As Banks Open In Schools, A Chance For Students To Learn To Save

Jun 4, 2014
Originally published on June 4, 2014 10:20 am

Wearing a red Union Bank polo shirt, high school senior Jerry Liu politely helps a peer with a bank deposit. With a waiting area and even a decorative plant on the table, this could be any bank branch — but right outside this island of adulthood are the hallways of Lincoln High School in Los Angeles.

This is one of three student-run Union Bank branches in California. They're all located in low-income, immigrant-heavy neighborhoods. You can only bank here if you're a student, teacher or parent, but these are real accounts handling real money.

Liu is one of 12 student bankers at Lincoln High School.

"It taught me a lot of new things," Liu says. "I was really worried about finances [before] I go off to college, and it opened my eyes to a lot of the new world."

As a kid, the closest you probably got to banking was handling colorful bills of Monopoly money. Now, kids are getting a lot closer to the real thing. Hundreds of student-run bank branches and credit unions are open in schools across the U.S. The first branch in Los Angeles opened this spring.

Union Bank trained Liu to work as a teller and will give him a stipend and college scholarship money totaling $1,500.

Mónica García, board member of the Los Angeles Unified School District, was instrumental in bringing the bank here.

"I thought the innovation of the student-run bank would be something that fits into our mission of college-ready, career-prepared graduates," García says.

Many schools across the country are experimenting with student-run banks; Union Bank and Capital One are two of the biggest.

J. Michael Collins, professor of consumer finance at the University of Wisconsin, Madison, says student-run banks have operated without much oversight, which has bred skepticism.

"You have some parents who say, 'Well, why would we allow that particular bank branch?' " Collins says. " 'Aren't we granting them, essentially, a monopoly on these relatively naïve, unsophisticated children?' "

Union Bank didn't have to compete against others to enter Los Angeles schools, for instance. The bank spent $200,000 to build each branch and pays to staff them with managers.

Collins believes banks are mainly in it for public relations and marketing. Union, at least, isn't in it for a financial return, says Jan Woolsey, who heads community reinvestment at the bank.

"We don't expect to make money. Certainly, I think it'll be good for our brand that we're making this kind of investment in young people and in communities that need us," Woolsey says. "But really and truly, our real motivation is: How do we help strengthen communities and make them healthier?"

Woolsey particularly hopes to reach communities in low-income areas, where immigrant or non-English speaking families operate outside the banking system — a difficult position that leaves vulnerable groups open to predatory lending. A school bank branch could help bring families into the system, she says.

As for the student bankers, they love their jobs; they get to build up their resumes, make money — and some have even been hired at Union Bank branches out in the community.

Those who bank at the school branches like it, too. It teaches them to save.

Back at Lincoln High, Liu finishes up a transaction. It wasn't long ago that getting access to credit at his age would've been unheard of. That's an important point, Collins says.

"We are in a bit of a grand experiment on financial literacy in schools," Collins says. "As I reflect on all the different approaches that are out there, this very simple concept of placing a bank branch in a school setting, to me, seems to have a lot of bang for the buck."

In the meantime, the Office of the Comptroller of the Currency is considering a special designation for school branches, which could pave the way for more.

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STEVE INSKEEP, HOST:

For many children, an early experience with banking is simply passing out that colorful Monopoly money. But now some kids are getting closer to the real thing. Hundreds of student-run bank branches and credit unions have opened in schools across the United States. Alex Schmidt reports on the first student-bank in Los Angeles which opened this spring.

(SOUNDBITE OF CASH REGISTER)

JERRY LIU: So how much would you like to deposit?

UNIDENTIFIED WOMAN: Twenty five.

ALEX SCHMIDT, BYLINE: Wearing a red Union Back polo shirt, high school senior, Jerry Liu, politely helps a peer with her bank deposit. This could be any bank branch with a waiting area and even a decorative plant on the table. But right outside this island of adulthood is a hallway of LA's Lincoln High School.

This is one of three student-run Union Bank branches in the state of California. They're all in low-income immigrant-heavy neighborhoods. You can only bank here if you're a student, teacher or parent, but these are real accounts handling real money. Liu is 1 of 12 student bankers at Lincoln.

LIU: It taught me a lot of new things. I was really worried about finances and et cetera before I go off to college. And it opened my eyes to a lot of the new world.

SCHMIDT: Union Bank trained Liu to work as a teller and will give him a stipend and scholarship totaling $1,500. LA Unified School District's Monica Garcia was instrumental in bringing the bank here.

MONICA GARCIA: I thought the innovation of the student-run bank would be something that fits into our mission of college-ready career-prepared graduates.

SCHMIDT: Many schools across the country are experimenting with student-run banks. Union Bank and Capital One are two of the biggest. J Michael Collins has studied the phenomenon in-depth. He's a professor of consumer finance at the University of Wisconsin, Madison. And he says student-run banks have operated without much oversight which has bred skepticism.

J MICHAEL COLLINS: You have some parents who say, well, why would we allow that particular bank branch? I mean, aren't we granting them essentially a monopoly on these relatively naive unsophisticated children?

SCHMIDT: For instance, Union Bank didn't have to compete against others to enter LA schools. It spent $200,000 to build each branch and pays to staff them with managers. Professor Collins believes banks are mainly in it for PR and marketing. Union isn't in it for a financial return, says Jan Woolsey, who heads community reinvestment at the bank.

JAN WOOLSEY: We don't expect to make money. Certainly I think it'll be good for our brand that we're making this kind of investment in young people and in communities that need us. But, really and truly, our real motivation is how do we help strengthen communities and make them healthier?

SCHMIDT: Love banks or hate them, operating outside the financial system is tough and even opens up vulnerable groups to predatory lending. A school bank branch could help bring families into the system.

As for student bankers, they love their jobs. They get to build up their resumes, make money. Some of them have even gotten actual jobs at Union Bank. Those who bank there like it too. It teaches them to save.

LIU: Twenty - 21, 22, 23, 24, 25.

WOMAN: Thank you very much.

LIU: No problem.

SCHMIDT: Back at Lincoln High, student banker, Jerry Liu, finishes up his transaction. It wasn't long ago that getting access to credit at his age would have been unheard of. And that's an important point, says J Michael Collins, of the University of Wisconsin, Madison.

COLLINS: We are in a bit of a grand experiment on financial literacy in schools. I mean, and as I sort of reflect on all the different approaches that are out there, this very simple concept of placing a bank branch in a school setting, to me, seems to have a lot of bang for the buck.

SCHMIDT: The Treasury Department is considering a designation especially for school branches which could pave the way for many more. For NPR news, I'm Alex Schmidt.

INSKEEP: Its NPR News. Transcript provided by NPR, Copyright NPR.