It’s a worldwide cliché that young people are spendthrift souls who don’t look after their money very well. I certainly remember having to teach my own children a thing or two about counting pennies.
It’s another cliché to say that the poor are unable to save; they live a hand-to-mouth existence in which putting a little money aside just isn’t possible.
Combine the two, and you’ll find a powerful myth that the young and poor of the “global south” are, from the point of view of financial inclusion, a very difficult “nut to crack” — at least until they are a little older.
This is an impression that is borne out when you examine the provision of savings groups by nongovernmental organizations. A 2013 survey by the SEEP Network found that across 43 countries, just 22 percent of providers included youth-focused groups. What’s more, young people don’t engage in “mainstream” groups — less than 4 in 10 providers reported participation by younger people in traditional savings groups.
This is a gap in urgent need of plugging. There are more young people than ever before — not far off half of the global population is under 25, and the vast majority of these are in developing countries. And yet this group is faced today with diminishing employment opportunities, and are three times more likely to be unemployed than adults.
The challenges — and opportunities — presented by this demographic phenomenon are well-known. What’s clear is that societies across the planet have much to gain if this burgeoning group is well equipped with the financial and entrepreneurial knowledge and skills to help them thrive, now and in later life.
So, let’s bust a myth. Spendthrift their image may be, but young people can and do save. Research suggests half of 15-24s in sub-Saharan Africa saved at least some money in the past year. But for the most part, this isn’t through formal institutions or even the informal savings group sector.
This is where, as NGOs, we need to deliver. Young people want to save for their futures; they simply need the right tools and encouragement to do so. If traditional savings group methodologies aren’t working for the young, we need to adapt them.
With this in mind, Plan UK, in partnership with Barclays and CARE International, has put together a set of principles — a youth savings group model — setting out how the tried-and-tested savings group approach can be adapted to work for young people. And work it does — as shown by the 132,000 under-25s who have been saving through our “Banking on Change” program over the past three years.
First though, it’s important to set out what doesn’t need to change.
The overall approach needn’t be radically overhauled, and that’s important to keep in mind. Some of the key principles of village savings and loans associations should remain the same; for example, group membership should be self-selecting, funds should be ring-fenced for a group’s exclusive use, and a social fund should be established for emergency assistance. These important principles work for young people as they do for adults.
But in other ways, particularly regarding the initial outreach work to recruit members, savings groups can be made to work better for young people.
We need to reach young people in their own spaces and on their own terms, so “youth village agents” should be recruited to bring new members on board. Drawn from existing successful youth savings groups, we’ve found that young agents are more likely to be successful in convincing their peers to get involved.
Similarly, while the principle of self-selection should remain, group facilitators have found that a degree of homogeneity of membership can be beneficial. Savings groups have proved more successful when members are at a similar life stage and share similar goals.
Once a group is formed, some adaptations can be made to make it better fit the reality of young people’s lives. In our work we’ve noticed a trend, for example, for young people to take part in the group with money from parents or caregivers, and even to be able to take loans on those people’s behalf. This needs to be carefully managed, with parents and caregivers included where possible in training provided, but if it helps young people have some access and exposure to financial services, the benefits are manifest.
And those benefits can go significantly beyond the purely financial, too. Savings groups for all ages are increasingly being used as a platform to deliver other interventions, but our research has found that young people in particular not only demand these “add-ons” but are more likely to draw on additional benefits than older members.
Such interventions should complement the overarching purpose of a savings group, but can go beyond that too. So as well as financial literacy skills and broader business workshops, advice on sexual and reproductive health, training on girls’ rights and encouragement of female empowerment can all be successfully delivered through the groups. Our evidence shows that a successful youth savings group can become a real hub of a young community.
With this in mind, it’s time that across the sector we step up and deliver for young people. The challenges facing the young are many, and global in scale. And with more than 1 billion children set to transition through adolescence into adulthood over the next decade, these are not challenges we can afford to ignore.
Our hope is that the youth savings group model will serve as a practical tool for practitioners as we seek to meet those challenges. Don’t believe the myths — young people can save, and with the right tools and adaptations, youth savings groups can help them prepare for their entry into the global economy.
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Tanya Barron is CEO of Plan U.K. since January 2013. Previously, she was international director at Leonard Cheshire Disability, and in 2003 was given the European Woman of Achievement (Humanitarian) award. Barron also holds various trusteeships and is currently a board member of the World Bank's Global Partnership on Disability and Development.
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