Do CSAs improve early reading and math achievement, which are some of the strongest predictors of later college success? Do CSAs have impacts on cognitive and linguistic development? How do children with CSAs gain financial knowledge compared to those without CSAs and do they gain this financial knowledge at an accelerated pace? Do CSAs opened for children have a positive impact on their households' finances? Through what mechanisms are the effects of CSAs achieved? Answers to these questions would provide us with a better understanding of CSAs' effects on children's educational and financial outcomes and how these effects are achieved, advancing the case for public investment in CSAs. In spring 2013, an interdisciplinary research team along with community partners began the process of planning, designing, and implementing a pilot experiment in the kindergarten classrooms of a local public school district to answer these questions. Investing with Kids aimed to lay the foundation for a wide-scale Children's Savings Account (CSA) experiment, varying CSAs and financial education in comparison to a control or "education-as-usual" group. CSAs—here, regular interest-bearing savings accounts held by a local credit union with modest initial deposits—were opened for children in the first treatment group who also received 12 in-class, interactive financial education lessons across the academic year. Children in the second treatment group only received the financial education lessons.
We are now half-way through the pilot experiment and are celebrating the completion of baseline data collection from 80 participating children and their parents. Their information from academic records, surveys, savings account statements, and in-depth, qualitative interviews allowed us to construct a 360-degree view of kindergarten children’s and their parents’ financial knowledge and behaviors, educational expectations, physical and mental health, and cognitive and linguistic development.
Here is a quick snapshot of our sample and some of the interesting descriptive findings that are emerging from our baseline data. On average, children lived in households with annual incomes ranging between $35,000 and $40,000. Most children (77%) had at least one sibling and 47% had two or more siblings. About half of their parents (54%) had a 4-year college degree or more, though 30% reported that they were not currently working for pay. Over half of children (65%) were white, 10% were black, and 5% were Native American. About 12% were Latino. The following bullet points describe findings related to children's and parents' educational expectations, saving behaviors, and financial knowledge. Keep in mind that these findings should be interpreted carefully given that the data come from a relatively small pilot experiment taking place in one city within the United States.
- Educational expectations among lower-income kindergarten children were high. At the start of their educational careers, 92% of kindergarten children from lower-income households expected to go to college compared to 78% of their peers from higher-income households.
- 60% of parents reported having some money saved and an equal number reported saving for their children. Among those with savings, 44% had accumulated less than $2,000. 30% reported saving specifically for their children's future education.
- Consistent with national trends, parents were not financially knowledgeable. On average, parents answered 1 out of 3 financial education questions correctly and only 25% correctly answered all three questions. These financial education questions gauged parents' financial knowledge on topics such as interest rates and inflation.
- On average, kindergarten children answered 5 of 8 financial education questions correctly. These financial education questions gauged children's knowledge on topics such as goods and services, money management, and saving.
- Children answered more financial education questions correctly on average when their parents also scored higher on financial education questions, compared to children whose parents scored lower on financial education questions—64% to 51%, respectively.
- While no noteworthy differences in kindergarten children's financial knowledge were observed by their households' annual income, there were differences by the extent of their households' material hardship. Only 48% of children answered the majority of financial knowledge questions correctly when their households reported above-average material hardship, compared to 66% of their peers whose households reported below-average material hardship.
We'll have a better understanding of whether the Investing with Kids pilot experiment had any measurable impacts on some of children's important educational and financial outcomes at the end of the academic year after we complete our first wave of follow-up data collection. And we hope to follow up with children and their parents annually over the next several years, allowing us to observe any measurable, longer-term impacts.
This pilot experiment—and the subsequent findings that will help us better understand CSAs—would not be possible without a dedicated, interdisciplinary team of researchers from across the university, including Emily Rauscher, Assistant Profess of Sociology and one of AEDI's faculty directors, Barbara Phipps, Associate Professor of Curriculum and Teaching, Utako Minai, Assistant Professor of Linguistics and Director of the Developmental Psycholinguistics Lab, Karin Chang, Director of Evaluation for the Center for Educational Opportunity Programs, and Nadia Kardash, Director of the Center for Economic Education. Promothesh Chatterjee, Assistant Professor of Marketing, provided early consultation to the research team. Numerous graduate students have also assisted with the developing and implementing Investing with Kids, including Nehemiah Rosell (School of Social Welfare), Nik Schuetz (School of Social Welfare), Paul Trana (School of Education), and Meghan Ecker (School of Education). The Lawrence Public Schools and Truity Credit Union have also been tremendous partners, working with us to find classroom time for teaching financial education and to open savings accounts for children. And of course, none of this would be possible without the participating children and their parents. We look forward to following up with children and their parents in the spring, and, pending additional funding and recruitment, we hope to expand the experiment in the 2015-2016 academic year.