Association for Public Policy Analysis & Management

Bank in school programs have existed for well over a century (Bowman 1922, Cruce 2002). Today, over 900 school bank branches operate in the United States (CUNA, n.d.). Advocates assert banks in schools will help students to gain financial and economic knowledge, as well as develop a positive attitude about banks and savings. Studies of experiential learning suggest there could be merit to having exposure to banks in schools, including having students apply what they learn in math or economics to banking transactions. Despite the long history of banks in school, there are few studies of these programs. Even if there are benefits to school bank branches, there are policy concerns that should be considered. One concern is that bank branches in schools are essentially granted a monopoly to serve students. These banks could exploit these relatively unsophisticated customers— elementary, middle, and high school students— who may not be equipped to recognize or protect themselves from potential harm.

This study focuses on three questions central to this policy discussion: (1) is there evidence that children who bank at school build a savings habit?; (2) are children more comfortable with financial institutions when they have access to in-school bank branches? ; and (3) does banking at school influence student’s financial knowledge?

Using data from a randomized field experiment of elementary school students in two US school districts, we provide the first formal analysis of school-based banking activity. Students were participated in a financial education intervention at schools with and without bank branches. Surveys were collected from both students and parents during two academic years. Administrative data from the bank branches was also collected, detailing in- and out-of-school deposits and withdrawals during the school year.

Students are more likely to have their own bank account when they have a bank branch available in their school. Students with a bank at school make more frequent deposits than those who do not have a bank at school. Students with a school bank branch also report more trust and familiarity with financial institutions and more positive attitude towards saving than students who do not have a bank in their school. We also find that bank branches at school and financial education programs are complementary in some ways, including student’s measured financial literacy.

These results support the idea that students could benefit from school systems allowing bank branches to open in school, at least if increasing financial literacy and capability are goals for school policy. But this study also highlights the disparities among which schools have branches, and which students open accounts. Meanwhile, banks and financial institutions may not favor the low-balance, high frequency small transaction accounts that bank in school branches tend to encourage. This study shows evidence that school bank branches offer opportunities for students to learn financial capability, potentially benefiting communities and the economy in the future. But it also raises important banking regulation, school policy and consumer protection issues that need more attention from policymakers and parents.