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Children's Savings Accounts

Introduction

Post-secondary education—like trade school, college, or graduate school—can make a huge difference in children’s future earning potential and act as leverage for upward mobility. Yet, nearly half of Americans do not have even $400 in savings for emergencies, let alone enough savings to support their children’s education past high school. High tuition costs can discourage families and dampen children’s educational ambitions from an early age. Parents’ and children’s educational expectations are an important predictor of children’s later academic achievement, and Children’s Savings Accounts (CSAs) can help families to see higher education as an achievable goal. CSAs are programs that provide children with savings and/or investment accounts, which are intended for post-secondary education (or other asset-building) and which provide direct, monetary incentives for savings.

Beyond educational expectations, savings for post-secondary education are also associated with improved child cognitive development, math and reading skills, and a greater likelihood of attending and completing college. Because investing in these programs reaps a wide and rich return of benefits for parents and children, CSAs are gaining traction as a promising policy tool to expand educational and economic opportunities for children from low- and moderate-income families. Numerous states, cities, localities, and organizations across the United States have begun sponsoring CSAs in recent years. . CSAs designed to fully include low- and moderate-income families can also help narrow the racial wealth gap by facilitating access to financial and educational opportunities for those who have historically been excluded.
With support from the Charles Stewart Mott Foundation, IASP rigorously studied several aspects of CSAs, including:

  • The emergence of CSA models at the state and local level over time
  • Features that make programs impactful
  • Local factors that promoted the success and sustainability of different CSA models.

The Growth of CSA Programs Over Time

Over the last 20 years, states, cities, localities, and non-profit organizations have implemented CSA programs to expand educational opportunity, boost the education level of the workforce, and address poverty in their communities. From 1997-2007, several states began offering matching grants to families who opened dedicated postsecondary education savings accounts. Since 2010, the CSA field has grown to include several programs that open accounts automatically for all children within a city or state, provide an initial deposit, and offer savings incentives. For example, in 2011, San Francisco became the first city to launch a universal CSA that automatically enrolls every kindergartner in public school in the city (unless parents opt out). San Francisco’s model has resulted in nearly 100% participation. In 2013, Maine became the first state to launch a universal, automatic CSA, which deposits $500 into an account for children born in the state, unless their parents opt out. Maine’s CSA program has also reached an estimated 100% of newborns.

To see how CSA programs have grown over time, view IASP’s Timeline of CSAs from 1991-2019.

Timeline of the development of CSA's


What makes a CSA successful?

Across the U.S. CSAs vary in program design and structure, ranging from a limited savings match on deposits to a privately owned account, to a universal seeded program. CSAs can be universal or targeted (or a hybrid design); they can be opt-in or automatic; and they can provide seeds, matches, and other incentives. Because CSAs are relatively new in implementation, no consensus has yet been reached on the optimal structure for CSA programs. And indeed, there may be no single optimal CSA design; instead, local goals and resources will help to shape each community’s CSA. To build understanding of what components are important to CSA success, IASP conducted a literature review to identify features of CSA programs that are associated with high levels of uptake and engagement by low- to moderate-income families, as well as features that contribute to the long-term sustainability of CSAs.

Cover of the Levers for Success Publication with a watering can pouring water on flowers
Read more on IASP’s literature review of CSAs- Levers for Success: Key Features and Outcomes of Children’s Savings Account Programs.

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