Now in their midteens, Oklahomans who received a SEED for Oklahoma Kids 529 plan account when they were infants have an average of $4,373 in total savings. They are more hopeful about the future, have a more positive academic self-concept and have stronger math skills than youngsters without such an account. Their families are socking away more in college savings for them, too.

These are the latest findings from the Center for Social Development at Washington University, which has been conducting a large-scale study of SEED OK since 2007. The first randomized, controlled trial of child development accounts (also called children’s savings accounts) in the U.S., SEED OK is a statewide initiative that rigorously studies the short- and long-term impacts of these accounts for children and their parents. The Charles Stewart Mott Foundation supported the research from its inception and today funds efforts to share findings with communities, policymakers and practitioners. With these latest results, the landmark study continues to inform and propel the growth of the children’s savings field.

“The latest research underscores the long-term value of adopting effective policies that build assets for all children automatically from the time of birth,” said Michael Sherraden, principal investigator of the study.

The findings are welcome news to the growing number of policymakers around the country who are eyeing children’s savings accounts as part of their comprehensive plans to improve post-secondary opportunities for kids in every ZIP code. As part of a broad body of evidence on CSAs, the SEED OK study finds that all children can have an asset-building account in their name and that these accounts greatly increase the likelihood that children from economically disadvantaged backgrounds will have savings for their post-secondary education.

Graphic: Center for Social Development, Washington University in St. Louis

The SEED OK model blends stability with innovation, an approach that also interests state and local leaders. It’s built around Oklahoma’s well-established 529 college savings plan platform and adds a suite of features that empower low- and moderate-income families to participate fully in the plan. These include universal eligibility for every newborn who was randomly assigned to receive an OK 529 account (as opposed to half of those randomly selected infants who did not receive one).

The initiative opened accounts with a $1,000 deposit for every child in this cohort and augmented them with deposit incentives, matching funds and educational materials for families. It’s important to note that SEED OK savings don’t count against family eligibility for TANF, SNAP or the Low-Income Home Energy Assistance Program, so parents who use these benefits aren’t penalized for saving. The latest research finds that it’s a formula that works for families.

“SEED OK demonstrates how states can bring policies like this to scale for all children,” said CSD Policy Director Margaret Clancy. “More broadly, SEED OK has transformed 529 policy. Over 90% of all U.S. children with a CSA are in a program that uses the 529 plan.

“After 14 years, the average total OK 529 savings is $4,373, and the value of the initial $1,000 investment in the OK 529 accounts has grown to $2,300,” Clancy added.

Just two decades ago, almost no one had heard of CSAs. Today, there are programs in 39 states and Washington, D.C. Nearly 5 million children now have a CSA in their name.

Informed by Oklahoma’s experience, seven states already have enacted statewide children’s savings policies, and that number is on the rise. In 2018, Pennsylvania became the first state to legislate a statewide automatic children’s savings account program for every baby born to a Pennsylvania family.

Administered by the Treasury Department, the program sets up an omnibus account in Pennsylvania’s 529 College and Career Savings Program that benefits about 135,000 babies each year. Last year, the state rolled out several new demonstration projects to increase savings deposits for financially vulnerable families, such as mothers who are enrolled in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) at the time of their baby’s birth.

Nebraska’s Meadowlark Program, so named for the state’s bright yellow songbird, was signed into law by Nebraska Gov. Pete Rickets in 2019 after unanimously passing the state legislature. Now, any baby born on or after January 1, 2021, is eligible for a NEST 529 College Savings account, seeded with a $50 deposit. The state has established an endowment fund for the program and encourages contributions through a matching program for employers and a low-income matching scholarship program for eligible families.

This year, California Gov. Gavin Newsom publicly launched the California Kids Investment and Development Savings program. CalKIDS creates a 529 account with up to $100 in seed funding for every infant born on or after July 1, 2022, and school-age children who come from low-income families may quality for up to $1,500 in college savings. Informed by SEED OK and San Francisco’s pioneering Kindergarten to College program, the program has enrolled more than 3.4 million children in its first cohort. At this size and scale, it is the largest such program in the country, to date.

“Rigorous research has always been crucial to the CSA field.” said Benita Melton, director of Mott’s Education program. “And large-scale, long-term experiments like Washington University’s SEED OK study are invaluable. From initiatives like this, we have learned and continue to learn what kinds of policies, programs and platforms work best to allow young people to realize their hopes and dreams.”

Children’s Savings Accounts: Q&A With Benita Melton

Planting the seed of desire to go to college early in a child’s life with a savings account produces lasting positive effects. This idea has galvanized the asset building movement in recent years.