By Professor William Elliott
Economic security requires both income (enough to live by) and assets (something to live for). However, discussions about economic security in America can never seem to get beyond income policies. This is understandable, even if it is shortsighted. Once you see a kid hungry or homeless, it feels almost immoral to talk about setting aside assets. This has left us with a social welfare system that values income over assets for the poor.
Unwittingly then, economic security conversations have drastically underestimated the importance of hope. Hope has allowed us as a nation to ‘endure’ World Wars, Cold Wars, Great Recessions, and pandemics. While necessary, doing what is required to endure does not catapult a child or nation forward into a better tomorrow.
Creating a better tomorrow requires that we plan and act with our children’s futures as our guiding star. Even in the face of economic turmoil. Hope empowers us to push beyond what is required to survive. We need a hopeful social welfare policy when it comes to our children.
Assets shorten the distance between children’s present and futures. Bringing the future self into clearer focus. When children have assets, it is as though they become time travelers. And what is hoped for takes on the quality of being tangible.
To help describe tangible hope Dr. Elliott has told the story of growing up poor and walking through affluent neighborhoods with his mother and hoping one day to live there. When he set out on these walks with his mother, they knew it was simply to get a reprieve from their current conditions. As they walked through these more affluent neighborhoods, they were looked at and felt like imposters. See, they had no stake there. Assets give you a stake. Therefore, the path to buying a home there was blurry, felt far off, and seemed like it was not for people like them.
In contrast, when a poor person is given access to institutions (e.g., Individual Development Account) that augment their ability to build assets, suddenly being a homeowner draws into clearer focus. And owning a home one day becomes your story not their story. Saving for a down payment gives poor families a better sense of the home and neighborhood they will one day live in. Furthermore, institutions and people respond to them differently. So, when they go to an open house with a down payment they are viewed as a serious buyer.
Even storing a small amount of assets for a down payment changes the way you think about your future. It brings your future as a homeowner, college goer, or business owner into focus. It gives you an increased sense that action now directed at your future is meaningful. The future becomes tangible, you can touch it, experience it, and to some degree begin to shape it.
In sum, assets enable children to purchase stock in their future selves. In turn, their future selves are moved to the forefront of their minds. In this position, they can draw a clearer picture of who they are to become and how to get there. Children’s Savings Accounts or CSAs are asset-building accounts for children, usually dedicated for expenses associated with postsecondary education. There has been dramatic growth in the number of CSA programs in the US. By the end of 2021, there were 123 CSA programs serving 1.2 million children in more than 39 states.
CollegeBound Saint Paul, led by Mayor Melvin Carter, is an example of a city-wide CSA program. It was launched January 1, 2020, with a $50 deposit for newborn babies in the city. Regarding economic security as both having “enough to live by” and “something to live for”, maybe no CSA program in the country is more significant than CollegeBound.
This is because CollegeBound in July 2022 is starting a rigorous test that will be conducted by the Center on Assets, Education, and Inclusion (AEDI) of a new model for providing families with economic security. What they call CollegeBound Boost, combines CSAs with guaranteed income, ongoing deposits, and financial literacy training.
What CollegeBound Boost gets from a policy perspective, is that income or assets alone are not enough. That is, real economic security is not only about being confident about today, but it also requires confidence about the future.
Also, important, the CollegeBound Boost model of economic security aligns well with federal policy proposals on both sides of the aisle. For example, US Senator Bob Casey in his Five Freedoms proposes large dollar CSAs ($500 per year from birth to 18; similar to Baby Bond proposals). He combines this with his Child Tax Credit proposal. US Senator Mitt Romney has also proposed a Child Tax Credit and a plan to build assets for college.
In conclusion, what we must once again understand is that programs like CollegeBound Boost are a necessary part of an American notion of economic security. We cannot create a better future for our children in the future. Instead, we must create a better future by acting today, both in good economic times and hard economic times. The income now, assets later narrative must be changed if we are to provide our children with true economic security. The foundation they need to pursue their own happiness.