ASPIRE Act/KIDS Accounts

A growing number of studies examine the relationships between children’s savings accounts and their educational and financial outcomes. (Please see the Center for Social Development’s website or read this review article for more information on the studies examining these relationships). Consistently, children who have savings accounts early in life have significantly better educational and financial outcomes compared to children who do not have savings accounts early in life. These findings hold true even after taking into consideration things like academic achievement, household income, and household net worth.

Those were the topics on tap at yesterday's Senate Banking Subcommittee on Financial Institutions and Consumer Protection hearing. As I mentioned yesterday, our own Ray Boshara (well, he's not all ours anymore) was on a crowded but extremely informative panel alongside Ida Rademacher from CFED.

This year the U.S. Department of Education's Gaining Awareness and Readiness for Undergraduate Programs, commonly known by the acronym GEAR UP, encouraged grantees to include children's savings programs in their applications. The Department of Education's decision to make children's savings programs a funding priority is based on research that tests the relationship between children's savings and their educational outcomes. This research, much of which is published by William Elliott (Assistant Professor at the University of Kansas and Senior Research Fellow here at NAF) and is publically available on the Center for Social Development's website under asset building, consistently finds significant, positive relationships between children's savings accounts and their educational outcomes including academic achievement, high school graduation, and college attendance and completion.

In the Spring of 2011, the City of San Francisco automatically opened college savings accounts for over 1,000 San Francisco Kindergartners. The City also “seeded” every account with an initial deposit of $50. The account openings marked the official launch of San Francisco’s Kindergarten to College initiative, or “K2C.” This initiative, the first of its kind in the nation, aims to improve the odds for San Francisco Kindergartners and set all San Francisco public school children on a path to college, from the very first day of school.

A growing number of research studies investigate the association between children's savings and their educational outcomes, findings which suggest providing children with savings accounts at an early age may be a way to improve their educational outcomes. A recent press release summarizes these research studies, many of which have been conducted by researchers at the University of Kansas and the Center for Social Development. Research also suggests children’s college-bound identities—whether or not they expect to graduate from college—are also associated with children’s educational outcomes. Along these lines, it may be useful to know whether interventions that combine savings plus college-bound identity are best for improving college attendance. A new study has recently been released on the Center for Social Development's website that addresses this very question. This post summarizes findings from William Elliott and colleagues’ paper, Toward a Children's Savings and College-Bound Identity Intervention for Raising College Attendance Rates. Results are forthcoming in the journal Sociology Mind. 

Yesterday, I had the opportunity to discuss the recent poverty and income numbers from Census on WNYC's Brian Lehrer Show.

The country is facing a serious debt crisis that threatens to undermine our economic recovery. No, not that one. American households are carrying around $11.4 trillion of debt.

Last week, NPR treated listeners to an interesting broadcast that touted preschool as potentially the best job-training program. This isn't really news to our friends in the Early Educational Initiative, who have been advocates for early childhood education for some time.

Last week the United Kingdom’s Treasury released details on Junior Individual Savings Accounts (ISAs), which are designed to replace the Child Trust Fund (CTF). The CTF, which was in operation from 2005 to 2010, provided universal savings accounts to all newborns in the U.K. with progressive contributions for eligible account holders. Their replacement, Junior ISAs, will retain little of these same features when they become available on November 1, 2011, calling into question whether their features will benefit children from low-income backgrounds.

The First FDIC-Insured Bank Designed just for Young People Turns 24 Years Old

The research on young people’s savings points to early access to basic financial services to improve young people’s life outcomes, including things like improved financial and educational outcomes. Just to give a few examples, research by William Elliott and colleagues finds that young people who have their own savings accounts are significantly more likely to attend and graduate from college. Some of my own research finds that young people are significantly more likely to continue saving later in life when they have access to savings accounts early in life. Given the apparent importance of young people’s savings for improving their life outcomes, financial institutions have a role to play in including young people in basic financial services.