CSA Learning Series Aims to Spur Strong CSA Program Development
By Monica Copeland on 04/14/2017 @ 12:00 PM
Beginning later this month, CFED will host a four-part webinar series on Children’s Savings Accounts (CSAs). This series is designed to share knowledge and best practices with organizations interested in starting CSA programs to help them develop stronger, more sustainable programs. The webinars will feature guest speakers from leading CSA programs and partners across the country, who will share their experiences and answer participants’ questions.
The four webinars in the series are:
Wednesday, April 26 (2-3 pm EDT) - Developing CSA Programs with Families in Mind
This webinar will discuss what it means to “engage” with CSA participants, their families and the community at large around CSAs. Topics will include how to assess community needs before starting a CSA program and how to keep families engaged once a program is up and running.
- Amanda Hahnel, Commonwealth
- Kerri Schmidt & Kimberly Lucas, City of Boston
Tuesday, May 16 (2-3 pm EDT) - Understanding the “Account” in Children’s Savings Accounts
This webinar will provide a high-level overview of the types of accounts used for CSA programs. A bank partner and a 529 partner will share how they work with CSA program coordinators and participants to expand children’s savings in different communities across the country.
- Nancy Goodin and Dawn Braden, Hastings City Bank
- Todd Mortensen, Utah Educational Savings Plan
Wednesday, July 26 (2-3 pm EDT) - Developing Program Goals & Interim Metrics for CSA Programs
This webinar will describe how CSA programs can formulate clear goals and develop interim metrics to capture if they are on track to meet their goals. Presenters will also share how to incorporate evaluation into the design of CSA programs.
- Dr. William Elliott, Center on Assets, Education, and Inclusion, University of Kansas
- Tim Marlowe, Oakland Promise
Wednesday, October 25 (2-3 pm EDT) – Children’s Savings Account Program Design Spotlight
This webinar will highlight how two CSA programs, located in Boston and Oakland, were designed. Presenters will describe how they made key decisions on elements such as their target population, account type, incentives, data tracking systems and more.
- Amanda Feinstein, Oakland Promise
- Kimberly Lucas, City of Boston
To register for any of the webinars above, click here!
To meet the needs of the growing field, CFED hosted a similar learning series in 2016 inspired by the contents of the CSA design guide, Investing In Dreams: A Blueprint for Designing Children’s Savings Account Programs. Past recordings and slides can be found in the Resource Directory.
The CSA learning series is sponsored by the Campaign for Every Kid’s Future, a collaboration among policymakers, practitioners, researchers, funders, financial institutions and advocates dedicated to expanding CSAs to more families. By broadening the base of practitioners and advocates who are knowledgeable and excited about CSAs, this learning series will help build more support and momentum towards reaching the Campaign’s goal of 1.4 million kids with Children’s Savings Accounts by 2020.
For more information about the Campaign for Every Kid’s Future or to receive additional CSA updates, visit savingsforkids.org.
CSAs as Part of a Comprehensive Child Development Strategy
By Shira Markoff on 03/27/2017 @ 02:00 PM
Last week, I attended the Federal Reserve Bank’s Strong Foundations: The Economic Futures of Kids and Communities conference. Much of the conference focused on making early investments in children in order to improve their longer-term wealth and health outcomes. While Children’s Savings Accounts (CSAs) were not explicitly discussed, they clearly fit into this discussion. CSAs are an early intervention—a way to let children know from an early age that their community, city or state believes in their potential and is investing in their future. In this blog, I will share a few highlights from the research presented at the conference and discuss the implications for CSA programs.
The opening plenary, along with several other sessions, focused on the importance of investing in early childhood development interventions. Researchers shared findings showing that the foundation for academic success, lifelong good health and future economic success is laid in children’s early years, starting even before birth. While K-12 education is important to children’s development, as Katherine Magnuson of the University of Wisconsin put it, kids don’t arrive in kindergarten as blank slates who are all equally ready to learn. Rather, the experiences, both positive and negative, of their first few years affect children’s readiness to learn and succeed in school.
Jack Shonkoff of Harvard’s Center on the Developing Child layered on to this research by showing that we can’t make real improvements in the lives of vulnerable children independent of the adults who care for them. Toxic stress during children’s early years—such as that experienced in households struggling with financial insecurity—has a significant, negative impact on their development. The way to alleviate this toxic stress is through interventions that improve parents’ financial situations.
Overall, the policy implications of the research presented at the conference are clear—we need to make deep investments in vulnerable children and their parents or guardians in the first few years of children’s lives and sustain that investment throughout their childhood if we truly want to change their life trajectories. These findings have several potential implications for CSA design that warrant further research and exploration:
- Start earlier – The age of enrollment in CSA programs ranges from birth through high school. Given what we know about the importance of the first few years of children’s development, how much more impact might starting a program at birth have on children’s development and long-term outcomes than starting at kindergarten or middle school?
- Integrate CSAs within broader interventions – Research points to the need for a whole suite of interventions to move the needle on children’s development and economic outcomes. This suggests that program coordinators should plug their CSA programs into a broader set of services (as some programs are already doing), including prenatal care, home visiting programs for vulnerable children, universal pre-K, quality K-12 education, college access programs and support for low-income college students.
- Incorporate robust parental supports – Given the strong connection between household financial insecurity and children’s outcomes, it is important to think about whether CSA programs can provide more robust wraparound services for parents. Improvements in parents’ financial well-being will enable them to save more in their children’s accounts. At a deeper level, addressing household financial insecurity will reduce toxic stress in children’s lives and enable parents to make more investments in their children’s development, such as reading to them and getting more involved in their education.
An innovative model that incorporates these ideas is Oakland Promise, a cradle-to-career initiative that includes scholarships, future centers and CSA programs to ensure that children graduate from high school with the resources needed to attend postsecondary education and have a successful career. Oakland Promise includes Brilliant Baby, which is a two-generation CSA program in which babies from vulnerable families that participate in a home visiting program receive an initial deposit of $500 into a CSA. At the same time, their parents can receive up to $500 in an account along with financial coaching and other supports. It is too early to see the results of this program, but the concept of a comprehensive program that supports children and their parents during children’s critical 0-3 developmental stage holds great promise.
Since the CSA field is still relatively young and rapidly growing, we have a golden opportunity to explore design options that put CSAs squarely into a suite of interventions that help children develop into educated, successful, healthy adults. I’m eager to talk with others in the field about their ideas on this. Please share your thoughts in the comments section below or email me, Shira Markoff, at firstname.lastname@example.org.
1:1 Fund Partners with Gift of College to Encourage Nevada Parents to Save
By Diego Quezada on 03/13/2017 @ 03:00 PM
As CFED has written about before, Gift of College, a national gift registry for 529 college savings plans and student loan accounts, launched the sale of plastic gift cards at Toys "R" Us and Babies "R" Us stores nationwide in an effort to increase uptake in 529 college savings accounts. Now, the 1:1 Fund has joined in an innovative public-private partnership with Gift of College and the Nevada State Treasurer's Office to encourage low-income Nevada parents to open 529 plans.
