When great ideas get greater: SmartSAVER and the CLB

Monday, January 26, 2015

The Canada Learning Bond (CLB) is a federal contribution of up to $2000 to a child's Registered Education Savings Plan (RESP). The CLB can capitalize the education savings of low-income Canadian households, without requiring any deposit or savings activity by the family. It's a valuable transfer and a critical 'seed' for the college savings of low-income Canadians.

Uptake has been low, however, since the CLB's introduction in 2005. SmartSaver estimates that more than 70% of those eligible have not received their Bonds, and advocates working with poor families cite confusing account regulations, less-than-friendly practices of financial institutions, and relatively low awareness of the Bond as principal culprits to blame for the low utilization. While no family deposit is required to be eligible for the CLB, some advocates have estimated that a family might spend several hundred dollars to secure the Bond, including lost wages and time to open the account and the costs of the foundational documents required for account opening.

To help families overcome these challenges and secure Bonds for their children, The Omega Foundation started the SmartSaver pilot, using intensive community outreach and vouchers for the CLB to encourage RESP account opening. The results were positive but limited, since the pilot centered on the Toronto region.

Last November, to coincide with the first-ever Canadian Education Savings Week, SmartSaver announced the Start My RESP initiative, an online tool for opening a RESP immediately, thus triggering application for the CLB. SmartSaver partners with financial institutions that offer RESPs to facilitate the account opening, and the interface is designed to be very accessible and even welcoming to the low-income parent or--significantly--frontline service worker. SmartSaver sees RESPs and, in particular, the CLB, as anti-poverty tools, and getting RESPs open, then, as the first step in leveraging these potent resources to improve the trajectories for children in poverty.

Start My RESP is still in the early stages, with ongoing testing and refinement of the tool expected to continue over the next few months. It's a huge leap in terms of using design to solve challenges related to CSAs, however. SmartSaver has figured out both technical issues like collecting all of the documentation needed to open a RESP online, as well as political considerations like how to convince financial institutions that reducing barriers to these accounts is in their own interest.

Our work in Canada has cemented our belief that asset transfers must be part of a Children's Savings Account approach. We applaud the government's commitment to education savings, with an entitlement that includes direct transfers and a progressive match. With the momentum we expect to result from the Start My RESP initiative, we can't wait to see what our neighbors to the north can do!

 
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