IF YOU BUILD IT, WILL THEY SAVE?
THE CANADIAN EDUCATION SAVINGS PROGRAM
THROUGH A CHILDREN’S SAVINGS ACCOUNT LENS
THE ASSETS AND EDUCATION INITIATIVE (AEDI)
University of Kansas, School of Social Welfare
ASSISTANT DIRECTOR MELINDA LEWIS AND DIRECTOR WILLIE ELLIOTT
NEW AMERICA
SENIOR POLICY ANALYST RACHEL BLACK
November 18, 2014
Joint Project of New America and
AEDI
New America
Mission:
to significantly broaden access
to economic resources through
increased savings and asset
ownership, thereby providing
families with enhanced
economic security, a direct
stake in the commonwealth,
and the means to pursue their
aspirations.
http://newamerica.net
Assets and Education Initiative
Mission:
to create and study innovations
related to assets and economic
well-being with a focus on the
relationship between children’s
savings and the educational
outcomes of low-income and
minority children
http://aedi.ku.edu
Overview
In this presentation, we’ll be answering 3 core questions:
• Why Canada and why now?
• What are CSAs and what are they intended to achieve?
• What can we learn about CSA programing and policy design by
looking at Canada’s experience?
Why Canada and why now?
Interests
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Understanding of CSAs is evolving
Momentum around CSAs at the state and local level
Renewed interest at federal level
Canada offers a model of a national CSA policy with the potential
to inform US policy development
Why Canada and why now?
Objectives
• Understand Canadian Education Savings Program, especially
how its features contribute to children’s savings
• Compare CESP and U.S. Children’s Savings Account policy,
particularly related to the system of 529 accounts
• Identify lessons from CESP for CSA policy and programming
in the U.S., particularly regarding decisions about delivery
systems, enrollment mechanism, incentives, state v. national
design, and roles for private institutions
• Facilitate cross-national learning, informed by developing base
of knowledge, largely in the U.S., regarding the framework for
understanding the effects of CSAs
Why Canada and why now?
Process
• Research review
• Policy analysis through lens of U.S.-based asset scholarship
• Collaborative deliberation with academics, administrators,
providers, and advocates in both national contexts
• Report, policy brief, presentations, and opinion media
Why Canada and why now?
Research Considerations
• Despite differences, considerable similarities in educational
landscape (rising tuition and high debt, growing inequality,
reduced need-based aid)
• Canada has education savings program with structures and
incentives used/considered in U.S. (initial deposit, savings
match, tax-preferred instrument, participation of private
financial institutions)
• Chance to look at two dimensions of CSA effects—asset
accumulation and account ownership—and their evidence in a
national program
What are CSAs and what are they intended
to achieve?
CSAs
• Children’s Savings Accounts (CSAs) have been developed to
facilitate asset building among low- and moderate-income
children.
– Universal programs that serve all young people
– Leverage investments by individuals, families, and, sometimes third
parties
– Initial deposits
– Progressively-financed 1:1 to 5:1 match
– Often combined with financial education
The Engine Behind Current CSA
Momentum in the U.S.: Small
Dollar Effects
• Account Ownership
– Research discussion
• How do asset effects occur?
• What are the effects of owning an account?
• How can small-dollar holdings make a difference?
– Policy discussion
• How do we get everyone an account?
Financial Aid Effects: Before,
During, and After College
The Special Case of Wilt
• ‘Wilt’ refers to the sizable number of minority and low-income
children who desire to attend college and have the ability to attend
college, but fail to transition to college after high school graduation.
• In the U.S., the lowest-achieving children from high-income
families attend college at a much higher rate than the lowestachieving children from low-income families (65% versus 33%,
respectively).
• Similarly, 88% of the highest-achieving children from high-income
families attend college while only 69% of the highest-achieving
children from low-income families attend college.
ACSFA. (2010). The rising price of inequality: How inadequate grant aid limits college
access and persistence. Retrieved July 15, 2011, from Advisory Committee on Student
Financial Assistance http://chronicle.com/items/biz/pdf/acsfa_rpi.pdf.