The treasurer's office will distribute Gift of College gift cards on a pilot basis at two Title I schools in Reno, Nevada that enroll at least 40% of their students from low-income families. Each gift card will come pre-loaded with $25 – thanks to a grant from Charles Schwab Bank – and will serve as a tangible incentive for parents to open a 529 account in their child's name with a $25 "kick start." The treasurer's office will then encourage parents to link their child's 529 account to their Nevada College Kick Start account.
According to recent data, serious educational inequities abound in Nevada. The state ranks forty-ninth in high school graduation rates at 70%. The U.S. high school graduation rate stands at 82%. Additionally, Nevada ranks 46th in the percentage of adults over the age of 25 who have completed a two-year and four-year degree, at 31% and 23%, respectively. By comparison, 38% of adults living in the United States have at least a two-year degree, and 30% have at least a four-year degree. This partnership will allow the state to engage with families in a unique way to help build postsecondary aspirations for students from low-income backgrounds.
"CFED is excited to be a part of this novel partnership," said Carl Rist, the Director of Children's Savings and the 1:1 Fund at CFED. "We're especially grateful to be working with Gift of College, an innovative private sector partner that allows us to leverage the latest technology and marketing ideas to increase ownership of 529 college savings accounts in Nevada."
To help get the word out and help families open 529 accounts using the pre-loaded gift cards, Sheila Salehian, the Deputy Treasurer for Prepaid Tuition, 529 College Savings Plans and Financial Literacy at the Nevada Treasurer's Office, said that her office will work with local public elementary schools during kindergarten graduation ceremonies this spring to promote college savings uptake.
"As parents celebrate this milestone in their child's life and reflect upon how fast the first five years have passed since their child was born, we will be there to remind them that there is no better time than the present to start saving for their child's higher education needs," she said. "Time is still on their side if they start saving now."
"The Nevada Kick Start initiative provides an easy way for our youngest students to begin saving for college," said Wayne Weber, CEO of Gift of College. "We are proud to partner with them to help families make their dreams of a higher education a reality."
Promise Indiana Activates Local Communities to Help Kids Save
By Carl Rist on 02/28/2017 @ 04:00 PM
If you’re like most people who follow the children’s savings field, you’ve probably heard about Promise Indiana in Wabash, IN. Under the leadership of Clint Kugler and Phil Maurizi from the Wabash County YMCA, and their local collaborators, Jason Callahan (Wabash City Schools) and Patty Grant (Community Foundation of Wabash County), the Wabash County Promise has already encouraged more than 2,000 kids and their parents in Wabash to open an Indiana CollegeChoice 529 Direct college savings account. What’s more, the Wabash County Promise has achieved an impressive level of both community and parental engagement, with a savings participation rate of 43% in the first three years of operation.
But did you know about the success of Promise Indiana in activating communities across Indiana to launch Children's Savings Accounts (CSAs)? At an event last week in Indianapolis sponsored by the Indiana Philanthropy Alliance to take a “deep dive” into the Promise Indiana model, I had the distinct pleasure of learning more about Promise Indiana’s expansion into 13 additional communities across the state. The event also gave me the opportunity to meet some of Promise Indiana’s key partners in those communities. Here’s some highlights of what I learned:
Promise Indiana is community-driven/state-supported.
At its core, Promise Indiana is based on a model that is community-driven, but state supported. The state support comes from the state’s CollegeChoice 529 Direct plan that provides the core account platform that all sites use. All sites also provide each participant with an initial $25 deposit (donated by local businesses or donors). From there, Promise communities have wide latitude in designing their own program features (such as matching incentives) and in setting goals for the program. As Clint Kugler said, “community is where change happens,” and each site “activates” their community in ways that align with local needs and preferences.
Innovation is all around.
The social entrepreneurs that direct the Wabash County Promise lead the way in innovation. Some of the notable innovations in Wabash include local banks receiving cash deposits from participants for ultimate deposit in the appropriate CollegeChoice 529 Direct account, and a Mott Foundation-funded initiative (managed by the Community Foundation of Wabash County) to provide early distribution of scholarships for fourth through eighth graders to incentivize achievement in school. But the innovation goes beyond Wabash. Take rural Jay County (pop. 21,330), which has the unwelcome distinction of having the state’s highest child poverty rate. With support from the Portland Foundation (the local community foundation) and local schools, 72% of eligible kids enrolled in the Jay County Promise in its first two years. With over 1,000 kids in grades K-3 that have opened a CollegeChoice 529 Direct account, Jay County now holds the distinction of ranking the fourth highest among all counties in Indiana for its share of youth under 18 years old with a 529 account.
Community Foundations are leading the way.
Indiana is blessed with a strong network of 94 community foundations. More than 35 attended last week’s Deep Dive gathering and many are playing a leading role in making the Indiana Promise a reality in their communities. Beyond providing funding to help support the Indiana Promise, many community foundations have also agreed to be the local fiscal agent for the program. In still other communities, the local community foundation is the lead organization. For example, in tiny Benton County (pop. 8700), which has no United Way or YMCA, the community foundation added staff to run the Benton Community Promise. Ashley Bice, the executive director of the Benton Community Foundation, noted that if the Promise Indiana was going to happen in Benton County, it “would have to be the community foundation.”
But it’s not just community foundations – a diverse set of funders have embraced the work.
One of the success factors of successful, sustainable CSA programs is the ability to attract a diversified set of funders, including public sources of support. In addition to the strong support from community foundations, Promise Indiana has attracted support from:
- Businesses – for example, Parkview Health, a network of health providers and hospitals across northeast Indiana provides the $25 initial deposit for all accountholders in Promise programs in their footprint.
- Public sector – several Promise Indiana communities have succeeded in attracting funding from their local county commissioners – often presenting the Promise as an economic development strategy.
- National foundations – the Lilly Endowment has provided funding to Promise Indiana to provide core operating support for three years to Promise Indiana sites in 10 communities.
Stay tuned for more updates as Promise Indiana continues to expand to more communities in Indiana and seeks to ensure that every child has the assets, champions and community support to pursue their dreams.
Cities Are a Hub of CSA Activity and Innovation
By Kamolika Das on 02/21/2017 @ 09:00 AM
Cities have been a hub of Children’s Savings Account (CSA) innovation, starting with San Francisco’s launch of the first universal, municipal CSA program, Kindergarten to College, which inspired the creation of many other city and state level programs. City leaders are increasingly pushing for CSAs as a strategy to promote higher education and economic development within their communities. Existing CSA programs serve a total of less than half a million children nationwide, so engaging cities with large numbers of children is a promising way to ramp up the impact of CSAs. Recently, municipal leaders in three cities – Los Angeles, CA, Milwaukee, WI, and Richmond, VA – have been thinking through policy questions and program design details for their respective CSA programs.
Los Angeles is exploring creating a CSA program for the nation’s second-largest school district, Los Angeles Unified School District (LAUSD). Last year, the Los Angeles City Council instructed the City Administrative Officer, with the assistance of the Chief Legislative Analyst and City Attorney to review the feasibility and economic impacts of establishing a CSA program for the Los Angeles Unified School District’s (LAUSD) approximately 72,000 kindergartners. The city is in the process of determining a final cost estimate for the program, which would be the largest running municipal-level CSA program. Champions of the program are confident that it would help narrow gaps in college participation between children from higher and lower-income families and increase economic opportunity for all Angelenos.
