When the recession’s credit crisis hit the Mission District – a neighborhood teeming with payday loan-lenders – the staff at Mission SF Federal Credit Union thought, perhaps, financial education needed to start much earlier for its members.
Now the credit union teaches children as young as five years old the basics of not only of checking and savings accounts management, but investments and loans through its Prize-linked Accounts for Youth (PLAY) Program.
Since the credit union and its non-profit subsidiary, the Mission SF Community Financial Center, started the pilot program last summer, it has drawn the interest of the Federal Reserve Bank of San Francisco as a potential model for motivating spenders to become savers.
Kids learn about money from an “interest fairy” decked out in glittery wings to teach the benefits of putting funds in a savings account. Mournful violin music emphasizes the sacrifice made when paying interest on their imaginary loans. Teens and young adults learn how a little planning can give them more financial independence and about careers in community banking.
The program sets up youth aged five to 17 with real savings accounts that earn 3 percent interest. The rules state a saver must deposit money for six consecutive months, and participate in an orientation and a prize-day at the end of six months where they can earn more money to put in their savings account. The deposits come from money the children acquire through things such as birthday presents, chore money or allowance.
Each youth sets a goal of saving up for something they want to buy at the end of the sixth months, but can continue saving instead if they wish. So far, eight children have completed the program. The financial education center is now advertising for more students to apply for the next session, which starts in June.
Seasoned savers from the center’s Youth Trainers for Economic Power program lead many of the lessons and activities.
“[Youth] always expect when they’re going to learn something from adults it’s going to be boring, but when you have financial education taught by someone closer to their own age, they tend to care more,” said Celina Ramos-Castro, the credit union’s youth program coordinator. Because public schools require no classes in budgeting, grabbing the attention of the youth they try to educate when they can is all the more important, she added.
For participants older than 10, the PLAY program departs from the “interest fairy” approach in favor of a more serious financial preparation for adulthood. Youth trainers invite them to become join their ranks and, if drawn to a career in financial services, can become the face of the Youth Credit Union Program (YCUP), a branch of the Mission SF Federal Credit Union now in its twelfth year.
Thirteen-year-old Randy Ramirez, who started at age 11, is one of those faces. He said the career potential attracted him.
“I just knew that I wanted a good job at an early age,” Ramirez said.
The credit union trains members as young as 13 to be actual bank tellers at the Mission SF Federal Credit Union and earn a monthly stipend of $150. On Wednesdays from 3-5 pm and Fridays from 4-5:30 pm, they work at the front desk at the credit union, one of the few that allows minors ages 14 and up open up bank accounts without parental permission. While many larger banks require a minimum initial deposit of more than $100, youth can open an account at the credit union with as little as $5.
Because of that, a range of youth sign up for bank accounts at the credit union, some with parents, some alone to be independent from their parents, while others are emancipated teens manage their own finances.
As a newly-minted youth program teller, 16-year-old Jessi Giovanni Aldana, said he has already learned a lot about saving money from performing transactions for the diverse financial needs of credit union depositors. Aldana said he sometimes sees responsible depositors reach savings goals faster than richer, but less financially responsible people.
“It just shows us what it really takes to build savings,” Aldana said.
Prodding youth like Aldana to think carefully about how and why to save drew the attention of the San Francisco Federal Reserve Bank’s research department.
“We’re interested in seeing what incentivizes people to save,” said Laura Choi, a research associate at the Federal Reserve Bank of San Francisco. “From a research standpoint, we don’t have a lot of conclusive information on what works.”
Choi said other programs such as the D2D Fund, a nonprofit which promotes innovative saving strategies for low-income families, are making progress with financial education in areas such as the Midwest. But the Mission SF Federal Credit Union’s PLAY program is unique because of its young audience and its diverse, low-income demographic, which Choi said she wants to engage in responsible banking.
Responsible money management can empower an entire community, according to one former youth credit manager, 19-year-old Stephanie Lopez. For Lopez, now a San Francisco State University freshman accounting student, that means advocating the use of credit unions over big banks.
“What I learned while I was here is that a credit union practically recycles what they earn and puts it right back into the community they’re in,” said Lopez, who acts as youth representative on the board of the Mission SF Federal Credit Union. “With a bank, your money could travel all the way across the country, if not the world. Then you never see where it goes.”
In addition to inspiring young savers to become masters of their own money, program officials hope the financial education rubs off on family members old and young, said Margaret Libby, executive director of the Mission SF Community Financial Center.
“We’re trying to get [youth] to say, ‘When I get my first job, I could see myself budgeting and using a savings plan like this,’” Libby said. “And that’s a habit most adults don’t even have.”