Center on Assets, Education, and Inclusion

This impromptu series grapples with issues derailing America from being able to tackle its economic inequality problem. The first paper (which probably should have been the last paper in the series, but that is why this is impromptu which is a nice way to say I did not start off planning a three paper series) deals with issues that stand in the way of the asset field specifically, but the poverty field more generally, uniting in the fight against economic inequality. The second paper pulls back the curtain on narratives that have shaped Americans’ views on the importance of wealth transfers for sustaining the ideal captured in the American dream. The third paper will dive directly into the unique issue of race in America as it relates to economic inequality. The objective of this series is to start a productive conversation on passing meaningful wealth transfer legislation that has the potential to greatly reduce economic inequality in America. Such legislation is not only important for American families, but is a way to strengthen America from both internal and external threats to its democracy. The existence of high levels of economic inequality are a direct threat to the survival of America and demand that we declare war on it today.

Improving educational outcomes for Rhode Island’s K-12 students is essential for the future of the state. While not an end in themselves, standardized tests can be used to measure school and statewide progress and guide accountability efforts. While extensive research has examined how student, family, school, and community factors influence test performance, one factor sticks out: student poverty (Reardon (2011;) (Carnoy & Garcia, 2017;) (Ford, 2011, (Kornrich & Furstenberg (2013;) (Duncan & Murnane, 2011). Because poverty is so closely related to performance, the failure to account for poverty can lead to misleading assessments of school performance, distorting policy efforts.

However, the relationship between poverty and school performance in Rhode Island, and how this should guide policy, is not well understood. Rhode Island currently uses standardized test data to comply with national reporting, benchmark performance, and identify opportunities for improvement. Expecting a fixed level of academic achievement for a certain amount of educational investment per student neglects the substantial variation in student experience and competency due to unequal family resources. A more nuanced understanding of the relationship between poverty and education would help to isolate schools that are performing well, and poorly, relative to their students’ poverty rate. Understanding the performance of Rhode Island relative to Massachusetts, a wealthy state and national leader in education reform, can help to elucidate the role of poverty in driving achievement gaps.

In this context, we used data on student poverty and 2018-2019 standardized test performance for elementary, middle, and high school students in Rhode Island and Massachusetts to examine the relationship between school district-level poverty and performance.

This study conducted two cluster randomized trials using household-level random assignment to test the impact of a rewards cards program at two different locations: Wabash County Indiana and the City of St. Louis. Findings show the treatment group in Indiana had a greater than three-fold increase in savings activity in CSAs, and in St Louis had a greater than seven-fold increase in savings activity in CSAs. These findings suggest that rewards cards can be an effective strategy for engaging families of different backgrounds in saving activities. 

Information about the nature and extent of wealth inequality among Whites can play a role in eliminating misconceptions and reframing the discussion about wealth redistribution as essential to restoring hope in the American dream and imperative to improving the life chances of all. Using data from the Panel Study of Income Dynamics, we find that the top quintile of White wealth holders has 212 times as much wealth as the bottom quintile. Further, multi-dimensional descriptive analyses from 1999 to 2015 indicate that median wealth has increased 46% among White households in the top 20% of both the wealth and income distributions. During the same time period, wealth holdings decreased among White household in the bottom 20% of both economic distributions. These data suggest that wealth inequality is a problem not only for Black households in America, but for White households as well. Thus, wealth inequality is not just a question of discrimination and racial disadvantage but is rooted in the fundamental nature of the American economy.

The study conducts an initial examination of school data and their associations with participation and saving in the Promise Indiana Children’s Savings Account (CSA) program. Data on savings were obtained from the onset of the program through February 2016 from Promise Indiana via the Indiana CollegeChoice 529 plan manager (Ascensus College Savings) and merged with administrative data on student outcomes for the 2014- 2015 school year. The primary research questions guiding this analysis is whether or not simply having a CSA, being a saver, or the amount saved is associated with lower absenteeism and/or higher reading and math scores. Given the importance of family income to both savings behaviors and academic achievement, we looked at these questions for the sample of students overall, and, separately, for the sample of low-income students (defined as free/reduced lunch participants). In this study, there is no evidence to suggest that having a CSA, being a saver (i.e., having at least one family or champion contribution), or the amount deposited are related to children’s absences. However, among the subsample receiving free/reduced lunch, having a CSA is positively associated with both children’s reading and math scores; however, this association is not found in the aggregate sample. In contrast, amount contributed has a positive association with the aggregate sample’s math and reading scores but not with the scores of children receiving free/reduced lunch. Further, being a saver is associated with reading scores for both the aggregate and free/reduced lunch samples. While more research is needed before policy conclusions can be drawn, these findings suggest that CSA programs may complement schools’ academic objectives.