City leaders in Milwaukee are developing a citywide CSA program to increase educational attainment among the city’s youth and ensure that Milwaukee has a skilled workforce prepared for 21st century jobs. The idea was first proposed in 2014 by Mayor Tom Barrett as part of his economic development strategy for the city, Growing Prosperity: An Action Agenda for Economic Development. The City of Milwaukee has made great efforts to include stakeholders from across the city in the CSA design working group, including financial service providers, community groups, philanthropic organizations and education leaders. The Milwaukee CSA program is expected to launch in the 2017-2018 school year, starting with Milwaukee Public Schools (MPS) kindergartners and eventually expanding to charter, private, choice, and home school students.
Most recently, municipal leadership in Richmond has also been exploring the concept of CSAs. Richmond’s new Director of the Office of Community Wealth Building, Reggie Gordon, has been building partnerships with the Superintendent of Richmond Public Schools and the Richmond Public Schools Education Foundation to collaboratively think through what a CSA program would look like in Richmond. Discussions are at an early stage, but the joint interest demonstrates that the impact of CSAs cuts across a number of policy areas from K-12 and higher education to anti-poverty measures and workforce development.
The number of cities that are beginning to learn from one another and explore CSAs as a path to financial opportunity is heartening. Eventually, as more states begin to pursue statewide CSA programs, municipal leaders may need to think strategically with state policymakers about combining the programs or even rolling them into a national CSA program – but for now, we can celebrate the new initiatives underway.
CSAs and ESAs Are More Different Than the Words Suggest
By Monica Copeland on 02/13/2017 @ 01:00 PM
We have recently observed an uptick in news stories and legislation about Education Savings Accounts (ESAs), which are individual flexible use accounts funded by states for families’ private educational expenses. ESA legislation has been adopted in five states since 2011. As many as 18 states introduced ESA legislation in 2016, and North Dakota and New Hampshire are currently considering ESA bills. Given the new Secretary of Education Betsy DeVos’ support for school voucher programs, tax credits and ESAs, we expect to see continued discussion of this policy. The growth of ESAs poses a challenge for the Children’s Savings Account (CSA) field, since though the names sound very similar, the goals are completely different.
How are ESAs different from CSAs?
As described in a previous blog, ESAs and CSAs have at least four fundamental differences.
- ESAs are not really savings accounts. ESAs are flexible spending accounts which allow families who have opted out of public education to use public funds to pay for expenses such as tuition and fees at private or parochial schools, home schooling, tutoring or online courses.
- ESAs are not about post-secondary education. Unlike CSAs, whose proceeds are primarily designated for investing in post-secondary education, ESAs pay for primary and secondary education expenses.
- ESAs provide no incentives for parents to actively contribute to the account. A fundamental feature of CSAs is that they offer savings incentives that encourage accountholders to save and build wealth in their accounts. ESAs offer none of these features.
- ESAs have few, if any, progressive features. With the exception of addressing a few unique populations, ESAs are not addressing gaps in wealth. An important feature of many CSAs is a progressive incentive structure that provides greater incentives for low- and moderate-income savers. In this way, greater benefits are directed toward those with less means.
Why is this an issue for our field?
The risk for our field is that as we advocate for CSA policies, they may get confused or conflated with ESA policies. For example, there is the potential for this confusion in New Hampshire, which currently has both CSA and ESA legislation pending. Calling what is essentially a voucher policy an “Education Savings Account” contributes further to the confusion, since it implies that families are putting savings into the accounts when they are not.
As we continue to promote the expansion of CSAs at the local, state and federal levels, we will keep a close eye on this issue. We encourage our partners and advocates to help raise awareness of the differences between these policies and make sure there isn’t confusion as you develop CSA programs in your communities. To learn more about CSA policies visit savingsforkids.org.
Children’s Savings Victories on the Horizon in Three States
By Kamolika Das on 02/03/2017 @ 03:00 PM
While the federal education policy landscape is still unclear, we are excited about the leadership of three state policymakers championing Children’s Savings Accounts (CSA) and college access. More than 10 states currently have long-term asset-building accounts for children in operation, and others are in the process of rolling out or funding their programs.
Recently elected Pennsylvania Treasurer Joe Torsella, newly elected Oregon Treasurer Tobias Read and California Assemblymember Adrin Nazarian are all taking leadership as champions for expanding financial security for all populations in their respective states, especially through increased education opportunities for children.
In Oregon, Treasurer Tobias Read has long been dedicated to education initiatives, as demonstrated by his work on full-day kindergarten and support for expanding eligibility to Oregon Promise grants and increasing services for Oregon Promise grantees. During his campaign, Read also committed to supporting Career and Technical Education programs, Early College Credit programs and Dropout Prevention Strategies.
The Oregon Asset Building Coalition has designed a CSA program and identified best practices to ensure that it is inclusive and accessible, especially for low- and moderate-income families. Treasurer Read’s involvement will be critical in helping to generate enthusiasm among Oregon policymakers and bring Oregon’s children one step closer to educational and financial success.
Similarly, Pennsylvania Treasurer Joe Torsella campaigned on the promise of creating economic opportunity for the state’s most vulnerable residents. As a symbol of his priorities, he was sworn in at Camp Curtin Academy, a public middle school in Harrisburg. He states, “This is a common sense, centrist idea that both parties should agree on…. It’s about raising expectations and results, and it’s about the economy of Pennsylvania.” Torsella has made this an early priority and under his direction, we are hopeful about seeing Keystone College Savings Accounts come to fruition.
In California, Assemblymember Adrin Nazarian has introduced a bill to establish a CSA program for the half-million children born in the state each year. He is working closely with stakeholders from across the state to shape the design of the program to ensure more children have an opportunity to get to and through college. As the bill language is developed, this could be an incredible addition to the commitment that several cities in California have already made to CSA programs.
CFED is optimistic that the examples above reflect progress in how state and local governments are partnering together and learning from one another. While we await policy changes at the federal level, we can take some solace in leaders at the state and local level who are finding innovative solutions to improve educational and financial outcomes for children across the economic spectrum.
How Executive Action Can Help Expand Children’s Savings Programs
By Shira Markoff on 01/27/2017 @ 09:00 AM
As we’ve discussed previously on this blog and in other CFED publications, Children’s Savings Account (CSA) programs have proliferated across the country over the past several years. As of the end of 2016, 42 programs—ranging in size from small community-based programs to universal statewide programs—were serving nearly 313,000 children. With growing interest and momentum across the country, CSAs are poised to scale significantly and reach hundreds of thousands more children over the next few years. However, this expansion may be thwarted by the lack of a turn-key account platform that meets the needs of cities and states designing programs. While some programs have developed workarounds, for other would-be programs, the challenge of finding a financial services provider willing to work with them to create an appropriate savings vehicle is too big to overcome.
