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Children's Savings Accounts

The Link Between Savings and College Success

Postsecondary education is one of the best investments an individual can make. A college degree translates to higher earning potential and can be a stepping stone to achieving economic security. Yet escalating costs discourage many from pursuing higher education. For the first time in generations, young adults in the United States are no longer attaining postsecondary education at a higher rate than their parents. For students in low-income households, the challenge of obtaining a college degree is especially difficult. In the absence of college savings or other assets to close the gap, students in these families face the prospects of either large amounts of educational debt or dropping out of college. One important strategy for addressing the financial challenge of low-income families is to provide incentives for low-income, minority and first-generation students and their families to save for college. Recent research has shown that savings is a powerful strategy for increasing college attendance and completion rates:

  • 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).
  • Evidence suggests that having even a small amount of savings might be as closely associated with postsecondary educational outcomes. Children with $1 to $499 designated for school are 3 times more likely to enroll in and 4 times more likely to graduate from college than children with no account (Elliot, Song and Nam 2013).
  • Savings and other financial assets are a consistent predictor of college graduation, even after controlling for variables such as income (Zhan and Sherraden 2009).

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