- Lessons Learned from Children’s Savings Account Programs: Tools to Leverage Spending to Facilitate Saving among Low-Income Families
- Educators, policymakers, and advocates concerned about persistent achievement gaps, stagnant upward mobility, and college unaffordability are increasingly turning to Children’s Savings Accounts (CSAs) as a policy intervention for catalyzing educational opportunity and greater equity.
- While state-run 529 college savings plans largely benefit middle- and upper-income families, these financial instruments can serve as platforms for CSAs in ways that help to more equally distribute the benefits of college savings systems.
- Asset accumulation in CSAs can be substantial. For example, some CSA models can help families accumulate as much as $31,483 by the time their child reaches 18, if they start to save at birth, use an investment vehicle such as a 529, and receive transfers and incentives that amplify their savings efforts (here, assuming an initial deposit of $500, annual family savings of $600, and $300 in savings matches).
- The provision of CSAs and the supports and features that accompany them results in family savings rates between 8% to 30% for opt-out CSA programs and about 40% to 46% for opt-in CSA programs. While this saving reflects authentic engagement and, often, considerable family sacrifice, CSA programs have been in search of a solution to increase saving.
- Combining CSAs with reward card programs may be one way to improve saving outcomes and increase wealth accumulation, particularly among low-income families whose ability to divert resources from consumption to saving is necessarily limited.