Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Effectiveness of gov't-led savings program for young people remains in doubt
Financial Services Commission (FSC) Vice Chairman Kim So-young, right, speaks during a public-private sector meeting for a final check-up on the Youth Leap installment savings product at the Government Complex in central Seoul, May 31. Introduced by the government, the savings product will be made available for young people this month. Yonhap
By Yi Whan-woo
By Yi Whan-woo
A new installment savings product assisted by the government will be made available this month for young people. But it is uncertain whether they can benefit from the product as it has demanding terms and conditions concerning the monthly savings amount and subscription period, among other things.
On each Thursday and next Monday, a total of 12 private commercial banks will list out deposit rates and other details for Youth Leap, the product initiated by the Yoon Suk Yeol administration to help young people to improve their financial well-being.
Product subscriptions are available to those aged between 19 and 34 whose annual salary does not exceed 75 million won ($57,300), with a goal of helping them save 50 million won over the next five years.
According to the Financial Services Commission (FSC), up to 3 million people are estimated to be eligible.
Industry sources, however, remain skeptical over whether enough people will take an interest.
They pointed out that a subscriber will be asked to save up to 700,000 won per month for five years, which is likely to be financially burdensome.
“For instance, a subscriber won't be able to spend at least one-third of their monthly income if their monthly salary is 2 million won or less,” a source said. “And the fact such a spending restriction will last for five years will be too tough for low-income earners to bear.”
To subscribe to Youth Leap, one must close other installment savings products that are also aimed at benefiting young people to ensure they do not benefit excessively through multiple, similar programs.
The problem is, many potential subscribers for Youth Leap have already joined Youth Hope, a two-year maturity product introduced during the preceding Moon Jae-in administration.
The number of Youth Hope subscribers stands at more than 290,000, meaning many of them will need to close their accounts if they want to switch to Youth Leap.
“This is such a waste of money and time to come up with similar products,” a source said, noting that the Yoon administration spends 344 billion won to support Youth Leap while the Moon administration spent 45.6 billion won for Youth Hope.
The details to be listed out by the 12 banks will be posted on the Korea Federation of Banks' (KFB) website, and offers of high deposit rates are expected to be a key draw to potential subscribers.