children’s savings accounts: a new strategy on the road to universal savings policy carl rist,...
TRANSCRIPT
Children’s Savings Accounts:
A New Strategy on the Road to Universal Savings Policy
Carl Rist, CFED2003 State IDA Policy Conference
St. Louis, MO November 10-12, 2003
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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).
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Children and Poverty: An International Comparison
0
5
10
15
20
25
30
Sweden
Taiwan
Germany
PolandU.K.
U.S.
Mexico
Sweden
Taiwan
Germany
Poland
U.K.
U.S.
Mexico
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Children and “Asset” Poverty
SOURCE: PSID, 1999
*Net Financial Assets below three-month income poverty standard.
1984 1989 1994 19990%
10%
20%
30%
40%
50%
60%
70%
BlackHispanic
All
White
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(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.
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Assets Matter
Evidence:
Returns to education
Importance of homeownership
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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
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Precedents for Children and Youth Savings Policy:
International
Singapore: Baby Bonus
Child Development Accounts
Central Provident Fund
United Kingdom: Child Trust Fund
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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)
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Precedents for Children and Youth Savings Policy:
U.S. State Policy
Oregon’s Children’s Development Accounts
(CDAs) – 1991 and 1993.
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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.
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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.
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SEED Objectives
Accounts: Move 1000+ 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 0-18.
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.
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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)
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SEED Partners
9 Community Partners: 50-75 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)
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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.
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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
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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)
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Initiative Partners
Researchers:Center for Social Development (Washington University, St. Louis)
Kansas University
Funders:Ford FoundationCharles and Helen Schwab Foundation Jim Casey Youth Opportunities InitiativeEwing M. Kauffman FoundationRhoda and Richard Goldman FoundationEvelyn and Walter Haas, Jr. FundEdwin Gould Foundation
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Contact:
Carl Rist
Corporation for Enterprise Development
123 W. Main St., 3rd Floor
Durham, NC 27701
919.688.6444
919.688.6580
www.cfed.org
See the SEED Website at seed.cfed.org