Reducing Wilt: The College-Saver
Identity
• A student with a college-saver identity expects to go to college
and has identified savings as a strategy to pay for it
– It’s not enough to imagine that college is in your future; you have to
believe that there’s actually a way to get there.
• College Savers ($500 or more college savings) vs. CollegeBound identities are (Elliott, Song, & Nam, 2013):
– Full sample: 2X more likely to graduate
– Black: 2.5X more likely to graduate
– Low- and moderate-income: 3X more likely to graduate
• This is where judging the potential power of a CSA
intervention by a metric other than mere asset accumulation—
in the form of growing balances—is essential.
The Next Step: From Testing
Associations to Testing Causation
• The SEED for Oklahoma Kids (SEED OK) began in 2007
(Kim & Nam, 2009)
– The experimental sample was drawn randomly from birth records
provided by the Oklahoma State Department of Health for all infants
born during certain periods in 2007 (Treatment n = 1,358; Control n =
1,346).
– Integrated into an existing Oklahoma College Savings Plan, or OK 529
– Automatically opened state-owned OK 529 with $1,000 initial deposit
for newborns
– Time-limited $100 incentive to open an OK 529 account
– Savings match for income-eligible treatments on their deposits of up to
$250 per year (2008-11)
Children’s Socio-Emotional
Development
• Infants from households with income lower than 200% of the
poverty line who were randomly assigned to receive the
CSAs+$1,000 demonstrated significantly higher socialemotional skills at age four than their counterparts who did not
receive a CSA (Huang, Sherraden, Kim, and Clancy, 2014).
– According to Huang et al. (2014), the effect of the SEED OK CSA is
similar in size to estimates of the effect of the Head Start program on
early social-emotional development.
– However, what makes CSAs exciting is the potential to maximize the
effects of other interventions.
• The largest effects of the intervention were found for students
from relatively disadvantaged households.
• Effects occur regardless of whether parents have saved.
SEED OK Findings Provide
Support for Prior CSA Research
• The link between social-emotional well-being and academic
achievement has been rigorously tested with overwhelming
support.
– Employing an experimental randomized design, SEL participants,
compared to controls, demonstrate significantly improved social and
emotional skills, attitudes, behavior, and academic performance that
reflected an 11-percentile-point gain in achievement (Durlak,
Weissberg, Dymnicki, Tyalor and Schellinger, 2011).
• Preliminary results show that the SEED OK CSA leads
mothers to maintain or increase their expectations of children’s
education (Kim, Huang, Sherraden, & Clancy, under review)
Eventually You Have to Purchase
an Asset: Asset Accumulation
• Asset Accumulation
– The Research Conversation
• Descriptive, how much wealth inequality exists
• Can the poor save?
– Is it enough?
– The Practice Conversation
• Institutional solutions over behavioral solutions
– The Policy Conversation
• Start saving early
The Good News: The Poor Can
Save
• Research shows that:
– Families with low incomes can save if given meaningful access to
facilitative institutions
– Early and sustained savings can have a significant impact on asset
accumulation
But, CSAs Provide an Infrastructure for
Wealth Transfers
Figure. College Accounts and College Assets for Young Children in 529 & inclusive CSAs
What can we learn about CSA programing
and policy design by looking at Canada’s
experience?
See AEDI’s New Report For More Information: Examining the Canadian
Education Savings Program and its Implications for U.S. Child Savings Account
(CSA) Policy.
