Building Brighter Futures: Children’s Savings Accounts in Illinois, a report from Heartland...Read more
Policy Recommendations: Universal Children’s Savings Accounts
A college degree is an important asset – helping people build wealth across their lifetime. A college graduate has median weekly earnings that are 64 percent higher than those of high school graduates. Furthermore, college graduates are much more likely than high school graduates to have jobs that provide access to other wealth generating tools such as health insurance, retirement savings accounts, paid time off, and other benefits.
Recent studies and pilot programs have shown that having an account in a child’s name dramatically increases the likelihood that a child will attend and complete college and improves early emotional and cognitive development. When compared to low- and moderate-income (LMI) children with no savings account, an LMI child with college savings of just $1 to $499 is more than three times more likely to enroll in college and more than 4.5 times more likely to graduate from college than a child without an account. An LMI child with college savings of $500 or more is about five times more likely to graduate from college than a child with no savings account.
The Bright Start Program could be a powerful tool for early childhood development and workforce development in Illinois. Unfortunately, due to some of the ways the program is structured, this vital savings tool is not available to many LMI families. Demographic data from 2012 and 2013 show that low- and moderate-income households of color are disproportionately not opening up accounts. Of new Bright Start Direct account holders during this two-year period (the first two years data were collected), 78% were white, 90% had a bachelor’s degree or higher, and 72% had household incomes of over $100,000. Only 3% of new accounts in 2012 & 2013 were opened by low-income Illinois households.
State Treasurers across the country have begun exploring ways to increase access to their state’s 529 programs in ways that lift families out of poverty and make college more accessible to all young people. Most recently, State Treasurers in Maine, Nevada, and Rhode Island rolled out programs that automatically open up 529 accounts for every child born (Maine & Rhode Island) or entering kindergarten (Nevada) in their state. These programs include an initial seed investment, matched savings incentives for low-income families, and financial education for the whole family.
We believe the Illinois State Treasurer could be a leader in improving early childhood development; increasing college savings, attendance and completion; and creating a more competitive workforce. The attached document includes recommendations for creating a program that works for all families in our state.
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