Financial literacy starts young.
Image: courtesy Michael cheang

Public school kids save for a rainy day


Cheang [assistant professor at UH’s Department of Family and Consumer Sciences] solicited local companies to adopt a school in their district and pledge $1,000 to $5,000 each year to make the program self-sustaining.

Education / How did a professor at UH-Manoa manage to help more than 1,000 kids from mostly low-income families in Hawaii save more than $115,000?

In her new book, The Money Class, financial guru and TV host Suze Orman says the key to teaching children how to save money is how the information is presented. She strongly recommends “financial honesty” rather than parental denial when explaining financial matters. Telling children it’s important–and fun–to save money, for example, is a positive lesson.

Saving for a new bike, a college education or a rainy day is a concept foreign to most children raised in low-income families in Hawaii. With Hawaii’s budget deficit and economic downturn, the state’s poverty rate jumped to 12.5 percent in 2009, its highest level since 1997, according to the US Census Bureau. That makes it difficult for many parents to save money or even consider teaching their kids to do so.

Start early

“It’s been quite a success,” says Michael Cheang, an assistant professor at UH’s Department of Family and Consumer Sciences in the College of Tropical Agriculture and Human Resources. “These are not privileged children. They never believed they could save money. Now they are doing it, and it has been life-changing for them.”

Learning to save early in life enables children to take advantage of the benefits of compound interest, according to Cheang. “Many baby boomers are finding out from their financial planners that waiting until age 55 to save seriously is not enough time to enable them to retire.”

In August 2008, Cheang laid the groundwork for the Kids Savings Project, motivated by his concern that our country is in a financial crisis, and children need to start the habit of saving early in life.

“Families in Hawaii without emergency funds are only a few months away from being homeless,” he says. “Research shows that those who get in the habit of saving when they are young tend to be better at managing their finances and lives as adults.”

Launching the program

Cheang began by getting small grants for seed money from the Hawaii Community Foundation and partnering with the UH Federal Credit Union to begin the pilot project. The first 100 kids (kindergarten to fifth graders) who signed up to participate received $25 to start a personal savings account. Additional children could join by depositing $5.

Partnerships were later established with the Hawaii Alliance for Community Based Economic Development, the Mayor and County of Hawaii, the Hawaii Credit Union League and numerous credit unions. Cheang’s next step was to persuade school principals to allow him to start the program in their schools. Many were reluctant because they worried it would involve extra work for their teachers.

“I discovered that this program is not for every school, just those where the principals see its value and are willing to commit to it.”

He has now enrolled 18 Department of Education elementary schools on Oahu, Kauai, Maui and the Big Island. He also solicited local companies to adopt a school in their district and pledge $1,000 to $5,000 each year to make the program self-sustaining.

How it works

Each child who joins the project receives an initial $25 to open a savings account with a partnering credit union. They also get a piggy bank, agreeing to save regularly during the school year, although each child sets their own goal, and there is no minimum amount to save each month.

Many of the children save part of their allowance, do additional chores or recycle cans in order to save each month.

To make it convenient for parents and kids, the credit union staff come to the school once a month to collect deposits. Each month or quarter, the children receive an official statement of their account balance from the credit union. Parents are offered financial literacy workshops on where to find money to save, setting goals for saving money, etc.

Now in its third year, the Kids Savings Project has encouraged siblings and parents to also open savings accounts.

“We have dispelled the myth that low-income kids cannot save money,” says Cheang. “If we put the pieces together to make it happen, they can and they do.”