Investing in the future–an update on youth savings programs

Last week I was fortunate enough to attend the first Conference on Children and Youth Savings sponsored by CFED, a national organization dedicated to expanding economic opportunity for all Americans. According to CFED,

People who own assets–such as a savings account–are more likely to have a more positive outlook and higher expectations for their futures and the futures of their children.

Children and youth savings accounts are created, mostly for low- and moderate-income children, at birth (or later in some programs) and initially funded with a small government contribution. As the child grows, additional contributions from family, friends, and, in some cases governments, help the account grow. Some programs limit use of the funds to education, while others offer broader opportunities or no limitations at all once the child reaches age 18. The theory behind children and youth savings accounts is:

• that low-income students (and their parents) will begin to see college as an achievable and affordable goal;
• that a savings habit learned in childhood is an asset for life;
• that youth savings will build assets for education, home ownership, and business start-ups; and
• that benefits of saving and investing by children help grow community and national economies.

CFED has been the main player in the SEED Initiative, a 10-year program to develop, test, inform, and promote children savings accounts. SEED incorporates 12 demonstration projects, including one in Oklahoma. The conference brought together a couple of hundred local service providers, funding agencies, government managers, and researchers in an effort to assess SEED and other efforts and to help figure out what comes next.

I got a decidedly mixed picture about children’s savings accounts from this experience. Here’s the good news:

1. Polls indicate there is broad public support for the concept of child development accounts.
2. There is broad support from leaders across the ideological spectrum and from both major political parties for youth and broader savings programs.
3. We’ve made a good start with public policy, including creating the 529 college savings plan and providing some public matching for 529s in 11 states. There are broader, public-assisted child savings programs running in three cities across the nation and more are planned. Some states promote individual development accounts (IDAs) for the adult population as well.
4. In limited pilot programs, most low-income participants are able to save, with an average accumulation of $1,500 per account after three years of the SEED program.
5. Universal savings program, with a publicly-supported match, work. The United Kingdom program is in its fifth year and participants are on track to have an average of $18,000 in their accounts by age 18.

Now the bad news.

1. While a bill to create a national matched savings account for all children has been introduced in Congress, even the most optimistic concede it will be “a large lift.”
2. At the state level, two states have discussed broader child savings beyond 529 plans, but neither has gotten a program off the ground.
3. Without public support, we seem stuck in small pilot projects that help lift a few children up the income scale and help us learn more about program design, but are dependent on foundation funding and are too small to make a community-wide difference.

At OK Policy, we are committed to developing an achievable and meaningful policy agenda to build assets for all Oklahomans across the income spectrum. Nobody should be shut out at birth from higher education, access to health care, home ownership, a start-up business, or a comfortable retirement. Over the next few months, we’ll be rolling out our long-term agenda and our first-year program goals, which will concentrate on getting 529 plans open for all Oklahoma children and making it easier for low-income families to contribute to them. These are small steps, but essential ones that can help meet those goals of changing expectations about the achievability of a college education, improving upward mobility, increasing savings, and expanding our economy. If we start down this path, incorporating what we’re learning from small programs across the country, we can make Oklahoma the national leader, just as we have with early childhood education.