What We Know About Childrens Development Accounts:

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What We Know About Childrens Development
Accounts
Lessons from the SEED Initiative

• Bob Friedman and Carl Rist, CFED
• AFN Webinar
• August 27, 2009

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Outline

• Overview of SEED, including key lessons
• Overview of state policy efforts in SEED and
  asset policy trends
• Opportunities ahead

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1. Overview of SEED with Key Lessons
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SEED Vision

• 1,000 at birth for every child.
• Accounts used for home ownership,
  entrepreneurship, education, or retirement.
• Universal system/institutionalized delivery.
• Progressive savings matches (0-18 years).
• Appropriate, cost-effective financial education
  at scale.
• Reducing intergenerational as well as new child
  poverty.

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The Power of Demonstration SEED

• 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 SEED accounts as a
  cost-effective life-long wealth-building tool,
  practice, policy and system.

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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
• RTI International
• Funders
• Ford Foundation
• Charles and Helen Schwab Foundation
• Jim Casey Youth Opportunities Initiative
• Citi Foundation
• Ewing M. Kauffman Foundation
• Charles Stewart Mott Foundation
• MetLife Foundation
• Lumina Foundation for Education
• Rhoda and Richard Goldman Foundation
• W.K. Kellogg Foundation
• Evelyn and Walter Haas, Jr. Fund
• Edwin Gould Foundation

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Federal Policy (NAF, CFED)
State Policy (CFED, CSD)
Community Practice (CFED)
SEED Initiative
Market Development (CFED, IFS)
Research (CSD, KU,RTI)
Communications (NAF, CFED)
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SEED Practice A Demonstration of CDAs

• 11 Community Partners
• Worked with one specific age cohort
• Opened approx. 75 accounts with local bank
  partner
• Provided up to 2,000/account in account
  incentives (initial deposit, 11 savings matches,
  benchmark incentives)
• Delivered financial education
• Provided support, encouragement and coaching
• Diverse designs
• SEED MI Experiment
• Head Start-based
• 500 accounts in treatment group across 7
  centers 500 comparison group across 7 other
  centers
• Rigorous impact evaluation
• Streamlined 529 Account Structure
• SEED OK Experiment
• Pure experiment among 2700 randomly selected
  newborns
• Treatment group (approx. half) receive 1000
  initial deposit in OK 529 college savings plan
  plus savings matches, depending on income
• Rigorous evaluation using three-wave survey
  design
• No community-based intermediation

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SEED Partners
SEED Partners
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SEED Partners
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SEED Partners
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SEED Partners
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Lessons from SEED

• CDAs appeal broadly to Americans across political
  and geographic lines.
• In a national poll, close to seven out of ten
  respondents (69) and more than three-quarters of
  parents (78) articulated initial support for the
  idea of CDAs.
• This support holds at 78 for parents and grows
  to 72 among all respondents after being exposed
  to messages both for and against CDAs. 

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Lessons from SEED

• 2. Outreach and enrollment in SEED, as in many
  other saving policies, has been challenging, when
  it is not automatic.
• All sites were able to recruit their targeted
  number of SEED enrollees, although many took much
  longer than expected and had to expand their
  target population.
• Barriers to enrollment included institutional
  factors and individual factors.  

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Lessons from SEED

• 3. Families of all income levels have saved in
  SEED.
• Among the 1,171 participants in the 12 community
  partner demonstrations of SEED
• total accumulation after almost three years of
  savings and incentives ranged by program from
  885 to 2,626, with an average of 1,500,
• the average quarterly net savings (excluding
  incentives) ranged by program from 9 to 69,
  with an overall average of 30.
• 30 of parents in MI SEED and 57 of the families
  enrolled in the other community partners in SEED
  deposited in their accounts (despite high levels
  of poverty and limited financial knowledge). 

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Lessons from SEED

• 4. Families have used innovative strategies to
  save in SEED.
• Research in SEED found that parents use
  innovative strategies to find and make new
  money for deposits into their childrens
  accounts.
• Typical strategies included
• encouraging children to earn deposits by doing
  household chores or other paid jobs
• eating at restaurants or ordering food less often
• spending less on movies or other recreation
• using coupons
• encouraging family members to make deposits into
  a SEED account instead of giving gifts for
  special occasions 

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Lessons from SEED

• 5. Saving is not easy, especially for
  lower-income families.
• Economic barriers to asset accumulation were
  prevalent among families participating in SEED.
• Almost half of SEED participants are from
  families with income below the federal poverty
  line.
• Low-income families find it difficult to save
  because of a variety of factors, including
• low incomes,
• multiple children,
• long-term goals competing with short-term needs,
• predatory and excessive lending, and
• inaccessible financial institutions.. 

