Center on Assets, Education, and Inclusion

This report examines enrollment, savings behaviors, and asset accumulation in the Wabash County Promise Scholarships program, which deposits early-commitment scholarship awards into children’s college savings accounts, in an effort to improve educational outcomes. The rationale for the Wabash County Promise Scholarships is rooted in research evidence examining the potential of early accumulation of educational assets to cultivate identities as college savers and increase educational expectations. This evidence has contributed to a growing trend among scholarship providers to consider ways to deliver awards early enough in students’ educational trajectories to influence not just the affordability of postsecondary education, but also students’ likelihood of enrolling in college and completing postsecondary credentials. One particular iteration of these efforts is the melding of ‘Promise’ programs or other early-commitment scholarships with Children’s Savings Account (CSA) programs that help families accumulate educational assets through incentivizing their own saving and amplifying families’ contributions with programmatic features (Elliott & Levere, 2017). Early-commitment scholarships provide early notification, guarantee, and/or delivery of financial aid to help offset the costs of postsecondary studies or training. The Wabash County Promise Scholarships program is an example of early-commitment financial aid that leverages the potential of both approaches.

New Mexico’s Prosperity Kids Children’s Savings Account (CSA) program provides incentives, financial education, and peer support to encourage participants, most of whom are relatively low-income Latino families, to save for their children’s futures. Nonprofit Prosperity Works leverages social networks and community partnerships in the Albuquerque, New Mexico area to recruit accountholders. While the particular features are somewhat unique to this model, Prosperity Kids evidences the hallmarks of Children’s Savings Account policy: initial seed deposits, facilitated or universal account opening, savings incentives, and long-term asset ownership (Goldberg, 2005; Sherraden, 1991). Those who open Prosperity Kids CSAs receive a $100 initial seed deposit and up to $200 in a 1:1 match for their savings per year, over ten years.1 Parents may also earn benchmark deposits for completing activities associated with child development and academic achievement. As is the case in many CSA programs, these incentives are financed with a mix of philanthropic and public dollars. Prosperity Kids accounts are custodial, held by Prosperity Works until used for postsecondary education or, when the child turns 23, for ‘transition to a stable adulthood’, such as homeownership or entrepreneurship.

This study examines patterns in 529 college savings plan account opening, family contributions, and asset accumulation by participants in the Promise Indiana Children’s Savings Account (CSA) program who are enrolled from Wabash County, Indiana1. While this report uses administrative data to focus on saving, savings outcomes represent only one metric of CSA “success.” Importantly, rigorous research suggests that the positive effects of CSAs on such outcomes as educational expectations (Kim, Sherraden, Huang, & Clancy, 2015) and children’s well-being (Huang, Sherraden, Kim, & Clancy, 2014) can be realized even if families are not contributing to the account (Sherraden et al., 2015). Indeed, the Promise Indiana design incorporates research evidence that simply having a CSA can catalyze other positive outcomes for children and families, including by reinforcing children’s sense of a college-saver identity (Elliott, 2013a). Many aspects of the Promise Indiana CSA initiative are designed to cultivate these effects and, as described below, are provided to all children within a participating school, whether or not their families have opened a 529 account or, certainly, begun to contribute. Therefore, the potential value of a CSA—including those offered through Promise Indiana—should not be viewed only in terms of the dollars in the account, and saving should not be considered the only worthwhile interaction with the CSA. At the same time, contributing to a Children’s Savings Account may be one way that expectations of college are communicated to children. Additionally, saving is a potentially significant source of asset accumulation for higher education and can help to provide a sound financial foundation for a child’s future. As such, analysis such as this adds to the growing body of evidence of CSAs’ effects on children and families. Importantly, direct comparisons to these measures in other CSA programs is complicated by acute differences in target populations, program design, and the savings context. However, to contextualize these findings, a review of account opening, saving, and asset accumulation findings from the CSA field can be found in earlier AEDI reports (e.g. Lewis et al., 2016; Lewis, O’Brien, & Elliott, 2017).