Long-term study reveals asset-building success of Child Development Accounts

CSD continues work on universal child account policy through SEED OK

A 10-year study on Child Development Accounts (CDAs) has confirmed their viability as a tool for long-term asset building.

Beginning as early as birth, CDAs are investment accounts that allow parents and children to accumulate savings for postsecondary education, homeownership or business initiatives.

The Center for Social Development (CSD) at Washington University in St. Louis has been actively involved with the national CDA study, the Saving for Education Entrepreneurship and Downpayment Initiative (SEED), since its beginning.

Key findings from the study are detailed in the report, “Lessons from SEED,” including:

  • CDAs appeal broadly to Americans across political and geographic lines.
  • Families of all income levels have saved and built assets for children and youth in SEED.
  • In addition to financial savings, CDAs may have positive attitudinal, behavioral and social effects.
  • Potential exists for a national CDA policy that is universal, lifelong, progressive and asset-oriented.

Additional study results and information are available at: csd.wustl.edu/Publications/Documents/SEEDSynthesis_Final.pdf

CSD is continuing the work of SEED with its SEED for Oklahoma Kids (SEED OK) project. As with all of CSD’s research on children’s savings, the goal of this project is to inform and influence a universal and progressive CDA policy in the United States.

SEED OK is a large experiment testing the idea of giving every child a CDA at birth. In 2007-08, 1,360 newborns received an Oklahoma College Savings Plan account containing an initial deposit of $1,000. Research is tracking these children along with 1,347 children who did not receive an account.

CSD researchers are looking at how much families save for their children’s education; the impact of SEED OK on parents’ expectations and behavior; and how much difference SEED OK will make in child development and educational achievement.

“We have evidence that if there is savings and assets in the household, particularly if the savings are in the child’s name, controlling for other features, that children will do better,” says Michael Sherraden, PhD, the Benjamin E. Youngdahl Professor of Social Development and director of the CSD. “They will have better educational attainment, and are more likely to do well in high school, attend college and graduate from college.”

“If people have an account, they’re thinking more in the future, not just thinking about today,” Sherraden says. “Having some savings and assets really helps people think about their long-term goals in a way that’s more productive.“

With more than 2,700 participants, SEED OK is the largest of the SEED studies. In addition, the research design — an experiment with random assignment in a total population — is the gold standard in research.

“In scientific terms, it’s hard to imagine a better project,” Sherraden says. “To our knowledge, SEED OK is the first experiment with children’s savings in the United States to use this type of research design.”

SEED OK is designed to allow researchers to follow participants over time. Funding is secured to study SEED OK participants from birth until age 7, but CSD hopes that research will continue well into the future.

“We are following the kids with accounts and the kids who don’t have accounts to see how they do in their early years and into their early schooling,” Sherraden says. “Hopefully, someone will follow them all the way through college.”

Early in SEED OK, one participant commented, “When I was growing up, there was never that encouragement to prepare or think about going to college. I think this SEED money will give parents and children a chance to look at it in a different way. Parents will know the money is there and will talk to their kids about it and encourage them to go to college.”

CSD researchers look forward to learning how SEED OK shapes the future of these now three-year-old Oklahoma children as they prepare to enter elementary school in the short term and for college and beyond.

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