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Lessons from SEED

• 6. SEED program and account features, or
  institutional characteristics, explain much
  about saving performance.
• SEED account design and program arrangements
  appear to facilitate savings
• Three specific SEED incentivesinitial deposit,
  cap on other incentives, and match limitappear
  to have distinct associations with savings and
  accumulation  

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Lessons from SEED

• 7. In addition to financial savings, CDAs appear
  to have positive attitudinal, behavioral, and
  social effects.
• In-depth interviews with parents found perceived
  impacts on well-being, including
• self-esteem,
• self-efficacy,
• hope for the future,
• future orientation,
• sense of security,
• fiscal prudence, and
• interaction with children about finances and
  college.

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Lessons from SEED

• 8. Community-based organizations can play
  positive roles in implementing CDAs.
• Relationships with community-based agencies and
  staff appear to be important in overcoming
  misgivings about participation in SEED and play a
  key role in motivating program participation and
  making account deposits.
• While CBOs may enhance the performance of a CDA
  policy, this also comes with added costs in staff
  time and other resources.  

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Lessons from SEED

• 9. Full participation in financial education will
  require involvement of schools.
• Even with a range of incentives to encourage
  participation, none of the SEED community
  partners was able to achieve full participation
  in their financial education programs. 
• The initial experience in SEEDespecially at the
  I Can Save SEED site in St. Louis that operated
  in a public school settingshows promise in
  integrating financial education into an existing
  curriculum at school, though this experience to
  date is limited.

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Lessons from SEED

• 10. There is potential for a national CDA policy.
• Four consensus core values (based on the
  deliberations of the SEED Policy Council)
• Universal
• Lifelong
• Progressive
• Asset-oriented 

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2. Overview of state policy efforts in SEED and
asset policy trends.
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State Policy Action
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By the numbers

• 11 States currently match 529s
• 5 States have introduced matched 529 legislation
• 2 States have introduced more ideal CDA
  legislation
• 4 States have created government task forces

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Lessons for Policy Design

• 1. If goal is universal savings/ownership, some
• system of auto enroll is essential
• 2. Even in auto-enroll system, some
  higher-touch
• elements may be important particularly for
• families with less experience in financial realm
• 3. If goal is total accumulation, initial deposit
  may
• be more important than matching funds
• 4. However, if goal is participant savings, a
  high
• match limit may be more effective

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Lessons for Policy Design

• 5. State policymakers should consider strategies
• to help low-income families find new money to
• save (e.g., conditional cash transfers, tax
• credits, earning opportunities)
• 6. Advocates keep expectations reasonable not
• all families will save (or large amounts),
• particularly in universal setting
• 7.Structure and market program to encourage trust
• ease of use, particularly among those with
• little financial experience

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Lessons for Policy Design

• 8. Without inclusive, progressive design, CSAs
  may actually exacerbate the wealth gap
• 9. In U.S. context, unrestricted accounts may be
  less desirable restricted, inaccessible accounts
  work well for participants (hard to withdraw
  funds, easier to save) for public entities
  (keeps public funds safe from unauthorized use)
• 10. Financial education is important if for no
  other reason than to educate savers about how
  direct deposit works and that it is an essential
  tool for saving

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Lessons for Messaging at the State Level

• College affordability/access - good choice for
  frame
• How middle-class families afford college
  brain drain are problems state policymakers
  feel they need to solve
• 2007 Hart polling data Education is most
  important use of accounts for general public
  82 said education, compared with 11 for
  retirement, 4 for homeownership
• 2009 Pew polling data 75 of respondents said
  a very effective step government could take to
  improve economic mobility is to make college more
  affordable
• New potential ally in federal student aid
  reformers

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Lessons for Strategy at the State Level

• Make CSAs the solution to pressing problem
• Task forces can buy you time, but no guarantee
  they will lead to more substantive policy
• Start cheap or move incrementallythis is a new
  idea policymakers are reluctant to try new ideas
• Buy some time until state budgets improve

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State Policy Opportunities

• 1. Think about broader assets opportunity
  agenda join with allies to protect the
  antipoverty programs youve already got
• 2. Use new federal policy and rhetoric to push
  for state changes
• 3. Lay the groundwork now for long-term
  investments

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3. Opportunities Ahead

• SEED OK experiment
• Municipal CDA initiatives
• Federal CDA opportunity
• College savings initiative for at-risk kids
  (UNCF/KIPP)
• Product development

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Contact

• Carl Rist Bob Friedman
• CFED CFED
• 202.466.5923 415-495-6701
• crist_at_cfed.org bfriedman_at_cfed.org
• www.cfed.org
• See the SEED Website at seed.cfed.org