Learn the Basics
Imagine if every child in America grew up knowing that he or she had a nest egg to attend college, buy a home or start a business. Children’s Savings Accounts (CSAs), also known as Children’s Development Accounts, are an innovative strategy that can make that vision possible.
CSAs are long-term asset-building accounts, established for children as early as birth and allowed to grow over their lifetime. Accounts are seeded with an initial deposit and built by contributions from family, friends and the children themselves. Accounts are augmented by savings matches and/or other incentives, and gain meaning as young account-holders and their families engage in age-appropriate financial education. At age 18, the savings in CSAs are used to purchase an asset – typically financing higher education.
- Saving provides opportunities for economic mobility. Assets play an important role in helping families move up the economic ladder. The children of parents who own assets – regardless of income – are more likely to have higher academic achievement and complete more years of education. In one study, children in families with as little as $3,000 in savings had greater odds of graduating from high school than children in families without savings.
- Saving increases expectations for the future. People who own assets are more likely to have a more positive outlook and higher expectations for their futures and the futures of their children. Also important are the expectations of the children themselves. Interviews with children show that they begin to formulate ideas about their futures – including college attendance – as early as elementary school. Other research suggests that having savings increases a child’s expectations about attending college; in fact, children with college savings are nearly twice as likely to plan to attend college than those without savings.
- Children and youth can build meaningful savings while learning about money and finance. Accounts established at birth with a modest initial deposit and incented with matched savings to grow throughout childhood can be expected to produce significant account balances by age 18. In addition, financial education – a key component of children’s savings initiatives – is a powerful companion to ownership of an account, and helps young savers and their families to build financial aspirations, knowledge and skills.