Working with other organizations in the field, we have developed a proposal for actions the presidential administration could take to address this challenge. As described in Administrative Actions to Close the Ever-Growing Gap, the U.S. Treasury Department could create a low-cost, easy-to-access account platform for CSA programs called myCSA; this idea was first proposed by St. Louis Treasurer Tishaura Jones and Ida Rademacher of the Aspen Institute in February 2016. Modeled after the myRA program, which facilitates small-dollar retirement savings by workers without an employee-sponsored retirement plan, myCSA would address a critical gap in the financial services market. By providing a ready-to-use account platform for new CSA programs, myCSA would unleash a new round of CSA innovation and expansion at the state and local level.
One key adjustment would need to be made to the myCSA structure to make it suitable for saving for postsecondary education rather than retirement. In particular, a Roth IRA, which is used in myRA, would not suit a CSA program. Roth IRAs are primarily meant to save for retirement, and deposits into Roth IRAs must come from earned income. Instead of a Roth IRA, for myCSA, Treasury could consider using a savings account or an investment account more akin to a 529 college savings plan.
In addition, myCSA would also need to accommodate the typical components of CSA programs and the needs of low-income savers via the following features:
- Accessible to multiple depositors, meaning that parents, relatives, children and the CSA program could all deposit funds into the account.
- User-friendly deposit options that facilitate small-dollar saving by low-income families.
- No fees that eat away at families’ savings and no minimum deposit or minimum balance requirements that prevent small-dollar deposits and erode the principal in the account.
- A safe investment product that allows for some growth while minimizing risk.
- Lifelong savings potential, which allows myCSA accounts to be rolled over into a myRA account when participants reach a certain age.
CSAs have the potential to improve the life trajectories of millions of children from low-income households. By making it easier for states and cities to start CSA programs and open accounts, creating a myCSA platform could potentially result in hundreds of thousands of more children having an account. Implementing myCSA is a concrete action the new administration can take within the first 100 days to demonstrate its commitment to promoting opportunity for all children.
Well-Designed CSAs Have the Potential to Help Decrease the Racial Wealth Divide
By Diego Quezada on 01/13/2017 @ 10:00 AM
Supporters of Children’s Savings Accounts (CSAs) often point to the fact that CSAs increase economic opportunity. CSAs are designed to ensure that all families, especially those in low- and moderate-income communities, have at least a modest wealth endowment to pay for postsecondary education. In order to achieve this goal, CSA policymakers should simultaneously address persistent, deep-seated racial wealth disparities in the United States through targeted policy design.
In 2013, the median White household had $144,200 in wealth, which is the value of what a family owns minus what it owes. By contrast, the median wealth of Black households was just $11,200. White families in the bottom quintile of the income distribution have slightly more wealth than Black families in the middle quintiles of the income distribution. Because wealth takes into account the intergenerational transfer of money, it is a better measure of economic security than income. That’s why we see these staggering racial inequities – White families have had much more time to pass wealth from one generation to the next.
The best CSA policies are the ones that are both universal and progressive – that is, they have greater initial deposits and incentive matches for families that come from economically disadvantaged backgrounds.
We know that this targeted approach could work. As CFED and the Institute on Assets and Social Policy have found, a universal, progressive CSA program established in 1979 with investments of $7,500 for low-wealth households and sliding-scale declines to $1,250 for high-wealth households would have reduced the racial wealth divide. The median wealth of Black households would be $7,450 greater today if such a policy were implemented, and the median wealth of Latino/a households would have increased by $6,100. The wealth gap between White and Black households would have fallen by 23%, and by 28% between White and Latino/a households.
Moreover, policymakers should also know that a progressive CSA program would not serve as a panacea to close the racial wealth divide. The returns to investments in education remain unequal for people of color, and for Black people in particular. In 2013, Black college graduates aged 22-27 had an unemployment rate nearly twice as high as their equally credentialed peers overall. In addition to promoting college access through CSAs, policymakers should ensure that people of color benefit equally from the same educational achievements. Increasing funding for the cash-strapped Equal Employment Opportunity Commission stands as one way to address this issue.
In order to achieve their goals of increasing college access and reducing wealth gaps, CSA policymakers should take into account that people have different opportunities and face different barriers toward getting ahead. They should also keep in mind that these disparities do not disappear as education or income levels rise. If CSA policymakers get it right, though, they have a great opportunity to benefit everyone and close wealth gaps.
1:1 Fund Partners Raise Nearly $127,000 for CSAs on #GivingTuesday
By Diego Quezada on 12/23/2016 @ 09:00 AM
Celebrated on the Tuesday following Thanksgiving, #GivingTuesday marks the start of the charitable giving season, when people in the United States and abroad focus on their holiday and end-of-year giving. Since its inaugural year in 2012, #GivingTuesday has cemented its status as a global day to support philanthropic causes through donations of both time and money.
Seven 1:1 Fund partners participated in #GivingTuesday this year, raising nearly $70,000 for their Children’s Savings programs. The newest member of the 1:1 Fund, Partners for Youth Opportunity, participated in their first-ever campaign event last month. Combined with the 1:1 Fund’s dollar-for-dollar matches for donations of up to $500, partners collectively raised $126,900 on November 29 – making a significant difference in the ability of low-income children across the country to save for college.
This year’s #GivingTuesday marked the second-highest day of giving for the 1:1 Fund. The top day was last year’s #GivingTuesday, when the 1:1 Fund offered partners a 2:1 match on eligible gifts instead of the typical 1:1 match. The “I Have A Dream” Foundation affilaite in Des Moines, Iowa raised the most money of any 1:1 Fund partner, hauling in more than $21,000 before the match. The El Monte Promise Foundation in California stood as a close second among the 1:1 Fund’s #GivingTuesday participants, raising more than $18,000 on November 29. El Monte did hold the honor of raising their funds from the largest number of individual donors during this particular campaign. One hundred forty-one people chipped in to El Monte’s one-day campaign, which was an average donation size of $128.
Over the course of the year the 1:1 Fund and our partners raised more than $444,000 in 2016. Roughly $141,000 of that total came in as online donations for the various campaigns, including this year’s #GivingTuesday. Looking ahead to 2017, the 1:1 Fund’s will facilitate four more fundraising campaigns, and the first campaign will coincide with America Saves Week, from February 27 to March 3. We look forward to sharing more about those upcoming campaigns in the New Year and sharing ways that you can support the 1:1 Fund’s efforts to grow children’s savings year-round.
Children's Savings Momentum Hits New York
By Diego Quezada on 12/19/2016 @ 08:00 AM
Children’s Savings Account (CSA) programs have cropped up across the country. By the end of this year, nearly 313,000 children will have a CSA – a 39% increase from the end of 2015. In addition to CSA programs currently operated by nonprofits such as Children’s Aid Society, the “I Have A Dream” Foundation and Credit Do, two recent developments have now brought significant momentum to CSAs in New York.
Next fall, as part of a three-year pilot initiative, all 3,500 incoming kindergarten students in one New York City school district will receive a $100 initial deposit in a CSA and additional incentives to save. In addition, New York Governor Andrew Cuomo signed a bill into law that will enable families to split their state tax refund and direct a portion of their refund into New York’s 529 college savings program at tax time.
