Cross-posted on YouthSave.org
Recently, the Citi Foundation asked members of its Research Working Group to write a paper analyzing the existing literature on the key components of economic citizenship among children and youth. The paper entitled, “Children and Youth as Economic Citizens: Review of Research on Financial Capability, Financial Inclusion and Financial Education,” was presented at the Children and Youth Finance International (CYFI) summit in April. Among the members of the committee working on this paper was YouthSave’s Margaret Sherraden, who contributed to the sections pertaining to financial inclusion and financial capability.
The paper focuses on the theory and research of the key components of economic citizenship: empowerment, social education, financial inclusion, financial education and financial capability, with an emphasis on the last three components. The Working Group’s starting point was a heuristic model they developed to show how financial education, social education, and financial inclusion interact with one another, influence empowerment and capability, and ultimately, lead to economic citizenship for children and youth. The authors begin by outlining the paper’s central idea that “global efforts to establish economic citizenship among children and youth can be best undertaken with a solid theoretical model supported by empirical evidence.” However, the authors point out some caveats, particularly that their model is only as helpful as the practical evidence on which it rests.
The first section of the paper focuses on financial capability, which is the paper’s key outcome of interest. Financial capability suggests that children and youth should learn about financial management and the financial world at the same time as they are provided access to beneficial tools to participate. The studies on financial capability indicate that both financial education and financial services are both important but “more rigorous research is required to understand the independent and joint contributions of financial education and financial services, and identify ways to integrate them.” The desire to gain a more nuanced understanding of how financial education and financial inclusion affect financial capability led the authors to look closer at the current research.
In order to analyze the interaction among the components of economic citizenship, the authors considered the other two major elements: financial inclusion and financial literacy. Based on the research’s initial findings, children and youth benefit from financial inclusion, particularly access to savings accounts. For children and youth, financial inclusion, at a minimum, means access to basic financial services that include a safe place to keep money and accumulate savings. For the final component of economic citizenship, the group analyzed several studies on financial literacy and found that financial education is generally associated with short-term knowledge gains and self-reported behavior changes.
Overall, the theoretical and empirical work to date suggests that increased financial inclusion, in addition to financial education, will likely be necessary to build the financial capability of children and youth. The Working Group’s key recommendations emphasize the need for a global network of researchers who will undertake empirical research across national and cultural contexts, and increasing the efforts of quantitative and qualitative studies. Additionally, one of the main conclusions of the paper is that theories regarding financial inclusion and education must be systematically tested if efforts are to be based on evidence.
YouthSave’s current research in Colombia, Ghana, Kenya, and Nepal may contribute to the Working Group’s goal by shedding some light on the relationship between savings and financial education for youth. For instance, YouthSave’s study in Ghana is testing the effectiveness of savings accounts and financial education for in-school and out-of-school youth.
The ultimate goal for leaders in the movement for economic citizenship is to assure financial and economic rights for children and youth, so that they may realize their full potential as economic citizens. We welcome CYFI’s thorough analysis and contributions to youth development, and in particular, we hope that our research can help the efforts to improve the opportunities of low-income youth in the developing world.