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Youth Savings Pilot Program Underway By FDIC

Earlier this month, the Federal Deposit Insurance Corporation (FDIC) announced a pilot program to encourage school-aged youth to save money. The goals of the program are to collect and share best practices by participating banks.

The pilot program includes two phases:

"... the first covers programs that will be in place during the 2014-2015 school year. Through August 22, 2014, the FDIC is soliciting interest from institutions that will have a youth savings program underway during the 2014-2015 school year. For the second phase, the FDIC will begin soliciting interest in April of 2015 for institutions that will begin new savings programs with schools in the 2015-2016 school year..."

After the "great depression," the U.S. Congress established the FDIC in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 6,730 banks and savings associations. The agency promotes the safety and soundness of banks by identifying, monitoring and addressing risks.

According to a December 2012 report by the FDIC (Adobe PDF):

"A majority of banks (87 percent) offered at least one of the following specialty savings products: Individual Development Accounts (IDAs), specialized savings clubs, workplace-based savings, or youth (minor) savings accounts. Youth accounts dominated, with 82 percent of financial institutions offering this savings product. Forty-one percent of banks offered specialized savings clubs..."

That same report also concluded about all consumers, not only youth, without bank accounts:

"Community outreach through collaborations with community groups was identified as the most effective strategy for developing relationships with these populations. Despite this recognition, only about half of all banks reported using partnerships with organizations to promote opening checking or savings accounts."

In a 2011 study by researchers at the University of Kansas concluded:

"... that when savings accounts are started for children of low-income families and financial education is included, not only are the families more likely to save, but students can be more likely to attend college and graduate... when money is set aside for college, families save more, find creative ways to save even when money is tight and view attending college as a more realistic possibility."

During its pilot program in 2014-15, the FDIC will document innovative practices and assess the success of participating banks. Participating banks must send in December 2014 a summary of the youth savings programs they implemented during the Fall. The FDIC will collect a variety of data about the pilot program, including:

".... the number of accounts opened, the average saved in the accounts, indications on whether the youth accounts helped the institution establish account relationships with the parents, the on-boarding process for the accounts, the financial education strategy used and its reception, the longevity of account relationships, whether banks felt satisfied with their work with the school, and whether the bank’s expectations were met."

Learn more about the FDIC Youth Savings Pilot Program. The Credit Union National Association (CUNA) operated during April 2014 a similar national program to encourage savings by youth.

What are your opinions of this pilot program? Do youth need to save more?


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Marcia Szkolka

Who is really benefiting from this program? Banks, children, or their parents? Interest rates on savings accounts are very low right now.

Of course I approve of youth saving money in bank accounts but where is the financial incentive? What interest rate will be offered so that new account holders can see it is really worth the effort? If the banks are collecting children's money without a fair payback it will only show how crooked and sly financial institutions can be. The banks are using the children to attract the parents to save. Looks like more money for the greedy banking system and less for the common folk.

The lesson on saving money needs to include a lesson on compounding interest. The idea of making money with your money is a lesson my mother taught me back in 1960.

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