Lessons - Enrollment
• Difficult to secure universal participation without automatic
enrollment
– Targeted outreach can work, but hard to scale, especially if not
connected to K-12 policy/system
– Organizations that succeed most in encouraging enrollment
leverage social networks, integrate into financial security
programs, link with employers, engage other providers, and
reduce ‘friction’ (e.g. helping with SIN application, providing
vouchers, coaching families)
– Without automatic enrollment, the most advantaged households
will benefit disproportionately, even with progressive
incentives
Lessons - Savings
• Canada’s national plan has increased PSE savings
– RESPs far outperforming 529s in utilization
– Potential for lower administrative costs
– Low-income households save ~$740/year in CESP—higher than most
U.S. CSA programs
• Group plans
– Setting savings expectations may be important, but these also increase
risk of principal loss
• Leveraging income supports may improve CSA outcomes
– Low-income Canadians may have more resources for saving (UCCB,
supplement); removing asset limits reduces ‘friction’
• Transfers may increase balances and may also encourage
saving (even when HH saving not required)
Lessons - Delivery System
• Potential trade-offs in using existing structure v. designing one
intentionally redistributive
– Utilizing existing infrastructure may make universal
engagement more elusive
• RESP requirement for SIN, cultural distance to institutions
– Separating accounts from incentives, administratively, may
frustrate policy reforms
– Having account architecture may accelerate development of
asset approaches
– Human-centered design may influence savings outcomes
– May lose ‘gateway’ effects if providers don’t offer other
products
Lessons – Use of Private
Institutions
• Private account administration may not serve most disadvantaged
– May contribute to skew to advantaged households
– Institutions may have few apparent incentives to serve poor
• Provider mix, plan options, regulatory constraints important
– Institutional performance varies
– Savings contracts may increase savings, but at cost of increased
risk and reduced account ownership effect
• Public/private arrangement may drive down costs
– CESG administration costs just $12.85 per beneficiary over six
years, on average (annual administrative costs of just $0.06 for
every $1 of financial assistance)
Lessons - Incentives
• Matches and initial deposits may work together as effective tools
to increase savings, asset accumulation, account opening
– Incentives encourage private institutional participation, but
may not secure active partnership
– May not have to choose between ‘seed’ and ‘match’—98% of
CLB recipients also saving in their RESP
• It appears that incentives must include direct redistribution to
overcome liquidity constraints and counteract disproportionate
participation of advantaged households
Additional Lessons
• Policy may need to find levers for account ownership and asset
accumulation effects
• CSAs may need to include robust transfers to build balances
• Equity in outcomes is important, including attending to asset
accumulation and account ownership effects
• Policy/program structure may increase positive effects with
attention to asset theory:
– Encourage regular deposits and early opening by setting clear
savings goals
– Cultivate ‘ownership’—even automatic enrollment doesn’t
guarantee engagement
– Make accounts lifelong
References
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Durlak, J.A., Weissberg, R. P., Dymnicki, A.B., Taylor, R. D., and Schellinger, K. B. (2011) The Impact of
Enhancing Students’ Social and Emotional Learning: A Meta-Analysis of School-Based Universal
Interventions. Child Development, 82 (1), 474–501.
Elliott, W. (2013). Small-dollar children’s savings accounts and children's college outcomes. Children and
Youth Services Review, 35 (3), p. 572-585.
Elliott, W., Song, H-a, and Nam, I. (2013). Small-dollar accounts, children's college outcomes and wilt.
Children and Youth Services Review, 35 (3), p. 535-547.
Huang, J., Sherraden, M., Kim, Y., & Clancy, M. (2014). Effects of child development accounts on early
social-emotional development an experimental test. Journal of American Medical Association Pediatrics
168(3), 265-271.
Kim, Y., & Nam, Y. (2009). The SEED for Oklahoma Kids experiment: Comparison of treatment and control
groups (CSD Research Brief 09-59). St. Louis, MO: Washington University, Center for Social Development.
Mason, L. R., Nam, Y., Clancy, M., Loke, V., and Kim, Y. (2009). SEED Account Monitoring Research:
Participants, Savings, and Accumulation (CSD Research Report 09-05). St. Louis, Mo.: Washington
University, Center for Social Development.
Nam, Y., Kim, Y., Clancy, M., Zager, R., & Sherraden, M. (2013). Do Child Development Accounts promote
account holding, saving, and asset accumulation for children’s future? Evidence from a statewide randomized
experiment. Journal of Policy Analysis and Management, 32 (1), 6–33. doi:10.1002/pam.21652
Questions