About the New York City CSA Pilot
In the New York City CSA pilot, for each of the next three years, all 3,500 incoming kindergarten students in one school district (still to be chosen) will automatically receive an initial $100 deposit into a 529 college savings account. Children can receive another $200 in their CSA over four years if their family meets certain benchmarks such as saving money on their own. The program is part of a three-year pilot designed by the city’s Office of Financial Empowerment (OFE) to create a college-going culture for participants. If successful, plans call for expansion to all kindergarten students in the city. This pilot phase is being funded by a contribution from The Gray Foundation, which is headed by Jon Gray, the head of global real estate at a New York City investment firm, and his wife Mindy. The Grays donated $10 million to start the program.
The program will strive to be inclusive of low-income and marginalized populations. The initial $100 contributions will go into an omnibus 529 account, allowing undocumented immigrants who do not have Social Security numbers to participate. The CSA program also has automatic enrollment, ensuring that all families, especially those with limited English proficiency or less financial knowledge, can benefit from the savings.
Moreover, the program will encourage families to set up their own 529 accounts. Currently, 529 accounts are primarily used by the wealthy – nationwide, the median assets of $413,000 for families with the plans are nearly 25 times higher than the $15,400 in median assets for those without the plans – but New York City’s Office of Financial Empowerment plans to use its Financial Empowerment Centers to advertise 529 accounts to all families and help them set up their own accounts.
About the New York State 529 Legislation
The new split refund legislation for 529s in New York State, which was signed by Governor Andrew Cuomo in late November, has the potential to connect more families with an easy option to save for college. Individuals and families will now have the ability to split their state tax refund and specify that a portion of their refund go directly into New York’s 529 college savings program. Only 3% of U.S. families have 529 plans, and two-thirds of Americans say they don’t know what 529 plans are. Advocates of the legislation and local community-based organizations plan to promote this new split refund option at Volunteer Income Tax Assistance (VITA) sites to help low- and moderate-income families take advantage of an easy way to save for their children’s futures.
Taken together, both the New York City CSA pilot and the NY State split refund legislation for 529s represent significant steps toward making it easier for more New Yorkers to save for college. At CFED, we look forward to hearing more about the rollout of both initiatives in the coming months.
Gift Cards Present New Potential for Children's Savings
By Diego Quezada on 12/06/2016 @ 09:00 AM
In addition to banks and credit unions, Children’s Savings Account (CSA) programs across the country work with 529 plan providers to offer accounts for children to save for postsecondary education. 529 plans, education savings plans that allow families to invest in funds for future college costs, have successfully been used by statewide CSA programs such as Maine and Nevada as well as local programs like Promise Indiana, “I Have A Dream” Foundation, and El Monte Promise Foundation. In recent news, 529 gift card access arrived just in time for this holiday season – but it also raises larger questions about overall access to the plans themselves.
Giftofcollege.com, a registry for online gifts to 529 accounts, has now made plastic 529 gift cards available for purchase at Toys “R” Us and Babies “R” Us retail stores. This new partnership with national retail chains may help more families think about opening or contributing to 529 accounts for their children or loved ones as they are making in-store purchases during holidays and other significant milestones.
How the gift cards work:
- Shoppers at Toys “R” Us or Babies “R” Us will be able to purchase 529 cards in fixed amounts of $25 or $50, or in variable amounts of up to $500, with a small fee.
- After parents receive the card, they must create an account on Giftofcollege.com – if they haven’t done so already – and redeem the card to direct the money to their 529 plan.
- If parents have not set up a 529 account for their children, they must start one and establish an account on Giftofcollege.com to receive the money.
We see potential for some CSA programs to use the gift cards to help increase uptake for families’ 529 accounts. For example, gift cards at large chains could help cash-preferred customers make contributions to accounts for their loved ones or be co-branded with a local program’s name. However, it’s important to note that 529 plans are used by less than three percent of all U.S. families, and these families tend to be wealthier than families who do not have 529 accounts.
To help reduce disparities in access for low-income households, 529 administrators may want to consider additional changes to the account beyond gift cards in stores. For example, they could make the following types of changes:
- Streamline the application forms and disclosure agreements for families, especially those with limited English proficiency or less financial knowledge.
- Reduce initial deposit amounts and/or minimum dollar amounts for one-time and recurring deposits.
- Provide additional deposit options for families that include ways to accept in-person or cash deposits.
- Promote multiple ways to open accounts, including working with local community groups and financial counselors/coaches to help facilitate application submission.
The presence of 529 gift cards at toy retail stories may do some good to help raise awareness for parents of all socioeconomic backgrounds. However, creating easier ways for people to open and contribute to 529 plans will ultimately help the programs assist more families who could benefit the most.
Exploring Best Practices for Integrating Technology into CSA Program Design
By Bahar Akman, Guest Contributor on 11/18/2016 @ 09:00 AM
Inversant, a Children’s Savings program based in Boston, Massachusetts, recently released a report and hosted a follow-up webinar to share insights they gained in their efforts to integrate and test various tech-based solutions to support their program goals. Like many other Children’s Savings Account (CSA) programs around the country, Inversant is interested in exploring how technology can offer cost-effective solutions to expanding program reach while increasing participation and engagement from participants. The research revealed that there is still demographic barriers to accessing and using the internet. Low-income families and families that speak primarily Spanish at home suffer from these disparities.
Starting in fall 2015, Inversant introduced monthly e-newsletters paired with e-survey sweepstakes, text messaging and an online portal for parents. These tech-based outreach and community strategies were developed to support three programmatic goals: 1) to encourage families to stay on track with their savings, 2) to effectively promote financial literacy and capability among college savers, and 3) to enhance two-way communication while cultivating a virtual college saver community. The paper and webinar offer an overview of these new tools and share the knowledge gained while launching and implementing them. For now, the evaluation mainly focuses on engagement with the e-newsletters (and whether participants have access to them). This first attempt at gauging our families’ engagement levels revealed some good news, but also raised new questions that need further attention:
- E-newsletters are useful to families who receive them. The monthly open rate averaged 40%, which is well above the open-rate benchmarks used for the non-profit or education sectors.
- The e-newsletters are a good complement to Inversant’s learning circles.
- 30% of families did not provide Inversant with an email, which means that they could not take advantage of the e-newsletters.
- 92% of families earning above $50,000 per year gave an e-mail address, but only 62% of families earning below $30,000 did so.
- A large portion of Inversant families are Latino, and although the e-newsletters were available in Spanish, almost half of the families who speak primarily Spanish at home did not have access to them.
While tech-based outreach offers low-cost solutions to reaching more participants, our analysis shows that there are still important demographic barriers to accessing and using the Internet. Therefore, it is crucial to assess how comfortable participants are with using email addresses and other online services before seeking to cultivate consistent online engagement.
As we gather data, other briefs will follow with evaluation of impact and effectiveness of other tech-based tools. With this ongoing research, Inversant seeks to start a conversation on best practices for integrating a wide range of tech-based communication and outreach strategies to support CSA programmatic goals.
Please contact Bahar Akman Imboden, Inversant’s Director of Research, if you have questions.
