Children’s Savings Accounts: A New Strategy on the Road to Universal Savings Policy Carl Rist, CFED 2003 State IDA Policy Conference St. Louis, MO November 10-12, 2003

2 The Facts: Children and Poverty  11,733,000 children under 18 (16.3%) lived in poverty in 2001 (Census Bureau).  1 in 3 children will be poor at some point (Children’s Defense Fund).  Of families with children in which the head of the household worked, the poverty rate was 9.2% in 2000 (Center on Budget and Policy Priorities).

3 Children and Poverty: An International Comparison

4 Children and “Asset” Poverty SOURCE: PSID, 1999 *Net Financial Assets below three-month income poverty standard. Black Hispanic All White

5 (Early) Assets Matter Research (summarized by Scanlon and Page-Adams):  Savings and investment income promotes educational attainment among children.  Savings and investment income—above earned income—reduces intergenerational poverty transmission.  Savings have psychosocial benefits for adults, which likely enhance the well-being of children.

6 Assets Matter Evidence:  Returns to education  Importance of homeownership

7 Investment in Children is Small, but Potential is Large As a share of federal spending, investments in children represent 2% of GDP, compared with:  Social security and Medicare = 7%  Defense = 3%  Interest = 2.5% At 6%, $1000 invested for 18 years yields $3,000:  Add $100 per year and sum  $5,000  Invest $50 per month and total  $22,000

8 Precedents for Children and Youth Savings Policy: International Singapore:  Baby Bonus  Child Development Accounts  Central Provident Fund United Kingdom:  Child Trust Fund

9 Precedents for Children and Youth Savings Policy: U.S. Federal Proposals  Children’s Financial Security Act (1996)  KidsSave (1995, 1998, 2000)  Educational Savings Accounts (1997)  Education IRAs/Coverdell ESAs (1997, 2001)

10 Precedents for Children and Youth Savings Policy: U.S. State Policy  Oregon’s Children’s Development Accounts (CDAs) – 1991 and 1993.

11 SEED Vision  $1,000 at birth for every child.  Accounts used for home ownership, entrepreneurship, education, or retirement.  Universal system/institutionalized delivery.  Progressive savings matches (0-18 years).  Appropriate, cost-effective financial education at scale.  Reducing intergenerational as well as new child poverty.

12 The Power of Demonstration: SEED The goal of the Savings for Education, Entrepreneurship, and Downpayment (SEED) Policy and Practice Initiative: To develop, test, document, and impel progressive, matched savings accounts and financial education – SEED accounts – as a cost-effective life-long wealth-building tool, practice, policy and system.

13 SEED Objectives Accounts: Move low-income children and their families toward economic independence through cost-effective SEED accounts. Practice: Develop cost-effective, scalable practice models for different age cohorts of children Research & Evaluation: Document, research, and evaluate SEED account models and effects. Policy: Develop, advocate, and enact progressive universal federal/state policy. Communication: Develop and communicate effective messages, results and lessons. Coalition: Build a diverse, inclusive, and effective coalition to guide and promote effective SEED practice and policy.

14 SEED Cohorts  Pre-school children (0-5; via parents)  Elementary school children (6-10 years)  Middle school children (11-13 years)  High school age youth (14-18 years)

15 SEED Partners 9 Community Partners:  accounts  Work with one specific age cohort  Diverse designs 1 “Experimental” Partner:  500 accounts in “treatment” group; 500 controls  Rigorous impact evaluation  Streamlined 529 Account Structure  Pre-school (age 3, HeadStart based)

16 Match and Operating Grant Model  $2,000 split at partner’s proposal among:  Initial deposit — $0–$1,000  Savings matches (1:1)  Benchmark deposits and other incentives  $25,000 annual operating grants for small sites.  Primary use for education through 529 plans—  but also housing, business, retirement, incentive rewards.  Link with existing systems: 529s, Roth IRAs etc.

17 SEED Partners Juma Ventures Mile High United National Center on Poverty Law Oakland Livingston Human Service Agency Community Foundation for Greater New Haven Harlem Children's Zone Boys and Girls Clubs of Delaware Beyond Housing Good Faith Fund Foundation Communities  Partner sites  Experimental site

18 SEED Policy, Communication & Organizing  Focus group work up front  Message development up front  Deliberate policy development  Policy development, advocacy, and lobbying  Direct state policy grants (if funding)  SEED policy council  UK Approves Child Trust Funds  Treasurers’ response to SEED highlights 529 Opportunity (many endorsements)

19 Initiative Partners Researchers:  Center for Social Development (Washington University, St. Louis)  Kansas University Funders:  Ford Foundation  Charles and Helen Schwab Foundation  Jim Casey Youth Opportunities Initiative  Ewing M. Kauffman Foundation  Rhoda and Richard Goldman Foundation  Evelyn and Walter Haas, Jr. Fund  Edwin Gould Foundation

20 Contact: Carl Rist Corporation for Enterprise Development 123 W. Main St., 3 rd Floor Durham, NC See the SEED Website at seed.cfed.org