Posted by:
Dave Zuckerman
New America Foundation releases final report in series
Foundation 2012
Yesterday the Asset Building Program at the New America Foundation and the Center for Social Development (CSD) at Washington University in St. Louis released the fourth report in a series collectively titled “Creating a Financial Stake in College.” This report, titled “Ideas for Refining Children’s Saving Account Proposals,” offers specific policy recommendations to help create a national children’s savings account system.
The first three reports in the series focused on why policy makers should care about savings, the relationship between inequality and bank account ownership, and the connection between savings and college attendance, respectively. One of the key findings by author William Elliott III, professor at the University of Kansas School of Social Welfare, is that children who have an expectation to graduate from a four-year college and have a savings accounts in their name are almost six times more likely to attend college than similar children without an account.
The advantage of a child savings account, or CSA, over a student loan is that these accounts leverage investments by individuals and their families with investments from the federal government and other sources. These other investments could be in the form of an initial deposit (e.g. $500 at birth), incentives (e.g. tax breaks), or matches (e.g. for every $1 the individual or family saves, the federal government matches $1).
The national children’s savings account system recommended in the fourth part of this series of reports would be modeled on the America Saving for Personal Investment, Retirement and Education (ASPIRE) Act, which has been introduced in Congress with bipartisan support since 2004. This legislation would promote savings by creating an account for every newborn child, providing an initial deposit and progressively matching contributions. The account would be specifically designated for post-secondary education or other targeted uses such as homeownership or retirement.
The principal goal of this type of policy is to encourage saving and to work toward narrowing the wealth gap (which is significantly greater than the income gap). More information about other strategies for individual wealth building, including information on Individual Development Accounts, can be found here.