The State of the Children’s Savings Field: A Look Behind the Numbers
By Shira Markoff on 11/07/2016 @ 01:00 PM
CFED recently released A Growing Movement: The State of the Children’s Savings Field 2016. Based on a survey of CSA programs, the document highlights trends in the field. For most people, that document covers all that they want to know about the state of the CSA field. However, for my fellow data wonks and CSA aficionados, this blog offers a deeper dive into the survey results.
One of the more revealing aspects of the survey is the variations in CSA program models. To dig into these variations more, we analyzed key program features by program size. For the purpose of this analysis, we categorized programs enrolling 2,000 or more children annually as “large” and programs enrolling less than 2,000 children as “small.” (See more on annual enrollment across programs in the State of the Field document.) Here is what the analysis shows about differences and similarities in key features between these programs:
- Large programs are more likely to use automatic enrollment — 57% of larger programs are opt-out as compared to 26% of smaller programs.
- Large programs usually have narrower target populations — all but one of the large programs enroll children at just one point in time (birth or kindergarten). Just over half of small programs have only one enrollment point, while the other 49% allow kids to enroll at multiple points (e.g., at any grade in elementary school).
- Large programs are more likely to offer initial deposits — 100% of large programs provide an initial deposit compared to 57% of small programs. However, the median initial deposit amount is the same for both ($50).
- Large and small programs offer savings matches and benchmark incentives at virtually the same rates.
- Large programs are more likely to use 529s as their account platform — 71% of large programs use 529s compared with 43% of small programs.
- Large programs are more likely to be at least partially government funded — 57% of large programs receive some type of government funding (local, state or federal) compared with 34% of small programs.
The analysis reveals that large and small programs tend to differ in some significant ways, particularly around enrollment. This is not very surprising given the need to streamline operations when a program enrolls thousands of children per year—even as many as 35,000. Larger programs cannot expend as many resources per child as smaller programs if they hope to keep administrative costs manageable. So, for example, automatically enrolling children based on data collected through birth or school records is more efficient for a large program than reaching out to and following up with more than 2,000 families about enrolling their children in the program.
Higher usage of 529 accounts for large programs is also not surprising, since four out of the seven large CSA programs are statewide programs. It makes sense that these programs would use the state-supported 529 college savings plan, especially given the difficulty of finding one bank or credit union that is accessible in all regions of the state. The omnibus 529 structure also supports automatic enrollment, since the program can invest an initial deposit on behalf of each child into the pooled 529 account by just using information obtained from state birth certificate records.
Overall, the structure of larger programs matches CFED’s guidance on designing CSA programs for scalability. (See a discussion of this at the beginning of Section A in Investing in Dreams.) Features such as automatic enrollment, working within the existing structure of a 529 account and receiving public funding and support, may make it easier to build and sustain large-scale programs, especially statewide programs. Even for programs that are starting with a smaller rollout, if the ultimate goal is to serve thousands of children per year, it is important to build in the features that will make the program manageable and successful at a larger scale.
CSAs and College Scholarships: The Beginning of a Beautiful Friendship
By Carl Rist on 10/27/2016 @ 01:00 PM
As Sara Goldrick-Rab describes in her new book, Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream, the inability to afford college is a significant reason for low rates of college completion for students from low-income families. In fact, less than 10% of students from low-income households complete college by their mid-20s. Given this strong connection between financial resources and college completion, I was excited to attend the annual conference of the National Scholarship Providers Association (NSPA) earlier this month. NSPA’s 370+ member organizations from the United States, Canada and the Bahamas give over 350,000 scholarships amounting to over a billion dollars each year, helping thousands of students – many of them low-income – pay for college and achieve college success.
As someone with both feet planted firmly in the Children’s Savings Account (CSA) world, it was especially rewarding to see and learn at the NSPA conference about a growing interest on the part of scholarship providers in understanding and integrating college savings into their existing work to help students meet the financial demands of going to college. Dr. William Elliott, Director of the Center on Assets, Education and Inclusion (AEDI), and I were at the conference to talk, in particular, about the potential for collaboration between CSA programs and College Promise Campaigns or Promise Programs (which typically extend a “promise” to elementary or secondary students in a particular community of either scholarships or free tuition to cover all or part of postsecondary tuition costs).
We were already aware of a couple of early-stage innovators in the world of higher education access who had previously begun to integrate matched college saving accounts and college scholarship models. This includes the Scholarship Foundation of St. Louis, which provided almost $5 million in no-interest loans and direct grants to students last year and also opened Missouri 529 accounts with a $500 initial deposit and an offer of additional savings matches to two cohorts of 8th graders at a St. Louis middle school. Another innovator is Earn to Learn, a model effort in Arizona that uses institutional aid from three higher education institutions in Arizona and federal Assets for Independence (AFI) funds to match the savings of low-income high school and college students. Over 1,000 Earn to Learn participants have taken advantage of the program’s generous 8:1 match and have saved over $700,000, which in turn has helped these students earn over $5.6 million in matched savings scholarships.
While at the NSPA conference, we learned about two more promising efforts that combine CSAs with scholarships:
- Forman Scholars. The Forman S. Acton Educational Foundation, launched in fall 2014, promotes educational opportunities for youth in Salem City, NJ. The Forman Scholars, who must attend Salem City High School and meet specific academic and financial need requirements, can receive between $10,000 and $40,000 in scholarships over their college careers. In addition, through a new initiative known as the Acorn Fund, the Acton Foundation will invest in college savings accounts for every child in Salem.
- KC Scholars. The Ewing Marion Kauffman Foundation recently announced the new KC Scholars program, which is designed to increase postsecondary educational attainment in the greater Kansas City area. As part of KC Scholars, 250 scholarship awards will be made annually to students in the 11th grade, with a commitment of up to $10,000 per year, renewable for up to five years. In addition, 1,000 9th graders will be chosen annually to participate in a college savings effort that will provide a $25 initial deposit in a 529 College Savings Plan. In each class of savers, fifty students will be selected to receive a 4:1 savings match (up to $5,000) with an additional $2,000 in potential incentives for students who achieve college-readiness milestones.
All of these models demonstrate the unique power and potential of combining CSAs and college scholarship programs. As we concluded in the paper on CSAs and College Promise programs that CFED co-authored with Dr. Elliott, CSA savers need a “promise” or scholarship in addition to the modest savings CSAs provide to help cover the cost of college attendance. At the same time, College Promise and other scholarship programs need CSAs to fully engage the aspirations of all students, not just those that already expect to go to college.
ALC Provides Launchpad for Latest CSA Findings and Developments
By Diego Quezada on 10/19/2016 @ 10:00 AM
The 2016 Assets Learning Conference provided a multitude of opportunities for CSA leaders to connect, share best practices and generate new ideas for moving the field forward. CFED hosted both a CSA pre-conference September 27, which brought together more than 50 experienced CSA practitioners, advocates, funders and policy champions, along with organizing a set of workshop sessions on CSAs at the conference itself.
Benita Melton from the Charles Stewart Mott Foundation kicked off the pre-conference session by noting the number and diversity of programs represented in the room, reflecting the growth and momentum in the field. At the same time, she pointed out that work remains in developing an account platform to help open accounts, improving parental engagement and improving data tracking data of educational outcomes—all of which were discussed throughout the day.
