Web site.

In Africa, too, where less than half the population has access to formal financial services, there's a growing trend toward creating non-institutional savings groups. The groups go by many names, including tontines, susus, merry-go-rounds and ROSCAs.

A ROSCA is a small group of individuals who each contribute a fixed amount at agreed-upon intervals; the amount collected each time is paid out to one member at a time until each member has received the "pot."

A report released last year by SEEP analyzes examples of this model and concludes simplicity and tradition make for good programs that can be autonomous in as little as a year. Nearly 200,000 women in Niger today belong to these groups, according to that report, titled Savings Groups: What Are They?

The international relief group, CARE, has a program - Access Africa - that promotes what it refers to as Village Savings and Loan Associations that are now in place in at least 26 countries, according to SEEP.

Americans use nonbanks to cash $60 billion in checks yearly

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