BANK FOR YOUTHS GIVES LESSONS IN FINANCE

Young Americans Bank loans money to kids to buy items such as cars, computers and pets. Kids nationwide have accounts.

"Will that be cash, check, or charge?" is not a common question asked a 12-year-old. But that is not out of the ordinary in Denver, where children have their own bank.

Young Americans Bank was founded in 1987 by Bill Daniels, a cable television pioneer, to teach children how to manage money.

"If you don't learn how to manage money, money will manage you," said Linda Sanders, president of Young Americans. "Learning things at a younger age is good, especially when it involves habits. Money management and budgeting is clearly a habit."

Only children under 21 are allowed to use the bank. Children can borrow money, have savings and checking accounts, even get traveler's checks.

"We are almost more in the business of education than we are in the business of banking," said Sanders. "The whole objective here is to expose young people to the banking system, financial management skills and knowledge about how credit works and checking accounts work."

Although the bank is run by adults, due to federal banking regulations, a youth board of 12 advises the adult board of directors.

20,000 children banking

Twenty thousand children from all 50 states and from nine foreign countries have had accounts with the bank. Eighty-five to 90 percent of them have had saving accounts.

"One of the important things that we think they learn here is just (to) develop a habit for savings," said Sanders.

The bank also gives out loans to children for such things as cars, computers, puppies, business start-ups and proms. Young Americans Bank has about 300 loans on the books right now. Sanders couldn't be exact because "they pay them off so fast it's hard to keep track."

"I don't know of any banker in the state of Colorado that wouldn't love to have our loan portfolio," she added. "We do not have delinquencies, and we don't have losses. The kids are extremely responsible with them."

To illustrate, Sanders told about an 11-year-old customer who borrowed some money for a business.

"We always tell these folks when they close the loans that if you don't have a checking account with us, don't mail cash in for your payments. Cash can get lost in the mail. We suggested they give money to Mom and Dad or someone with a checking account and have them write a check and send that in to us."

Well, the 11-year-old was late with a payment so the bank called him, Sanders continued. "He dropped the phone and said, `Mom, what did you do with that money?' She told him she had forgotten to mail the payment, and he was just really upset with her. He said, `You're going to ruin my credit rating.' "

Children have to be at least 12 to open a checking account because younger children may not be able to handle the responsibility, Sanders said.

Kids have had no trouble getting merchants to accept their checks, she said, because the bank took steps to ensure that businesses would understand its operations. It hired 20 teen-agers to go out and explain the concept to local merchants and tell them that there would be children as young as 12 with checking accounts.

The bank also made up decals resembling MasterCard and Visa that announce Young Americans Bank checks are welcome here. Stores that are willing to accept these youths' checks display them in their windows.

Why hasn't the idea of a bank for kids caught on in other major cities? The bank is very expensive to operate and loses money every year, Sanders said. It is subsidized primarily by Daniels.

Sanders explained that balances and service charges are so low _ average balances are between $250 and $300 _ the bank doesn't make money. "For another organization to look at this, they are looking at a pretty substantial commitment."