Teaching kids to save in elementary school can pay off later

() — Many kids lack financial literacy, or the knowledge to know how to save and use their money, with as many as 75% of teenagers reporting they don’t feel comfortable understanding their finances.

For the past 20 years, elementary schools across the state of Nebraska have partnered with local financial institutions to do something about that.

Together, they have operated In-School Savings Programs (ISSPs) that allow elementary school kids to experience what it’s like to save up money in a bank account.

While these programs were pioneered in Nebraska, they are growing in popularity across the United States.

The way an ISSP works differs depending on the school, but they are generally set up as a partnership between an elementary school and a bank or credit union.

The financial institution establishes a special branch inside the school for the students who have parental permission to deposit money into a savings account (they are not allowed to withdraw funds). Students in upper grades are allowed to work as tellers who take deposits from students once a week, when the branch is open.

Students are given different incentives to encourage them to make deposits into the savings account — these range from stickers to pencils or coin pouches. In the state of Nebraska, around 50 schools currently participate in these programs.

Jennifer A. Davidson, a University of Nebraska-Lincoln professor who has studied ISSPs and helped schools set them up, argued that the benefit of these programs is to change students’ thinking.

“The whole goal is to teach, establish the habit of savings. That’s the entire wish, the entire goal of the program is for students to see this habit, ‘Oh I can do this is, it’s really easy. I just get really used to it.’ So when they move on, high school and beyond they already have this habit,” she said.

Davidson conducted research on a school in Nebraska that has been operating an ISSP program for over 10 years. She found that over 90% of those who participated in an ISSP program opened bank accounts by the time they reached high school compared to around two-thirds of those who didn’t participate in an ISSP program.

While many factors can influence how much money someone saves up — like their income, which will vary from person to person — opening a bank account at an early age can help someone learn good financial habits and accrue more savings that can help them when they start adulthood.

She acknowledged the school she examined in this study did not have a lot of socioeconomic diversity; she hopes to study the implementation of ISSPs in a larger school district like Omaha in the future.

Davidson argued, however, that even low-income students who don’t have much money to put into their accounts still benefit from the program. She said many low-income schools participate in ISSPs and the goal is to encourage participation regardless of the amount of money you have.

“They can bring a penny that they found on the sidewalk on the way to school and they’re participating, right? Because we don’t want them to be left out,” she said.

Davidson did caution, however, that while it doesn’t cost much on the financial institution’s part, these programs require long-term relationships between them and schools.

“This is a marriage, not a date… it does take employee time, from the bank or the credit union, to go over to the school every week and it really does take commitment from the school to ensure that it’s successful,” she said.