Following a presentation on interim outcome metrics, Frank DeGiovanni, formerly with the Ford Foundation, and William Elliott, with the Center on Assets, Education, and Inclusion, commented that the field has made the evidence-based case that CSAs work by helping families save, and now programs should focus on improvements and understanding what factors help children do better.
The pre-conference session also featured a Shark Tank-inspired session that included three “pitches” from providers of new technology solutions to make provision of CSAs more accessible and efficient. Megan McTiernan of EARN showcased a new online platform that connects directly to savers' individual bank accounts and rewards them based on their saving activity. As part of the demos, Utah Educational Savings Plan and VistaShare’s Outcome Tracker also presented their products, followed by probing questions from the expert panel and audience.
In addition to the robust discussions during the pre-conference, the Assets Learning Conference highlighted CSAs in a variety of ways. At the opening plenary, CFED’s President Andrea Levere challenged the audience to expand CSAs from 29 states to all 50 states. She also urged attendees to join the Campaign for Every Kid’s Future, which works to connect 1.4 million kids to CSAs by 2020. Finally, four workshop sessions at the 2016 ALC focused specifically on children’s savings, providing attendees with tools to design and launch CSA programs, the latest research on CSAs and strategies for how to pitch their programs to different types of funders and elected officials.
One of the highlights of the conference was a session on CSA research. At the session, Trina Shanks of the University of Michigan's School of Social Work reported on recent findings from a quasi-experimental study of CSAs. The so-called Michigan SEED site, which opened CSAs for kids in Head Start more than a decade ago, was part of the multi-year SEED Initiative. Findings from recent interviews with participants emphasized youth voices about CSAs gathered through qualitative data. This series of interviews revealed that financial barriers remain a challenge in the lives of the CSA savers and that communication between the parents and children about the value of CSAs is critical to increasing college aspirations. In addition, research on Kindergarten to College students, presented by William Elliott, found that more disadvantaged students – students in schools with a high percentage of the population on free or reduced lunch – saved at the highest rates, challenging conventional notions about saving.
Overall, the insights and new findings on CSAs shared at the 2016 Assets Learning Conference and pre-conference highlighted the incredible progress across the country over the past several years to expand CSAs and increase the effectiveness of programs.
If you would like to see speaker presentations and handouts from the CSA workshops and concurrent sessions, visit the Assets Learning Conference website.
Nearly $250,000 Raised in September to Help Low-Income Children Save for College
By Diego Quezada and Monica Copeland on 10/06/2016 @ 09:00 AM
On September 17 at Rose Bowl Stadium in Pasadena, California, CFED’s Children’s Savings team joined CFED Board member Jamie Kalamarides at Prudential’s second annual 4.01k Race for Retirement. The Race for Retirement is a large public relations campaign designed to raise awareness about the importance of saving for retirement. CFED’s 1:1 Fund was selected to be the cause marketing partner for the race again in 2016, and Prudential donated $200,000 as a result of the race—$15 on behalf of every runner who registered. Since 2015, Prudential has provided $600,000 to support Children’s Savings Account (CSA) programs through the 1:1 Fund, making a meaningful difference in the ability of low-income children across the country to save for college.
The 1:1 Fund and Prudential understand the impact of regular savings, which lead to big dreams in the long-run for families. As a result of this partnership, Prudential made a $200,000 donation to the 1:1 Fund, which was presented to CFED’s Carl Rist on the main stage at the race.
At the 2016 Race for Retirement, CFED also released a brand new video that outlines the role of the 1:1 Fund in supporting children’s savings programs and features two powerful CSA programs—Boston-based Inversant and San Francisco’s Kindergarten to College.
To cap off a great month of raising incentive funds to for child savers, four CSA programs also participated in the 1:1 Fund’s Back to School campaign, which took place September 12 – 16. Together, these programs raised an additional $40,000 from individual donors across the country, which will be matched by the 1:1 Fund to deepen the impact of these programs. Additionally, two of the four programs—Barry Community Foundation’s Kickstart to Career program and San Francisco’s Kindergarten to College—created short videos to help publicize their Back to School campaigns, which resulted in over 1,000 views on YouTube.
Thanks to the generosity of Prudential and the individual donors who made the Back to School campaign a success, we will help make the college dreams of thousands of low-income children a reality. For more information about the 1:1 Fund and ways to support matched savings for future generations, visit 1to1fund.org.
How Inversant is Making it Possible for Over 1,000 Families to Save for College
By Tracy Aguila, Guest Contributor on 10/04/2016 @ 03:00 PM
This year, Inversant had the opportunity to not only attend but also present at CFED’s Assets Learning Conference. During the CSAs 101: A Road Map to Designing and Launching Your Children’s Savings Program workshop, we shared our Children’s Savings Account model, outcomes and research efforts.
We know that families who financially plan for college and who are familiar with the college preparation process are more likely to send their children to a four-year school and to understand the positive return of a higher education degree. To this end, Inversant’s Children’s Savings Account (CSA) model combines college saving and planning to empower low and moderate income families to become smart and savvy investors of higher education.
Inversant works with nine partnering sites in Boston, Lynn, Salem, and Chelsea, Massachusetts. Along with opening matched savings accounts, Inversant provides a college-focused financial education curriculum delivered through monthly workshop; we call them ‘learning circles’. These learning circles help create a community of engaged parents who support each other. Along with our learning circles we’ve also developed several tech-driven communication and outreach strategies to better engage our CSA participants. For instance, we’ve recently introduced an online portal where families can view their savings progress, status of their incentives, as well as other program updates. We’ve also developed a series of monthly email newsletters, text message reminders and sweepstake surveys to ensure that more of our participants take advantage of as many resources as possible. Equipped with the right information, parents can help mitigate the typical reasons that lead to low-income students drop out, advise their children to choose a school that offers a better value and provides more student counseling and support, and help lower the cost of college by saving and applying to scholarships.
Since 2009, Inversant has worked with over 1,000 families to save for 1,200 K-12 students. They have opened savings accounts and put away more than $900,000 toward their children’s education. Over 350 Inversant students are currently matriculating in college.
Inversant also values research and understands the importance of evidence-based program expansion. As a team, we are committed to producing rigorous evaluations of our program and collaborating with researchers to determine the various impacts of CSAs on parents and their children. Last fall, we produced our first working paper sharing our lessons learned titled “Building a CSA Program That Empowers Families to Invest in Higher Education.” This fall, our second working paper focuses on the evaluation of our engagement strategies through technology. We have also partnered with researchers at the Harvard Graduate School of Education to investigate the effects of the Inversant program on parents’ engagement levels and on children’s educational performance.
In Massachusetts, Inversant has been instrumental in convincing the legislature to create a commission to examine the desirability and feasibility of a statewide CSA program in Massachusetts. After five years, these efforts culminated into the passing of a bill establishing a two-year pilot CSA program in at least five cities in Massachusetts. The program will be managed by the Office of Economic Empowerment in Massachusetts State Treasury.
As the CSA field is gaining great momentum we hope to increase the visibility of its promise through good research and effective advocacy. Attending the Assets Learning Conference provided a space to share what we have learned as well as learn from others who have the same mission of providing every child with the opportunity to higher education.
