Financial Services Commission Allocates 352.7 Billion KRW Budget for Next Year
Moon Administration's 'Cheongnyeon Hope Savings' Program to End in Feb-Mar 2024
Choi Sang-dae, the 2nd Vice Minister of the Ministry of Economy and Finance, explained the main contents of the "Warm Budget for the Socially Vulnerable, Four Core Tasks," including the new introduction of the Youth Leap Account for 3.06 million young people, at the Government Sejong Complex in Sejong City last September. Photo by Yonhap News
[Asia Economy Reporter Yoon Seul-gi] Financial authorities are allocating a large-scale budget to launch the 'Youth Leap Account,' a key youth pledge of the Yoon Seok-yeol administration, in the second half of next year. The Youth Leap Account is a policy financial product where the government contributes funds proportional to the young subscriber's own deposits. By saving 700,000 KRW monthly for five years, one can accumulate up to 50 million KRW in a lump sum.
According to the budget and fund operation plan review report under the Financial Services Commission's jurisdiction by the National Assembly's Political Affairs Committee on the 1st, the Financial Services Commission has allocated a new budget of 352.772 billion KRW next year to launch the Youth Leap Account. The budget consists of 344.037 billion KRW in contributions to supplement young subscribers' deposits and 8.581 billion KRW for infrastructure construction costs.
The Youth Leap Account is a policy financial product promised by President Yoon Seok-yeol during the presidential campaign to support asset formation opportunities for the youth. Eligible subscribers are young people aged 19 to 34 who meet both individual income below 60 million KRW and household income below 180% of the median. It is estimated that 3.06 million young people satisfy both the individual and household income requirements for the Youth Leap Account. The budget was prepared considering a maximum average monthly matching support of 24,400 KRW per person and an 80% savings payment rate among the youth.
The account maturity was shortened from the previously proposed 10 years to 5 years for practicality. The monthly deposit ranges from 400,000 to 700,000 KRW, and the government’s contribution is calculated as up to 6% of the deposit amount.
The interest rate for this product is expected to be the market bank’s 5-year fixed deposit rate plus an additional margin. Considering the current market interest rate situation, depositing 700,000 KRW monthly for five years would accumulate about 50 million KRW in a lump sum. The Financial Services Commission plans to finalize the specific product structure, including the operating format and interest rate level, through the budget process and consultations with the financial sector.
The Youth Hope Savings, a similar policy financial product to the Youth Leap Account, will not reopen for additional subscriptions and plans to conclude the program by paying incentives in February to March 2024 when the 2-year maturity ends. To this end, a budget of 360 billion KRW for savings incentives has been allocated in next year’s budget plan.
The Youth Hope Savings is a product where the government provides additional savings incentives and tax exemption benefits on interest income if one deposits up to 500,000 KRW monthly for two years until maturity. Eligibility was limited to young people aged 19 to 34 with a total salary of 36 million KRW or less in the previous tax period of January to February 2021, and it gained popularity with about 2.9 million subscribers earlier this year.
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