high interest savings accounts for children

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					      The Importance of Children’s
           Savings Accounts:
Practice and Policy Lessons from the SEED Initiative

             Don Jones and Susan Mosqueda, OLHSA
             Michigan Affordable Housing Conference
                  Lansing, MI   April 28, 2008
Why are CSA’s an effective strategy for
    building assets for children?
   Investment in Children is Small, but Potential is Large
As a share of federal spending, investments in children represent 2% of GDP,
   compared with:
       Social security and Medicare = 7%
       Defense = 3%
       Interest = 2.5%

At 6%, $1000 invested for 18 years yields $3,000:
       Add $100 per year and sum → $5,000
       Invest $50 per month and total → $22,000

   13 million children under 18 (17.8%) lived in poverty in 2004 (Census

   1 in 3 children will be poor at some point (Children’s Defense Fund).
               (Early) Assets Matter
Research (summarized by Scanlon and Page-Adams):
        Savings and investment income promotes educational attainment
        among children.

        Savings and investment income—above earned income—reduces
        intergenerational poverty transmission.

        Savings have psychosocial benefits for adults, which likely enhance the
        well-being of children.

        Some emerging research from the University of Michigan indicates
        children who believe they are going to college, do better in school
        immediately just through messaging.– Mesmin Destin,
    The Power of Demonstration:
The goal of the Saving for Education,
 Entrepreneurship, and Downpayment
 (SEED) Policy and Practice Initiative:

To develop, test, document, and impel
  progressive, matched savings accounts and
  financial education as a cost-effective life-long
  wealth-building tool, practice, policy and system.
                  SEED Objectives
Accounts: Move 1000+ low-income children and their families toward
   economic independence through cost-effective SEED accounts.

**Practice: Develop cost-effective, scalable practice models for different
   age cohorts of children 0-18.

Research & Evaluation: Document, research, and evaluate SEED
   account models and effects.

**Policy: Develop, advocate, and enact progressive universal federal/state

Communication: Develop and communicate effective messages, results
   and lessons.

**Coalition-Building: Build a diverse, inclusive, and effective coalition
   to guide and promote effective SEED practice and policy.
                    SEED Partners
11 Community Partners:
     50-75 accounts
     Work with one specific age cohort (3-Pre-school, 5-Elementary School, 1-Middle
     School, 3-High School
     Diverse designs
     Savings goals differ by site and age cohort

1 “Experimental” Partner:
     500 accounts in “treatment” group; 500 controls
     Rigorous impact evaluation
     Streamlined 529 Account Structure
     Pre-school (age 3, HeadStart based)
1 Universal Model Experiment (Oklahoma) - newborns
Goals of the SEED program at OLHSA

• Help families with young children build assets for
  post-secondary education.
• Instill the expectation that SEED participants will
  attend college or post-secondary training
• Help families with limited resources meet their
  financial obligations and build assets through
  increasing financial management skills
• As the preschool demonstration site in the SEED
  project, test and research an asset building program
  that will impel policymakers to invest in and reward
  low-income families building financial assets to leave
  A SEED Account At OLHSA
• Utilizes the MESP 529 account and state
  matching grant account
• Program makes $800 initial deposit
  (began in December 2004)
• 1:1 match up to $1200 until December
• Non-custodial account
• Savings is for post secondary education –
  college or vocational trng.
     Other program features
• Semi-Annual Home Visits
• Semi-Annual Family Financial Education
• Quarterly newsletters and deposit
• Holiday and Birthday cards encouraging
• Education and outreach on EITC and free
  tax preparation services
    Who are the Participants?
• 500 children ages 3-5 (at program entry)
  enrolled in the Head Start program
• Ethnicity
  – 32% African American
  – 42% Caucasian
  – 8% Hispanic
    Who are the Participants?
• 48.1% from Single parent households
• 39% from Married households
• 47% of households have monthly income
  of $0-$999
• 57% have a checking account & 44% have
  a savings account
            Results to Date
• 15 months to enroll 500 in the program
• As of 12-31-07
  – 160 accounts had additional savings totaling
  – 23 account owners had already saved the
    $1200 eligible for full match
  – Average participant savings, $425.47
  – 10 unqualified withdrawals
            Lessons Learned:
           Practice Perspective
•   Recruitment
•   Account Structure
•   Financial Literacy
•   Participant Support
•   Asset Limits
        Recruitment at OLHSA
• It may be harder than you think.
• One on one is essential to be successful in enrolling
  families in a program like this
• Takes multiple encounters for families to become
  fully enrolled
• Trust is a key factor in enrolling families in this
• Changing people’s way of thinking about the
  accessibility of post-secondary education is key
    Account Structure at OLHSA
• Match given in real time –
   – Pro - participants see match the quarter after their savings is identified.
   – Con-match received and then participant may later withdraw from their
• If the account is non-custodial, you may not be aware of withdrawals and
  miss an opportunity to counsel the client about alternatives.
• Education is the only approved use.
• Having to mail deposits vs. stopping by the local bank can be a barrier
• High minimum deposits and inability to use money orders creates barriers
  for very low income to save in this type of account
• Complicated investment choices may intimidate participants
  Effective Financial Literacy for
          Young Children
• Make it a Family Affair; Teach parents through fun activities they
  participate in with their children.
• Make use of newsletters, etc.
• Teachable Moments – during home visits
  with parents, in classroom
         Participant Support for
           Preschool Clients
• Success often requires high touch
• Real focus is on the parents and other relatives
  and friends saving for the child
• Providing resources and referrals for immediate
  needs is crucial in keeping this money in the
  account for the long run for the child
• One on one home visit has proved to be the
  most important way to impact participants to
  Resolving Asset Limits at OLHSA

