The Center For Social Development at Washington University (WU) in St. Louis is designing and implementing a statewide children’s savings accounts demonstration with the help of a $200,000 grant from the Mott Foundation. This project is part of the Foundation's larger effort to evaluate and promote asset-based approaches to poverty alleviation and economic security. These approaches -- such as individual development accounts (IDAs) -- have shown that given opportunities and incentives, low-income families can save money, attain assets and move toward self-sufficiency.
The idea behind children’s savings accounts is to begin building assets at birth. Modeled after Great Britain's Child Trust Fund program, children’s savings accounts would be established with an initial public investment and provide incentives for additional contributions from family and community members. The account later could be used only to pay for college, buy a home or start a business. WU's demonstration -- called Saving for Education, Entrepreneurship and Downpayment (SEED) Universal Policy Initiative -- will create, implement and study a model of children’s savings accounts that would be available to every child in America.
Through a competitive selection process, WU will choose one state in which to pilot the universal savings model over the next six years. Working with the state treasurer and State College Savings (529*) plan administrators and providers, and with a target group of 2,000 participants -- 1,000 each in a control and program group -- savings accounts would be set up at birth and funded with a public investment of $1,000. Options for additional deposits will be considered during the design phase along with larger deposits for children in low-income families.
Benita Melton, program officer of the Foundation’s Pathways Out of Poverty program, describes the concept of children’s savings accounts as a product of the knowledge gained through the field's experience with IDAs for adults.
“When fully implemented, children's accounts will be universal, progressive, lifelong, and, most importantly, fully integrated into the existing infrastructure of asset-building opportunities at the federal level," she said.
* 529 college savings plans are state-managed, tax-exempt investment accounts, whose funds can be used for "qualified education expenses" such as tuition, fees, room and board, books, and supplies.
Additional Resource
- Click here to read about the grant to Washington University.
- Click here to access the Center for Social Development Web site.