Saturday, 13 June 2009


SKO – stands for Szkolna Kasa Oszczędności (EN: School Savings Association). An invention with the long, tracing back to 1920’s, tradition, under the umbrella of partly state-owned PKO Bank Polski (this bank is a monopolist when it comes to that very product). SKOs are aimed at pupils, mainly of primary schools, aged under 13. The idea behind the whole deception is to instil the pupils ability and habit of saving. End is indeed commendable, but end justifies the means.

According to the bank’s statement, in which it declares it can’t decline to run SKOs as it is one of activities arising from its articles of association, the primary goal of the scheme (do not mistake for scam) is the financial education. Probably it even sounds loftily but there’s a hitch which can’t pass unnoticed. In the normal economy the value of money rises with time, this is called inflation. In the normal banks people get interest for the money they deposit, so that by inflation of four per cent and interest rate on their deposit of five per cent their money turns a real profit of about one per cent. At least depositors’ savings retain their real value – but that’s the shape of things in the normal bank, not in SKO. Here, indeed the deposit is interested, at 0,01 per cent (to illustrate it by an example, imagine that you pay ten thousand zlotys, pounds, dollar, etc. and after a year you get one zloty, pound or dollar as interests), what in practise means that a child would take out exactly as much as it paid in.

Case study:
A child puts aside money for a new bike, which costs 600 zlotys. Each month (at the beginning) it pays 50 zlotys into SKO, or into bank savings account set up by its parent with the interest rate of 5%. In the former variant it gets no more and no less than 600 złotys, in the latter approximately 613,95.

You might say that additional almost 14 zlotys is a little sum. It is, for one child, but it teaches that saving pays dividends. We deposit our money in the banks instead of putting them under the mattress to get more then we put – that’s the logics behind it. Children, although bank may highly speak about it’s action, are taught something different – taking into account inflation they pay out in real terms less than the paid in. Isn’t it in contradiction with the idea of financial education? It’s pathology, something like this should not be allowed to function. A normal man would not save on his current, bearing no interest, account, a financial surplus is transferred into savings account so that it works there.

But many people are unaware of another aspect of the situation. Banks doesn’t keep the collected money in the safe deposit box. It has it at its disposal and can lend it to another bank at the WIBOR rate (currently about 4,6 per cent). So, the conclusion is that bank makes money on poor, still naive children, doing them out of due interests.

Bank explains that the interest earned on the deposits of pupils is turned into precious prizes, like school trips for the best associations. The next lie and pathology – namely unfair redistribution of interest income – children from the whole country finance the trip of one, chosen school. That’s the con, although it may raise the spirit of competition among children – but the more they save, the more profit the bank can make on it. It may only discourage children from saving, as they see it doesn’t beat any fruits. If such programme is to be held, it should be held under market conditions – so depositors should be paid interests.

A traditional piggy bank is a better solution. One won’t get more anyway, the basic assumption is fulfilled and big fishes in expensive suits won’t get their bonuses from children.

The post was inspired by a short article from yesterday’s issue of Gazeta Wyborcza.

“Dziś oszczędzam w SKO, jutro w PKO!” – a fool and his money are soon parted!

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