Stay Informed!

By Ethan Geiling on 04/24/2012 @ 10:30 AM

Tags: Children's Savings Accounts, Financial Empowerment, Matched Savings

More than one in four children – and roughly two in five minority children – are born into families with negligible savings to weather emergencies or invest in their futures. According to the 2012 Assets & Opportunity Scorecard, 35% of households with children (an estimated 12 million households) are asset poor, while 50% of households with children (an estimated 17 million households) are liquid asset poor. Research has shown that poor financial habits are passed on from parent to child; from generation to generation. Sadly, these are the financial lessons that many of our children are learning.

Source: CFED, The Financial Security of Households with Children (May 2010)

Teaching children the fundamentals of financial education early in life means that they will have a chance to build healthy financial habits and enjoy financial success later on in life. Saving and building assets in the earliest years can promote educational attainment and create a sense of hope for the future.

In 2003, CFED and a group of partners launched the Saving for Education, Entrepreneurship and Downpayment (SEED) Initiative, a multi-year endeavor that developed, tested, and implemented matched savings accounts and financial education for more than 1,300 low-income children and youth across the country. On average, children in SEED accumulated more than $1,500 in savings during the course of the demonstration. SEED generated a substantial body of learning, research and lessons from practical experience that are already playing an invaluable role in efforts to expand savings and asset-building opportunities to millions more children nationwide.

Within the past couple of years, additional research from the Center for Social Development at Washington University in St. Louis has come out showing the incredible power of children’s savings:

• Controlling for other factors – including household income and children’s academic achievement – children with savings dedicated for college education are four times more likely to attend college. (Elliot and Beverly, 2010)
• Children’s savings accounts are strong predictors of college matriculation. Among youth who expect to attend college, youth with a savings account in their names are about six times more likely to actually attend. (Elliot and Beverly, 2010)
• Savings and other financial assets are a consistent predictor of college graduation, even after controlling for variables such as income. (Zhan and Sherraden, 2009)

Today is the 16th anniversary of Teach Children to Save Day, a national campaign to raise awareness of the importance of encouraging lifelong savings habits to young people. Teaching children good financial habits early on and providing an account to make these lessons real opens doors to new possibilities. Children will be free to dream big. Better, they will have the means to begin pursuing their dreams

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