The NEF report, Punishing Costs, estimates that the average yearly cost of keeping a young offender in custody is £100,000 a year.
The report argues that community based sentences would not only save money but would also be more effective in reducing repeat offending.
Aleksi Knuutila, the NEF researcher who wrote the report, said: "Prison costs the public purse about six times more than sending a child to Eton.
"All the research shows that prison is failing to rehabilitate offenders and isn't steering them away from crime. At a time when public services are being cut everywhere, we need to ask whether our spending is really delivering on safety in our neighbourhoods."
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