Savings and Financial Security
Take the Money and Run? A Case Study of Non-Qualified Withdrawals in Children's Savings Accounts
By Carl Rist, Brigitte Gavin & Sean Luechtefeld
As children’s savings accounts (CSAs) continue to gain visibility and emerge as an important asset-building tool, critics often raise a fundamental question: during childhood, when withdrawals are restricted and savings should be growing, will CSAs be preserved for their intended uses later in life, or will parents be tempted to prematurely withdraw their child’s CSA funds for unapproved uses? In other words, will parents be tempted to raid the accounts? More specifically, in the context of legislative proposals such as the ASPIRE Act which seek to establish nest-egg savings accounts for all children at birth, will parents be tempted to raid CSAs in situations in which strict programmatic controls over the account are not in place?
This white paper uses quantitative data and program staff interviews from the Saving for Education, Entrepreneurship and Downpayment (SEED) pre-school demonstration and impact assessment site at the Oakland Livingston Human Service Agency (OLHSA) in Pontiac, MI, to examine the extent to which—and reasons why—parents made “non-qualified” withdrawals from their child’s account during a five-year demonstration period. SEED is a national policy practice and research initiative designed to test the efficacy of a national system of progressively funded matched savings accounts for children and youth.
This White Paper should be useful evidence to policy influencers and practitioners who seek to dispell the myth that parents cannot be strong stewards of their children's savings.