Four Reasons Why Education Savings Accounts (ESAs) are Not Children’s Saving Accounts (CSAs)
By Carl Rist on 09/23/2016 @ 01:00 PM
As the children’s savings movement continues to grow and attract attention from policymakers in cities and states across the country, a new trend – related in name only – has also begun to gain some traction at the state level. Beginning with legislation adopted in Arizona in 2011 and continuing in four other states (Florida, Mississippi, Nevada and Tennessee), so-called education savings accounts (ESAs) have been enacted by state legislation. In 2016, as many as 18 states saw ESA legislation introduced.(1) More recently, ESAs have been included in the 2016 Republican Party Platform. Though sharing a similar designation, children’s savings accounts (CSAs) are fundamentally different from ESAs in everything from their purpose to their design to how they engage parents and children. Here is what all CSA advocates should know:
- ESAs are not really savings accounts. According to the Education Commission of the States, ESAs are “individual accounts funded by the state that allow parents or guardians to purchase a broader array of educational choices.”(2) In this sense, ESAs are really an extension of school choice and voucher programs in that they allow parents to direct public funds toward a range of education expenses that may include tutoring, online courses and private school tuition. ESA supporters promote the fact that parents are able to roll-over or “save” any funds not spent on primary and secondary education into a college savings account or toward post-secondary education expenses. But saving other people’s funds (in this case public dollars) is hardly “saving” in the traditional sense. ESAs have also been termed “flexible education spending accounts,” which is a more apt way to describe their purpose and use.
- ESAs are not about post-secondary education. Unlike CSAs, whose proceeds are primarily designated for investing in post-secondary education, ESAs (as noted above) are really about using public dollars to pay for primary and secondary education expenses. While ESAs allow a range of eligible uses, research on Arizona’s ESA program (the first to be implemented and the program with largest number of participants) indicates that 83% of all ESA funds in 2014-2015 were used for tuition costs at private secondary schools.(3) Smaller shares were used for tutoring (7.1%) and therapy (5%).
- ESAs provide no incentives for parents to actively contribute to the account. A fundamental feature of all CSAs is that they offer savings incentives that encourage accountholders to save and build wealth in their accounts. ESAs offer none of these features. Rather, ESAs are a mechanism to allow parents to control public funds that are allocated for the education of their child. ESAs are funded either with a deposit (usually 80 to 100 percent of per pupil funding for a particular child) into a restricted-use account or via reimbursement to parents for education expenses at a level equal to the per pupil revenue the student would have received in public school.
- ESAs have few, if any, progressive features. Another important feature of many CSAs is a progressive incentive structure that provides greater incentives for low- and moderate-income savers. In this way, greater benefits are directed toward those with less means. The only feature of ESAs that might be deemed progressive is that, in each of the states that currently has a program (with the exception of Nevada), eligibility is limited to “special needs” students, defined as those who are currently enrolled in public school and are either: a) subject to an Individual Education Plan (IEP), or b) have a form of legally recognized disability. As ESAs proliferate, however, it appears that they may be moving away from this special needs focus. Nevada’s legislation, passed in 2015, provides universal access to ESAs (though the program is currently on hold pending a constitutional challenge in state Supreme Court). In Arizona, since the original legislation was passed, eligibility has expanded to include children with “unique needs,” including children of armed service personnel, wards of the state, those residing on an Indian reservation, those attending failing schools, and siblings of students already participating in the ESA program.
We encourage CSA advocates to carefully monitor legislation in their state capitols and to be prepared to clarify with policymakers, the media and the general public that ESAs are really an extension of school choice and voucher proposals and should not be confused with CSAs.
1. Inez Feltscher, “The 21st Century Education Savings Accounts: Peer Reviews, Branding and Consumer Reports as Parent Tools,” The State Factor: A Publication of the American Legislative Exchange Council, May 2016.
2. Hunter Railey, “Education Savings Accounts: Key provisions and state variations,” Education Trends, Education Commission of the States, August 2016.
3. Alexandra Hudson and Rick Esenberg, “Education Savings Accounts: A Primer for 21st Century Education Policy,” a report from the Wisconsin Institute for Law and Liberty, July 2016.
How Children’s Savings Accounts are Helping Bridge the Racial Wealth Divide
By David Meni, Graduate Intern on 09/13/2016 @ 02:00 PM
We’ve written a lot on the blog this summer about the growing promise of Children’s Savings Accounts (CSAs) and reports from the field on how CSA programs have been growing and succeeding in more places than ever before. Shira Markoff wrote about how CSAs can fit into the larger national conversation about free or debt-free colleges, Delaney Luna took us through a number of CSA pilot programs that are leading the way in New England, and just last week, Megan Kursik from Michigan Communities for Financial Empowerment discussed strategies for proliferating a strong CSA program throughout the state of Michigan.
Now that the summer is winding down (though you wouldn’t know it from the heat here in DC), let’s take a step back and look at why states and localities have been pursuing CSAs so enthusiastically. Spoiler alert: it’s because they work.
Today we’re releasing a new Fact File: Scholarly Research on Children’s Assets and Children’s Savings Accounts. The Fact File serves as a guide to the growing body of evidence that shows the potential of CSAs to expand opportunity for children, particularly those from low- and moderate-income families and families of color.
A great deal of new evidence on the effects of CSAs has been released in the last few years, particularly from the SEED OK experiment in Oklahoma, the first randomized controlled trial (RCT) of a universal progressive CSA in the United States. The strength of this RCT study reinforces a litany of past research on the promise of CSAs and children’s savings in general: that they improve child development, college expectations and outcomes and help build financial capability.
Here’s a summary of the major findings from the literature:
- CSAs improve early child development and academic performance. Starting children off with savings early in life has ripple effects throughout their development. One study showed that the development effects of having a CSA are similar to that of the Head Start Program. Children with savings have also been shown to perform better on standardized math exams.
- Parents and children with early savings have greater college expectations. Having expectations of attending college– and developing those expectations early for both parents and children – is one of the most important factors that put a child on a pathway to enrolling in college. Studies have shown that CSAs and other early childhood savings can be one of the most potent tools for developing college expectations, particularly in families where neither parent went to college themselves.
- Children with college savings are more likely to enroll in and graduate college. Children’s savings can impact more than just expectations of going to college. Even a small amount of savings – less than $500 – increases a low- or moderate-income child’s likelihood of attending college threefold. CSAs may also be able to help families weather the uncertainty about college affordability and prevent them from having to take out expensive loans or dropping out entirely.
- Children’s savings increases a child’s future financial capability and reduces the racial wealth gap. From reinforcing financial literacy education to helping low- and moderate-income individuals become banked from an early age, studies on CSAs have found that these programs have the capacity to bolster a child’s financial capability as they mature.
The fact that the strongest CSA programs are universal and progressive (matched funds are greater for lower-income families) also means that CSAs can act as one of a number of policies we can enact to help reduce the racial wealth gap.
For more information on these and other findings, be sure to check out our latest Fact File.
Special thanks to our partners at the Center for Social Development at Washington University St. Louis and the Center on Assets, Education, and Inclusion at The University of Kansas for their continued work in the field of CSA research and for indispensable input on this publication.
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