Strengthening Youth Asset-Building Programs in the Republic of Korea
Since the launch of the Youth Leap Account on 15 June 2023, the number of applicants has soared to 103.6 million by 14 July 2023, reflecting a growing interest in asset-building programs for youth. The Youth Leap Account is a state-backed savings program designed for a five-year maturity period, allowing Koreans aged 19 to 34 to make monthly payments of up to KRW 700,000 ($517). The government provides a basic interest rate of 4.5% for the first three years. Account holders can receive up to KRW 50 million ($36,922), combining preferential interest rates and government contributions upon maturity. Young adults with an individual gross income of KRW 75 million ($55,382.87) or less, and household income at 180% or less of the standard median income announced by the Ministry of Health and Welfare, qualify for the program. After three years, the interest rate converts to a variable rate based on the average difference between the base and preferential rates.
In addition to the Youth Leap Account, the government has various youth asset-building programs. These include the Youth’s Savings Account for Tomorrow, managed by the Ministry of Health and Welfare, targeting low-income youth with a monthly income of KRW 2.2 million ($1,624.48) or less; Benefits for Tomorrow, managed by the Ministry of Employment and Labor, supporting young adults employed in small and medium-sized enterprises (SMEs) in manufacturing and construction industries with 5 to 50 employees; and the Youth Hope Savings introduced by the Financial Services Commission (FSC) in February 2022, targeting young people with a total income of KRW 36 million ($26,581.21) or less. Although the Youth Hope Savings also targets young adults aged 19 to 34, detailed conditions vary by applicant (e.g., military service completion, income scope). The FSC does not allow applicants to apply for both the Youth Leap Account and the Youth Hope Savings simultaneously. However, sequential registration is permitted, allowing applicants to register for the Youth Leap Account after mid-term cancellations and maturity of the Youth Hope Savings.
These asset-building programs aim to:
- Bridge both intergenerational and intragenerational wealth gaps.
- Help young people accumulate assets for marriage or childbirth.
- Provide incentives for young people to join the workforce.
- Promote stable asset building by curbing excessive leverage and increasing investment in safe assets.
Since these programs are limited to young adults, they can help reduce the generational wealth gap. They also aim to close the intra-generational wealth gap by varying government contributions based on household and earned income. Additionally, these programs can improve the quality of life for youth by aiding their transition to independence, marriage, or childbirth, and promoting social dynamism. They support labor supply and build human capital by helping young people accumulate assets through earned income. Programs like the Youth Leap Account contribute to stable asset building by providing safe and profitable state-backed savings accounts.
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