This week, Junior Individual Savings Accounts went live to six million potential users.
At the same time it, Minister for Children and Young People, Tim Loughton, announced that 55,000 young people in long-term care will receive a £200 JISA.
Whilst financial education is primed for debate in the House of Commons, youth saving is now taking centre stage – personal debt is £1.5tr and a pensions time bomb is ticking, efforts like these offer the chance to boost savings, financial inclusion and literacy.
The JISA hook
Young people’s attitudes towards saving and use of bank facilities are poor. 5.1 million under 25 savers don’t know the interest rates of their accounts and 3.7 million under 25s don’t know their balance.
JISAs offer something regular bank accounts don’t, an incentive to saving. Young savers receive the worst return on their deposits, half under 1%, the lowest, 0.05%, whereas most JISAs offer between 3.5% and 2%.
Savings are locked in until 18 years of age, at 16 they can take control and manage it as they see fit. JISAs could be a great chance to have a tangible first experience with a financial product.
Even before 16, a young person could be involved in the decision-making process with their parents on how to make best use of their ISA. Later, perhaps as they start that first job, they can take ownership and start to contribute towards their own financial future in a safe and secure environment. Then, at 18, there is a reward right before university when they may need it most.
If financial education is relevant, engaging, accessible with a tangible outcome, it works and just as our work demonstrates, using real money experiences brings knowledge to life.
At the moment there isn’t a crowded and confusing amount of providers and the Islamic and ethical offerings allow young people to make an informed choice. We hope to see more innovative and flexible JISAs that put young people and their families at the heart.
Saving with care
Helping young people make that transition to independent living is what MyBnk is all about, the move is especially difficult for those vulnerable people in challenging circumstances like sheltered housing or unemployment.
Again savings are locked in until children become 18 and individuals and organisations who want to invest in a young persons future can also contribute.
Helping young people in care manage their money is step one, this initiative could make step two, putting money knowledge into action, that bit easier.
The sooner young people are familiar with banking and saving, the better they can develop sound financial habits and navigate the system – stay out of debt, manage student loans etc. We’ll be spreading the knowledge inside and outside the classrooms and sharing the power.