Children’s Savings Accounts to Kickstart Education

Written by Lisa Assenmacher, Communications and Training Specialist

Financial empowerment is a game changer.

From adults struggling to get ahead to children just beginning to save, financial capability programs can help people of all ages reach greater self-sufficiency and the freedom to live rather than simply survive.

Growing implications.

Lack of financial capability is widespread in the U.S. today, from generational struggles passed on, to middle income earners facing job loss and unexpected challenges. As the financial marketplace becomes increasing complicated and living wage employment increasingly hard to come by, people need help navigating a complex new economy.

Changing the Course

Financial empowerment initiatives are taking place across Michigan through partnerships with nonprofits and municipalities. Rather than using a bandaid as a temporary solution, these initiatives target the root cause of need in our communities – financial instability.

Momentum is building around programmatic additions and changes to nonprofit organizations, including greater partnerships with municipalities like Financial Empowerment Centers. There are currently four centers across Michigan providing free, one-on-one, professional financial counseling to educate people on savings, debt reduction, credit repair and banking.

Other Michigan communities are working to learn more and are starting to consider strategies for their own residents.

Early in August, the Michigan Communities for Financial Empowerment, a program of CEDAM, hosted the 2nd Annual Financial Empowerment Summit, bringing together industry leaders and those interested in learning together to share best practices, ideas and methodology. The primary focus of this year’s Summit was Children’s Savings Accounts.

csa-graphicStarting Financial Education and Savings Young

One of the best things we can do to tackle financial instability in our communities is to invest in children when they are young and give them the tools to be self-sufficient right away. Earlier in 2015, Lansing launched Lansing SAVE, the first all-inclusive children’s savings account program in Michigan, and soon Barry County will launch Kickstart to Career. These programs automatically open savings accounts for children with seed money to initiate the process of saving money for college and other post-secondary training options.

Municipalities and Organizations Leading the Way

Statistics show that youth that have a designated account for college are more likely to attend higher education even in low amounts (between $1-$499). Further, low-income students with a college savings account are four times more likely to graduate from college than students without accounts.

From San Francisco to New England, leaders in the financial empowerment field have recognized the potential implications for their communities through investment in child savings. The City and County of San Francisco established the first universal, automatic children’s savings account program Kindergarten to College and is helping to share best practices with others, like Barry Community Foundation to craft their own program that will work for their needs.

Beyond The Basics

The notion of program or service of any kind creates a lot of questions. Who funds it? How will we engage users and inspire investment? Leaders from CFED, the City of Lansing, the CFPB, the San Francisco Office of Financial Empowerment and many others highlighted their experience and their ideas, but the truth is that these programs are investments. We won’t see the real return for another 20 or so years when these initial programs come to fruition.

Data from San Francisco show that even low income parents are contributing to CSAs. Private savings show that parents are utilizing the help that was given to them to empower their child and teach them good financial practices at an early age. Incentives, when available, help them to save even more. CFED launched the 1:1 Fund to help programs raise money for savings matches and incentives. As the children’s savings field develops, great attention is being paid to what incentives work to ensure strong private savings rates by children and their families.

Expanding Technology

While traditional accounts offer electronic transfer and middle income earners often have access to direct deposit, children’s savings programs must consider the needs of lower income, unbanked families and their technical barriers. We must also consider the possibility of family and friends interested in contributing and streamlining this process. Chris Duffus, with LEAF College Savings, identified some of these technological barriers and created college savings gift cards, making it easy for people to contribute to any child’s college savings account.

What’s Next?

As technology advances and other people start their own programs and financial empowerment initiatives, the future holds much possibility. Will it be less likely that a child will live in poverty through their adult life? Will children accessing savings accounts at a young age become self-sufficient and set the course of their own future?

The Michigan Financial Empowerment Summit brought together leaders from across Michigan and across the country invested in the notion that the answer to these questions is yes. Beneficiaries of Children’s Savings Account programs get the added bonus of saving toward their goals from a very young age. Could this be the difference that changes the game, giving kids have a real shot at fulfilling their dreams?

Though they’re just about to enter first grade, Michigan’s first class of community-wide college savers in Lansing are already thinking about their goals beyond high school. Congratulations class of 2031!


State Farm 2012 transparent

CEDAM would like to thank Sponsor State Farm for supporting financial empowerment training and other financial empowerment initiatives in Michigan.