I’m always prepared for a little bit of reader feedback, but I didn’t expect a recent column about a banking program for children to generate any big concerns.
In September, I wrote about the Federal Deposit Insurance Corp.’s Youth Savings Account pilot program, which launched this fall in a handful of schools around the country. Nine financial institutions with existing school-based educational programs were selected to participate in the one-year test.
The program seems straightforward: Children in the participating schools are encouraged to open savings accounts at the same time they’re learning about the banking system and good money-management habits in the classroom.
The FDIC hopes to use this test as a springboard for a broader test with more banks in fall 2015, with the goal of offering a blueprint for banks to work with schools and other organizations to combine financial education with access to a savings account.
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End of story, or so I thought until I heard from a reader named Randy. He was skeptical of how well the kids will be schooled.
“So now (banks) are going to schools to collect money from our children for accounts that they will loan out for 4 percent while paying the savers less than 1 percent in interest,” Randy wrote in an email.
“Since the current interest rate is lower than the inflation rate, the kids are actually losing money by putting it in a savings account. Do the bankers plan to tell them that?” he asked.
Young Americans Bank, for one, is not shying away from interest rate realities and other current banking topics.
The bank, based in Cherry Creek, Colo., is participating this school year in the FDIC’s pilot program. It opened 27 years ago and is the only bank in the country that solely serves account holders up to age 21.
The FDIC is monitoring Young Americans’ program with middle school and high school students at a public school campus near the Denver airport called the Children’s Corridor. The three high schools, two middle schools and one elementary school draw about 1,700 children, mainly from low-income Hispanic families.
Adding to the challenge, many of the students distrust financial institutions, and a significant number of them come from families that don’t have bank accounts, said Rich Martinez, Young Americans’ president and chief executive.
To break down those barriers, Young Americans’ employees work with teachers to give students a broad-based financial education curriculum that covers saving lessons, credit, budgeting and investing.
“We try to get them to come to some self-awareness about money and what they do with it,” Martinez said.
Do students ask questions about low rates on savings accounts, credit card delinquencies and home foreclosures?
“We hear it and we talk about the negatives,” said Martinez. “We don’t sugarcoat it. Why would we?”
The Athol Savings Bank in Athol, Mass., is also participating in the FDIC test. Its Save $um program, which it launched in 1999, is for children at five grade schools.
As part of Save $um, Athol Savings operates a real bank in each school, with student “tellers” taking deposits and helping to open passbook savings accounts and even certificates of deposit.
Program coordinator Cheryl D’Ambra, a senior vice president at Athol Savings, said bankers go into the classrooms and offer kid-friendly explanations about how banks operate, including how loans are made and why there are microscopic rates on savings accounts.
The conversations also include topics such as compound interest and wants versus needs — with a few games added in for fun and a party at the end of the school year for the “tellers.”
“This is an introduction to banking for younger children,” said D’Ambra. “It’s important to us. We see parents getting in trouble. We don’t want to see history repeating itself.”
I couldn’t agree more.