Hello, I am Jun Ji-hye, a reporter at The Korea Times. I primarily cover financial authorities and write articles on a wide range of topics related to finance and capital markets. If you have any information to share, feel free to email me at jjh@koreatimes.co.kr, and I will review it carefully. I am committed to always doing my best to communicate with readers through high-quality articles.
Young Koreans cancel high-interest savings accounts amid rising living costs
gettyimagesbank
By Jun Ji-hye
Kim, a 30-year-old office worker in Seoul, began contributing 500,000 won ($360) to a government-subsidized savings account, or Youth Leap account, in September 2023, setting aside part of his monthly salary from his first job.
He was hopeful about the state-provided matching funds and tax advantages, which promised a sizable lump sum after five years. But the optimism did not last long. As the cost of living surged, covering monthly credit card bills and basic expenses became increasingly difficult. Kim ended up terminating the savings plan early in April.
“With rent and food prices rising, I felt like I was going into the red every month. I just couldn’t afford to wait five years,” Kim said.
Kim’s experience reflects a broader trend with the Youth Leap account program, launched under the previous Yoon Suk Yeol government to help young adults accumulate long-term savings.
Despite its intended goals, the program has struggled to gain traction as many young participants face financial strain due to unstable employment and rising living costs.
The program, which began in July 2023, targets individuals between the ages of 19 and 34 with annual incomes of 75 million won or less. Participants can deposit up to 700,000 won per month. If held to maturity over five years, the account offers a maximum effective annual return of 9.54 percent through a combination of interest, government support and tax exemptions.
However, the early withdrawal rate of this high-rate savings account has been steadily climbing, according to a report published Monday by the National Assembly Budget Office.
The rate rose from 8.2 percent in 2023 to 14.7 percent last year, and further increased to 15.3 percent as of April. The report pointed to financial hardship among young participants as the main driver of this upward trend.
In a separate study by the Korea Inclusive Finance Agency, released in March, among those who canceled their accounts early, 39 percent cited job loss or declining income, while 33.3 percent said they needed immediate cash.
Meanwhile, half of the surveyed youth identified rising living expenses as their most significant financial burden.
The Yoon government initially aimed to attract 3.06 million young people to the Youth Leap account initiative, but as of July 25, the program had accumulated only 2.2 million sign-ups.
Amid disappointing results, the program is set to end this year. In its tax reform announcement last week, the Ministry of Economy and Finance confirmed that the program’s tax exemptions on interest and dividend income will expire as scheduled in December.