This study uses administrative records from New Mexico’s Prosperity Kids Children’s Savings Account (CSA) program and in-depth interviews with a sample of participating parents and children to examine savings outcomes and experiences for these low-income Latino families. At this point in the CSA’s evolution, 29% of Prosperity Kids accounts have seen deposits from families’ saving. As of December 2015, among families who contributed in addition to match or incentives, 54% have saved more than $100 in their account. The median total account value for these families was $345 at the end of 2015 (mean, $394). The median amount of family deposits is $123 (mean, $155), with median match deposits of $124 (mean, $139). Average monthly contributions are $12 (ranging from <$1 to $220). Average quarterly contributions were $31.

In this report AEDI presents three separate but complementary studies that analyze data from the Promise Indiana CSA Program Intervention. First, analysis of a survey conducted by Promise Indiana staff with families in the Promise Indiana target population examines attributes associated with knowledge and ownership of 529 accounts. Second, analysis of savings data collected by Ascensus College Savings on behalf of Promise Indiana considers patterns of deposits, asset accumulation, and account ownership by families who have opened CollegeChoice 529 accounts through Promise Indiana. Third, findings from interviews with a subsample of parents whose children have 529 CollegeChoice accounts opened through Promise Indiana are shared to provide some qualitative context for parental perceptions about college savings within this community-driven CSA program.

This paper presents quantitative and qualitative evidence of the relationship between exposure to a community-based Children’s Savings Account (CSA) program and parents’ educational expectations for their children. First, we examine survey data collected as part of the rollout and implementation of The Promise Indiana CSA program. Second, we augment these findings with qualitative data gathered from interviews with parents whose children have Promise Indiana accounts. Though results differ by parental income and education, the quantitative results using the full sample suggest that parents are more likely to expect their elementary-school children to attend college if they have a 529 account or were exposed to the additional aspects of The Promise Indiana program (i.e., the marketing campaign, college and career classroom activities, information about engaging champions, trip to a University, and the opportunity to enroll into The Promise). Parents who were both exposed to the additional aspects of The Promise Indiana program and have a 529 account are over three times more likely to expect their child to attend college than others, increasing to 13 times more likely among parents with no college education. With regard to the qualitative analysis, findings suggest that most parents who participated in the qualitative interviews have formed a college-saver identity (i.e., they expect their child to attend college and see savings as a strategy for paying for it). That is, they have formed an identity of themselves as having a child who is college-bound, and see saving as a path to paying for college. Moreover, there is evidence that Promise Indiana is helping to form a college-going culture among those enrolled. Overall, results suggest a community-based CSA program – Promise Indiana – is associated with nontrivial benefits for families.

Higher education funding policy rests on the assumption that college graduates enjoy equal opportunities for economic mobility regardless of how they finance their education. To examine this contention, this study compares the time it takes to move up the economic ladder for young adults who acquired student debt and those who did not. Findings reveal that college graduates who acquired student debt take longer to reach the midpoint of the net worth distribution than college graduates who financed their education without student debt. In fact, an additional $10,000 of student debt - only one third of the average amount college students acquire - is associated with a 26% decrease in the rate of achieving median net worth. Even after controlling for key differences, acquiring the relatively small amount of $10,000 in student loans is still associated with an 18% decrease in the rate of achieving median net worth. This study also finds some evidence that student debt is associated with a slower rate of reaching median income. An additional $10,000 in student loans is associated with a 9% decrease in the rate of achieving median income, although these differences do not emerge until about age 35. These findings suggest that over the course of a college graduate’s lifetime, those who acquired student debt have less opportunity to move up the economic ladder than their counterparts without student loan debt. Findings underscore the inequity created by the current U.S. system of financing higher education.

Children’s Savings Accounts (CSAs) are savings vehicles, usually initiated early in a child’s life and usually designated for postsecondary educational expenses (Elliott & Lewis, 2014). While CSAs are financial products, typically held either in a deposit institution such as a credit union or bank or in a state-supported 529 college savings plan, they are more than just an account. CSAs are best understood as transformative asset-based interventions that reshape the distributional consequences of the current educational structure (Elliott & Lewis, 2015). As such, CSAs have significant implications for improving educational outcomes, particularly among low-income and otherwise disadvantaged children (see Elliott, 2013 re: asset effects on children’s educational attainment). This potential to close achievement gaps by cultivating greater educational expectations, engagement, and persistence among children less likely to succeed without such interventions has captured policymakers’ attention and galvanized significant momentum for Children’s Savings Accounts. In recent years, CSAs have been implemented by school districts (such as Kindergarten-to-College in San Francisco), state governments (Nevada’s College Kickstart and Connecticut’s CHET Baby Scholars), state/private partnerships (Maine’s Harold Alfond College Challenge is funded by the Harold Alfond Scholarship Foundation, but administered through the state’s NextGen 529 plan), and community-based organizations (Promise Indiana, started by the YMCA of Wabash County, as well as New Mexico’s Prosperity Kids, the focus of this report). There is municipal movement, as well, with a CSA recently announced in St. Louis, Missouri, and programs soon to come online such as in Boston, Massachusetts. State leaders are also exploring ways to integrate the principles of children’s asset building into their work in order to leverage the benefits of CSAs on educational outcomes within their respective states. These efforts include a two-generation approach in public assistance programs in Colorado, a child support savings initiative in Kansas, and new CSA pilots in development in Vermont, Massachusetts, and New Hampshire.

