When it comes to savings for the poor and financial inclusion efforts, India is a dynamic market ripe for innovation and experimentation. Its extensive web of financial service providers as well as the incidence of large-scale exclusion are contradictory features that also make it a market worth examining.

Youth savings accounts are emerging as a potential poverty reduction and youth development tool, with initial evidence indicating that children and youth who save in accounts earlier in life begin to think positively about their futures. Researchers have observed asset effects, or as the YouthSave Consortium defined the term in a 2010 publication, the “economic, social, behavioral, and psychological impacts of asset ownership,” in a number of studies. For example, qualitative findings from the SEED (Saving for Education, Entrepreneurship, and Downpayment) Initiative, a national demonstration of 1,171 child development accounts in the United States, showed that, in addition to gaining financial savings, participants had higher self-esteem, hopes for the future, financial knowledge, and security.

Kenya’s financial market has caught the world’s attention. The rise of mobile money in Kenya has become the interest of financial inclusion experts, the excitement of mobile network operators, and an opportunity for financial institutions to rethink their products and services. However, the implications and transformative impact of mobile money and other related innovations in the financial landscape are often much less examined and understood.

This paper argues that common definitions of financial capability understate the role of psychological barriers to establishing sound financial behaviors, namely savings habits. Drawing on insights from psychology and behavioral economics, we explore these missing psychological variables in the standard financial capability equation and suggest mechanisms, or nudges, to overcome those barriers to accelerate financial capability among low-income youth.