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Strengthening the financial future of America’s young workers

Each year, millions of young adults enter the workforce and take the first steps toward building their financial futures. Since 2014, the Bureau has worked to help job training programs prepare young adults for the key financial decisions that come with their first paycheck. Through this work, the Bureau has heard from youth employment programs across the country that a critical component of youth financial capability is helping young people obtain and utilize a bank or credit union account, or a prepaid account to deposit and manage their income. However, some youth employment programs have told us that it can be difficult for young people, under the age of 18, to access an account.

The value of a checking or savings account

The Federal Deposit Insurance Corporation’s (FDIC) 2015 National Survey of Banked and Unbanked Households  found that people who are banked build savings at a higher rate than those who are not. The survey also found that approximately 9 million American households did not have checking or savings accounts at the time of the study. Households headed by individuals age 15 to 24 were almost twice as likely to be unbanked than the national average. Youth employment programs provide an opportunity to offer more unbanked young people with the opportunity to open an account and begin to build positive financial habits.

Helping young workers access banking services

Some banks and credit unions across the country are already collaborating with youth employment programs to help more young people access low-cost savings and checking accounts, including noncustodial accounts for working minors. However, some youth employment programs have told us that it can be difficult for participants under the age of 18 to open their own accounts, due to concerns from financial institutions about how federal or state laws may apply to noncustodial accounts for customers under age 18. Some young people under the age of 18 need a noncustodial account because they do not have a trusted adult or guardian who can serve as the custodian of account funds on their behalf. The Bureau has heard from youth employment program staff and leadership that sometimes sharing a transactional account or financial information with an adult can put the young person at risk of experiencing identity theft, fraud, misuse of funds, or even a debt due to unpaid fees. 

Resources for entities seeking to help youth access transaction and savings accounts 

Youth employment programs offer a key opportunity to build financial capability into the lives of young people who are preparing to enter the workforce and manage their own finances. Helping youth participants access a checking or savings account may help more young people begin on the path to financial security early in their lives. 

To support financial institutions and youth employment programs as they explore ways to incorporate financial capability services in youth employment programs, the Bureau compiled a list of three key resources related to checking and savings accounts for young people.

1) Federal interagency guidance on youth savings programs 

The Bureau has heard from youth employment programs that some financial institutions are cautious about opening accounts for minors due to concerns about whether there are federal restrictions that may prevent them from providing youth with noncustodial accounts. In order to address this concern, several federal regulatory agencies came together to release Federal Interagency Guidance to Encourage Financial Institutions’ Youth Savings Programs and Address Related Frequently Asked Questions . This guidance states that federal law does not prohibit minors from opening savings accounts. The joint guidance was released and updated in 2017 by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), Financial Crimes Enforcement Network, National Credit Union Administration, and the Office of the Comptroller of the Currency (OCC).

The guidance also outlines flexibilities in Customer Identification Program (CIP) requirements that allow financial institutions to verify the identity of minors using nontraditional forms of identification. For example, it notes that a student identification card may be used by a financial institution to verify a minor’s identity.

2) The Conference of State Bank Supervisors offers an online tool for statutory requirements for opening bank accounts for minors 

Many states allow minors to open noncustodial accounts, in some cases with restrictions. The Conference of State Bank Supervisors offers an interactive Online Tool for Statutory Requirements for Opening Bank Accounts for Minors that financial institutions can use to review their state’s law. The tool also provides relevant state regulatory contacts for financial institutions.

3) FDIC Model Safe Account Template

In 2011, the FDIC developed and tested its Model Safe Accounts Template . According to the FDIC’s materials about the template, it was designed to test "safe, low-cost transactional and savings accounts that are responsive to the needs of underserved consumers." The template provides guidelines on features and fees for transaction and savings accounts.

The FDIC’s 2011 one-year Model Safe Accounts pilot program with nine financial institutions demonstrated that accounts that followed the template had higher retention rates with consumers at roughly the same cost to the banks as other accounts. The final report on the pilot has this and other information.

As youth employment programs increasingly focus on developing the financial capability of young workers entering the workforce, there is an opportunity for financial institutions and youth employment programs to work together to offer young adults checking and savings account options that work for them. Making these options available, in conjunction with financial education that helps young people understand how to utilize accounts and build critical money management skills, can help young adults begin their careers with positive financial habits.

To learn more about the Bureau’s Youth Employment work, read about the 2017 Youth Employment Success Roundtable

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