Last spring, we set out to explain--coherently and concisely--our understanding of how and why Children's Savings Accounts work, and how, then, CSAs could be valuable solutions to some of our most pressing problems: educational inequity, constrained economic mobility, persistent poverty.
We wanted to pull together the different elements of our research, to better understand the state of scholarship around CSAs today, and to clearly identify the questions still outstanding, to which our research must respond. We wanted to present a more nuanced answer to the question of "what matters, getting kids an account or getting money in that account", than "both." We felt compelled to advance CSAs beyond the realm of nice interventions that no one really opposes, to definitively position them as integral tools for a prosperity agenda. We needed to inform evolving policy conversations about the best delivery systems, financial incentives, and enrollment/engagement policies, with which to cultivate CSA effects.
To respond to these field imperatives, we partnered with CFED to release Redeeming the American Dream: Children's Savings Accounts Build Children's Capacity for Economic Mobility. In our public presentations, policy analyses, and publications since, we have continued to use the framework outlined in that document to organize our discussion of CSAs and their effects. The data are compelling and the implications profound:
CSAs have both asset accumulation and account ownership effects, both significant drivers of children's outcomes, and both reliant on somewhat distinct policy/program features.
Low-income children, in particular, need real dollars in their accounts if they are to use them to catalyze later economic mobility. Leveraging the power of initial assets requires having initial assets, of course, and, for many poor children, this will necessarily require asset transfers, since their families are unlikely to be able to save sizable sums on their own. Assets that they can use to finance the cost of college can prevent students from having to borrow heavily, facilitate better educational decision-making, and provide a critical cushion upon college exit. These are the effects of asset accumulation that many advantaged children accrue just from growing up in households with some financial wealth, and public policy can construct similar advantages for those not born with them.
But, significantly, some of the most potent effects of CSAs do not require very large balances at all to take effect and may, in fact, be triggered even before any real saving occurs. Through the mechanism of Identity-Based Motivation, just having a savings account dedicated for college may shape what children think about themselves, their futures, and their families. Evidence suggests that low-income children may be particularly affected by these increased expectations, making them as much as six times as likely to graduate from college if they have a dedicated education savings account.
Seeing CSAs--and the children whose lives they impact--through the lens of this framework suggests important directions for CSA policy. Because account ownership matters so much, automatic account opening should be used to get every child that critical intervention. Because building real balances counts, transfers have to be part of the political calculus. Because both effects are valid and valuable, CSA outcome measures should attend to this 'double bottom line', asking the right questions to reveal how policy is building balances and expectations.
If you have used the Redeeming the American Dream brief or other AEDI materials related to the CSA framework, how have they been helpful to you? What other tools would you like to see, to help you explain the framework to your constituencies? How has attending to account ownership and asset accumulation effects changed how you think about CSAs?