Children’s Savings Accounts

The Basic Idea:

Help children, youth and their families save towards the purchase of an appreciating asset upon reaching adulthood so that economic status will not be a barrier to the young person’s path to success.

How it works:

• Children and youth are provided with a specialized savings account that they can access and use upon reaching adulthood towards the purchase of an appreciating asset – most often post-secondary education, but also a home or even a small business.
• Children and youth save in specialized bank accounts and parents, grandparents and other relatives may contribute to their accounts. In fact, contributions may come from a variety of sources including foundations, faith-based organizations, scout troops, etc. The savings are matched by a host agency and the match money becomes available for pre-determined uses when the youth becomes an adult.
• As with IDAs, the savings and match are accompanied by financial and asset-specific education. Depending on the age of the accountholder, the education may be directed more at the parent or guardian than the child.
• The idea is to remove the financial barriers that prevent many children and youth from having a successful launch into adulthood.

Who Does It:

• The lead agency can be a nonprofit, city or state agency, or foundation that partners with a financial institution, such as a bank, credit union, and 529 account provider, to hold the funds.
• Foundations, individual donors, and businesses can provide match dollars to augment savings funds, so they are important partners in the work!
• Other key partners include community organizations (financial education providers, social services, etc.), parents of potential participants, public officials, and schools.

Pros:

• A savings account establishes a mindset early in a person’s life that they will have the funds necessary to achieve.
• Assets play an important role in helping families move up the economic ladder.
• It’s easy for policy-makers, funding sources, academics and the general public to see potential of the program.

Cons:

• There are significant challenges to moving this strategy to scale because of the lack of a widely available, high-quality delivery system, and the high cost of running an effective program.
• There are a lot of moving parts to pull together, including: funding, a reliable delivery system, family engagement, and financial education integration.

Simplicity Index:

Tough nut to crack – but worth it! CSAs require a high level of collaboration with financial institutions, funders and other community partners, so start-up will not be immediate. In addition, it can take time to select the financial product that best meets the needs of your population, as well as to define match criteria for your program. While challenges do exist, the time and effort you invest in developing a CSA will pay off over time as children and youth use the savings acquired to meet their long-term educational and economic goals!

Quilt It:

• Child Tax Credit Campaigns
• Pre-College Assistance Programs
• Recruiting College-Level Classes to Rural Places

Examples:

• The Barry Community Foundation (Barry County, Michigan) started Kickstart to Career, which provides a savings account to every child in the county who “graduates” from kindergarten. The foundation is catalyzing opportunities to add more community deposits to family deposits in those accounts as the children reach certain benchmark milestones or provide service to the community.
• Caldwell Saves 1st is a higher education savings initiative launched in 2015 by the City of Caldwell, Idaho. The program seeks to achieve three goals: 1) More students saving for and obtaining higher education credentials 2) Bringing family focus to financial education 3) Engaging the community in supporting our youth and higher education. Caldwell Saves 1st uses Idaho’s 529 program, known as “Ideal – Idaho’s College Savings Program” to help elementary school children achieve success and prepare for their financial futures.
• Montana Money Magic is a matched education savings account program, funded with TANF reserve funds. Eligible participants (ages 16-18) earn a 3:1 match on their savings, up to a maximum match of $1350, and complete 16 hours of in-person financial education. Match funds can be used for a variety of education-related expenses: dual credit tuition and fees, computer, tools, tutoring, books, dorm deposits, and educational travel (e.g., DECA conference, or similar).
• Check out CFED’s CSA  Directory to learn about CSA programs across the country.

Resources:

• Head to CFED for a comprehensive set of CSA resources including:
  • Investing in Dreams, an interactive guide to help organizations, cities, counties, and states design successful CSA programs.
  • Scholarly Research on Children’s Savings Accounts, from the CFED Fact File, June 2014. This brief points to the research that provides empirical evidence for current policy proposals around Children’s Savings Accounts (CSAs).
  • The Center for Social Development at Washington University in St. Louis has a number of publications on their website about child savings programs, including information about the large-scale SEED for Oklahoma program.