State governments should establish children's savings programs.

These universal children’s savings account programs (also known as child development accounts), sponsored at the state level, should establish accounts early in life (either at birth, upon entering kindergarten, or at an early age the state deems appropriate). Existing programs are often “seeded” with an initial deposit, and savings are built by contributions from family and the children. Philanthropy, business, and government may provide funding for incentives – matching dollars for additional savings, incentives for academic achievement or performing certain tasks like filling out a FAFSA are just some examples of how incentives are being used in programs to date. Savings can be held either in a banking account or in a 529 college savings plan.
CSA (children’s savings accounts) program models differ, but the essential characteristics of CSA programs are that they:
  • Are intended for a long-term asset-building purpose, most often post-secondary education (broadly defined) but other possible uses include entrepreneurship, homeownership, and retirement.
  • Provide direct, monetary incentives (e.g., initial deposits, savings matches, benchmark incentives, prize-linked incentives, or refundable tax credits).
  • Restrict withdrawals from savings for non-qualified purposes (i.e., the funds must be used for a designated asset, which is usually post-secondary education).
Elected officials can administer, seed, and incentivize accounts through a variety of mechanisms. Some options include:
  • Using discretionary funds paid to a city or state agency, such as fees paid directly to an agency. Examples include fees paid to a state Treasurer’s office by the state’s 529 program or, as the city of St. Louis has done, through parking fees and fines.
  • Leveraging strategic partnerships in education, such as by boosting participation in existing early scholarship programs. The Tacoma Housing Authority in Washington State has ensured that all of its residents enroll in the state’s College Bound Scholarship Program.
Because these programs are universal, they should ensure that all children – regardless of income, race, gender, or other factor – has access to their benefits and an opportunity to succeed. A body of accountability should work closely with the program administrator to ensure in both program design and execution that the program continues to achieve equitable outcomes for all children, including low-income children with the most limited access to the means and tools for building wealth.

These children’s savings account programs would be supported by state and community organized parental engagement, business and philanthropic investments in incentives, and financial education in schools coupled with bank-in-school programs.

In jurisdictions where such savings programs exist, schools can begin to add discussion of such accounts into the curriculum. This increases the effectiveness of existing financial education programs by integrating hands-on account usage, ensuring knowledge and skills are retained longer and build a better foundation of financial habits. There are a range of promising, emerging models like a pilot program tested in Wisconsin and Texas called Assessing Financial Capability Outcomes. This program demonstrated financial education can improve student knowledge of and attitudes toward saving while those with access to banking in school were more likely to have and use a savings account. Even modest deposit levels and incentives can have drive positive behavior especially when paired with parental engagement and partnerships with local financial institutions.

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