Weekly stipend of $50 spanning 40 weeks significantly impacts lives of teenagers with no conditions attached
In a groundbreaking study conducted over the past five years at Rooted School in New Orleans, high school students have been receiving $50 every week for 40 weeks, totaling $2,000 with no strings attached. The study, which has since expanded to eight other high schools in New Orleans and Rooted's sister campus in Indianapolis, aims to explore the impact of giving cash directly to young people on their financial capability, self-perception, and academic performance.
The findings of the study suggest that unconditional cash transfers to teens can reduce financial stress, improve financial literacy and savings habits, and somewhat increase school attendance, even if they don't directly improve academic outcomes.
Financially, the extra cash has helped students acquire stronger long-term planning skills and familiarity with savings accounts and other financial products. On average, recipients saved about $300 by the end of the program, representing a 15% savings rate, which is triple the national average for American adults. This growth in financial literacy and capability is evident in the students' improved understanding of savings and their ability to plan for their futures.
However, academic performance did not differ significantly between the groups. Nevertheless, students receiving the cash were slightly more likely to attend school regularly. This indicates that the cash transfers may have a positive impact on students' overall commitment to their education.
Students used the money for a variety of personal needs and aspirations. Some spent it on TikTok shop items like posters, keyboards, and lights, while others aligned their spending with future goals such as college prep classes, getting a driver's license, and dance class expenses. Even though some students used the cash for personal expenses, the study shows that the majority of recipients were able to make thoughtful decisions about their spending, prioritizing their long-term goals.
One participant described the cash as the "most helpful thing ever" for supporting their goals and mental focus. Another student, Lyrik Grant, used the $50 to afford dance class expenses and a college entrance exam. Vernell Cheneau III, a former student, tried to use the $50 to build credit history and learned the full cost of being an adult in America.
The city of New Orleans has invested $1 million to bankroll another extension of the study in January 2024, as part of an economic mobility initiative that taps into federal Covid relief funding. The report released Tuesday shows students who received the cash payments were slightly more likely to attend school than those who didn't.
Despite the positive findings, the politics surrounding cash transfer programs may need to catch up to the research. Skeptics often worry about recipients using public dollars for drug use or illicit behavior, but data does not support this claim. Talia Livneh, senior director of programs for the Rooted School Foundation, believes that kids deserve deep trust in managing their finances.
The study has found links between cash transfer pilots and better test scores and graduation rates for kids. As the study expands to Washington, D.C., and perhaps Texas, it will be interesting to see if these positive trends continue in other cities. The $50 study demonstrates a promising approach to investing in young people's futures by empowering their financial independence and self-efficacy during a pivotal life stage.
- The study, which has expanded to various schools, explores the impact of providing unconditional cash transfers to students on their education and personal-finance, demonstrating that it can help reduce financial stress, improve financial literacy and savings habits, and slightly increase regular school attendance.
- personal-finance education seems to be a beneficial byproduct of the study, as students have acquired stronger long-term planning skills, familiarity with savings accounts, and other financial products, resulting in a higher savings rate on average compared to the national average.
- Deducing from the Rooted School's study, it appears that cash transfers could have a positive influence on students' commitment to their education-and-self-development, since those who received the cash were slightly more likely to attend school regularly.