• Resolving asset limits is a crucial first step in
  creating these accounts.
• In MI, SEED accounts have received a waiver
  for Department of Human Service programs
  funded with TANF $$ that have asset tests
  (Food assistance, FIP, Child Day Care).
• To date, we have still not been successful in
  having parent owned 529 accounts excluded as
  assets for SSI purposes (I believe based on info
  from Traci at the SEED meeting this has
 Children’s Savings Accounts (CSA)
        Federal and National
• Five national programs
  –   ASPIRE
  –   PLUS
  –   Baby Bonds
  –   OK SEED (Oklahoma)
  –   U.S. Child Accounts (Aspen Institute)
  –   UK Child Trust Fund
                  CSA – State
• Six state programs
  –   Michigan (enacted)
  –   Arkansas (enacted)
  –   California KIDS Accounts (proposed)
  –   Hawaii (proposed)
  –   Missouri (proposed)
  –   Oklahoma (proposed)
             Role of Head Start
• High touch and low touch
  – Helping very low-income families save
• CSAs, IDAs, asset tools are a tool
  – Part of a comprehensive strategy
• Family support
  – Child care, health, seniors, housing, job skills,
    community development
Assets and Opportunities Scorecard
• Comprehensive look at wealth, poverty and the
  financial security of families in U.S.
• Median net worth rose 25.8%; 76.7% for
• Homeownership major reason
  – Efficacy of housing finance and credit innovation
          Scorecard, continued
• Fragility of asset base
  – 3 out of 4 lack college education; living wage jobs
  – 44% of the poorest quartile not enough savings to
    last three months without job (at poverty level)
  – Net worth of male headed household $82,400;
    female headed household $48,500
  – 1 in 5 female headed households have negative net
  – Households with children more likely to have
    negative net worth
           Scorecard, continued
• Each state is ranked
• 46 performance measures
  –   Financial Security
  –   Business Development
  –   Homeownership
  –   Health Care
  –   Education
             CSA and Scorecard
• CSA not a stand alone asset strategy
• Consider in context to strategies needed to
  move a person through their life
  –   Save for post-secondary education
  –   Own a home
  –   Start a business
  –   Save for child’s future
  –   Save of retirement
  –   Create legacy for children and grandchildren
             Assets and You
• CSA as tool
• Head Start as platform
• Asset development as a family development
• Advocate for state and federal programs to
  give Head Start families more tools to succeed.
       Questions and what next
• Did you learn something today that you would
  like to pursue?
• What are some obstacles to pursuing it?
• What tools, skills, assistance do you need to
  pursue it?
• Who are your allies and partners at home that
  could help you pursue it?
            SEED Initiative Partners
National Partners:
      Center for Social Development (Washington University, St. Louis)
      University of Kansas School of Social Welfare
      New America Foundation
      Aspen Institute – Initiative on Financial Security
      Ford Foundation
      Charles and Helen Schwab Foundation
      Jim Casey Youth Opportunities Initiative
      Citigroup Foundation
      Ewing M. Kauffman Foundation
      Rhoda and Richard Goldman Foundation
      W.K. Kellogg Foundation
      Evelyn and Walter Haas, Jr. Fund
      Edwin Gould Foundation
            Contact Information
Oakland Livingston Human Service Agency (OLHSA)
196 Cesar E. Chavez Avenue
Pontiac, Michigan 48343

Don Jones, Director of Resource Development, 248-209-2620

Susan Mosqueda, Associate Director for Asset Development, 248-209-2790

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