Mediyaan YuvaAccording to the World Bank, nearly 40 percent of the world’s population is between the ages of fourteen and twenty-five, and 85% of them live in developing countries. Further, one in five youth lives on less than US$ 1 a day and the unemployment rate among youth is several times that of adults (United Nations, International Labour Organization). In effect, there are more young people who need opportunities, techniques and financial support to become productive adults. Towards this end, scholars and practitioners have increasingly been focusing on savings as a basis for building their resources to empower the youth particularly from disadvantaged and low-income backgrounds. Evidence indicates that connecting young people to savings opportunities could benefit low-income children and vulnerable youth in a number of ways.
Youth comprise a sizeable segment of India’s population which has a high level of demographic dividend; but, youth especially from underprivileged groups and communities face several problems at socio-economic levels. More importantly, young girls and women face enormous social discrimination and inequities, which comes in the way of getting opportunities or tools or financial backing to become productive adults. Among the different ways of empowering youth – especially girls and young women, who face greater social and economic inequities as well as discrimination, teaching them to learn about money management skills through building up savings during their adolescent period would go a long way to create opportunities for their personal, educational, and livelihood opportunities.
In the last two decades evidence shows that building assets especially savings, can bring a range of benefits to individuals and households with low incomes. Relevant literature in the field shows that women who save are better positioned to support their families, weather emergencies, take advantage of economic opportunities, and build their businesses. Ownership of assets in the form of savings or youth savings accounts has demonstrated in many low-income countries that it can bring about economic, social, psychological and behavioural changes that can improve several development effects for vulnerable youth. An important aspect of creating an attitude towards savings lies in its ability to make the youth inculcate habits of financial responsibility and financial discipline. Moreover, it can help them to be included into the formal financial system at an earlier age thus giving them access to more diverse opportunities for their livelihood (through improving their educational or skill enhancement for better job or self-employment opportunities) and better management as they begin their adult lives.
The Global Index data for 2013 shows the gender disparities in ownership of formal accounts is sharpest in India like in the rest of South Asia.[1] For instance, women are 41 percent less likely than men to have a formal account: while 44 percent of men report having an account, only 26 percent of women do so. By comparison, in the rest of the developing world women are 22 percent less likely than men to have an account. Empowerment of women rests not only on the levels of their education and health, but also on their access to finance, financial inclusion and financial capability/ skills. Economic independence plays a critical role in empowering the poor women. While financial inclusion is of paramount importance; an essential element to access financial services lies in the poor’s ability to save. This would enable them to boost their self confidence in handling money and in responsible spending, thus improving their financial capability through the benefits of their own saved money.
Reserve Bank of India’s decision in May 2014 to let banks offer independent saving accounts to children over 10 years is a case in point to highlight that the policy makers think it right to let young people access formal financial services because it will teach financial responsibility. The Government of India subsequently introduced ‘Sukanya Samriddhi Account’, a new small savings instrument for the girl child that could be operated by her after the age of 10, which underscores how important it is to encourage young girls to develop savings habit. Seva Mandir, a leading nonprofit institution in Rajasthan, India, is a pioneer in encouraging youth to save through promotion of ‘Bacha bachat samuh’ or ‘Child Savings Club’ based on self-help group model run and operated by children.[2] This club has been successful in its goal of making its youth members understand money management and financial skills and knowledge besides certain other social outcomes.
Microfinance practitioners in India have been promoting financial access and capability principally in the form of savings and often complemented by financial education for women. Extant research indicates that the poor adults do save in various informal mechanisms; however, youth savings has been not only under recognized but also not received serious attention in India. Anecdotal information about dropping gift money received on occasions like birthdays, festivals by kids in gulaks or clay piggy banks, tin boxes etc., is a prevalent practice in many Indian households that encourage children to learn about saving and spending responsibly.
Creation of habits towards thrift and prudence and promoting a culture of savings at an early age would go a long way in meeting their own dreams and aspirations. An attitude to save and benefits of building up savings may not be comprehended by the youth either because of lack of awareness about the need for savings or lack of preference for savings or lack of economic foresight due to high level of aspirations and consumerist attitudes among the youth. For instance, a recent survey[3] on young Indians’ saving and consumption (splurging) patterns, it is reported that 59 percent of young Indians want to be rich enough and consumption emerged as a big marker of youth identity. A survey by KPMG indicates that the Indian youth psychographics reflects high level of pent-up demand and aspirations.
The New Education Policy 2022 introduced by the Government of India aims to make education more flexible, and all encompassing, with a focus on basic skills, life skills and critical thinking. It is rightly said that good habits are best learned and taught young. The NEP augurs well for the educational institutions, especially the schools, to think out of the box to provide children the platform and an opportunity to save and build up resources (financial) that would help them to practically learn the skills of money management.
Schools across India play an important role in offering children a holistic development of academic and extracurricular activities through various clubs for students ranging from cultural, sports, interpersonal, public speaking clubs, to name a few. It is timely for the school system to cover a new territory by starting ‘Savings Club’ for middle school[4] students to help to foster a saving habit and other good financial habits from an young age. Primarily, Savings Clubs are schools-based activity which offers students opportunity to deposit and withdraw small amounts of money on a regular basis, usually in collaboration with a local bank (or credit union) as seen in some developed countries. Savings clubs can offer practical experience of handling money with the handholding support of a local bank and school authorities. As schools have children from various walks of lives including economically weaker sections, the focus of the savings club should be in motivating to save regularly and not on the quantum saved; besides, saving for a specific purpose (buying stationary, gifts, or books etc).
The schools can involve students in running and operating the savings club as a self-help group model similar to Seva Mandir ‘s Child Savings Club. Savings Club need the participation of senior student volunteers as monitors with expert guidance from local bank and teachers. In effect, the concept of a School Savings Club offers a bouquet of practical learning opportunities for students when they join and in helping to run a school savings club. There are 2 important payoffs that can come with this savings club initiative. Firstly, the students will gain money management skills by managing their own money, handling and taking responsibility for money through this ‘hands on learning opportunity’. Secondly, this would provide an opportunity for girls to open a savings account with a local financial institution and develop the skills necessary to use the bank account / financial services from a young age.[5]
A starting point for conducting this Savings Club initiative could begin with ‘Girls Only’ schools because research indicates that women in general, are better disciplined, by disposition in handling money as well as towards financial responsibility, contrary to popular perception. Given the innate trait of women to pass on the benefits of their learning, skills, capabilities and especially, financial resources to their families, the true empowerment lies in creating every young woman to become financially skilled in managing her life and those around her. So, one life skill that can be imparted at a young age is rightfully to every young girl in the school system that would go a long way in providing her an opportunity to access both resources and gain economic independence.
- Dr. Mani Arul Nandhi, Former Associate Professor of Commerce, Delhi University
Arul Kumar