Credit cards are a fundamental component of households’ financial portfolios in the United States; however, overreliance on credit may contribute to financial setbacks. The potential for financial setbacks is particularly concerning among the current young adult generation that is accumulating higher amounts of credit card debt than preceding generations. These trends have led many researchers and policymakers to argue that financial education should become a fundamental component of public school curricula, assuming that financially educated young adults would make better, healthier decisions about credit. However, young adults’ credit card debt may be more than an individual phenomenon. A young adult’s street address—the community in which they grow up or live—can be a key factor in determining how they use credit. This study uses restricted-access, zip code data from a longitudinal sample of 748 young adult college students to examine whether the characteristics of the communities in which they grew up or lived prior to attending college relates to their outstanding credit card debt. A community’s characteristics, such as its unemployment rate and concentration of mainstream banks, have the strongest associations with a young adults’ credit card debt even after taking into consideration their financial education or whether their parents taught them about money as they were growing up. Findings help to understand how communities can be better capacitated to support young adults’ financial health.

There is concern that the increasing number of alternative financial services in communities across the US is risking individuals' financial health by increasing their use of these highcost services. To address this concern, this study used restricted-access, zip code data from nationally representative samples of adult individuals and examined whether the density or concentration of alternative financial services within communities related to individuals’ use of these services. The associations between community density and individuals' use varied by annual household income: Communities' higher density of alternative financial services was associated with the increased probability that modest and highest income individuals ever used these services, while higher density was associated with more chronic use among lowest income individuals. State regulation that prohibited payday lenders was protective for modest and highest income individuals, but had no effect for lowest income individuals. Policy implications are discussed.

Financial education sans opportunities for hands-on experience and knowledge operationalization may be insufficient for promoting healthy financial behaviors. Financial capability combines financial education with financial inclusion via a savings account, thereby giving an opportunity translate knowledge into practice. This study used data from the 2012 National Financial Capability Study to examine relationships between financial capability and financial behaviors of United States Millennials (N = 6,865). Compared to their financially excluded peers, Millennials who were financially capable were 176% more likely to afford unexpected expenses, 224% more likely to save for emergencies, 21% less likely to use alternative financial services, and 30% less likely to carry burdensome debt. Interventions that focus solely on financial education or inclusion may be insufficient for facilitating Millennials’ healthy financial behaviors; interventions should instead develop financial capability.

The dismantling of the American social contract is jeopardizing the economic security and mobility of today's young people and that of future generations. The labor market no longer delivers on its promises of adequate compensation. Higher education, itself pruning opportunity by expecting young people to borrow heavily for its privilege, now has outsized importance for realizing the labor market’s potential. Young people are increasingly born into opportunity that determines whether and how they can take advantage of these institutions and the opportunities they offer. This paper makes a case for financial inclusion as part of a new American social contract. Like owning stock in a company, financial inclusion may be one way of giving young people a stake within these institutions and affirming these institutions' commitments to their roles in the social contract. Children's Savings Accounts (CSAs) are presented as a way of beginning to deliver financial inclusion and create and shore up a new American social contract—one that can sustain future generations and the United States economy into the 22nd century.

Debt is an important component of young Americans’ balance sheets, in part because the effects of different types of debt can vary widely: while some types of debt can contribute to lifetime economic mobility, other types can drain resources. This paper used data from the 1996 Survey of Income and Program Participation to consider the role that a savings account might play in the use of secured and unsecured debt by young adult households. While a savings account was related to more accumulated debt overall, the type of debt accumulated was less risky and potentially more productive. Owning a savings account was associated with a 15% increase, or $7,500, in the value of secured debt and a 14% decrease, or $581, in the value of unsecured debt. Thus, a savings account may help young adults “invest in their debt” by entering better, healthier credit markets and protecting them from riskier ones.

This study explored relationships among young adults’ wealth and entrepreneurial activities with emphasis on how these relationships differ among racial and ethnic groups. Using data (N = 8,984) from the 1997 National Longitudinal Survey of Youth, results indicate that being Black or Latino/a, as well as liquid asset holdings and net worth, were significantly related to the likelihood of self-employment. In analyses disaggregated by race or ethnicity, greater liquid asset holdings were associated with the decreased likelihood of self-employment among white young adults. Black young adults’ greater debt and net worth were associated with increased likelihoods of entrepreneurial activity. Among Latino/a young adults, greater liquid asset holdings and net worth were associated with increased likelihoods of self-employment. Wealth may play an outsized role in the self-employment of black and Latino/a young adults compared to that of their white counterparts. Racial and ethnic minority young adults may have a heavier burden for generating their own capital to embark on entrepreneurial activities when mainstream credit markets are unresponsive or inaccessible. Policy implications are discussed.