Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Researchers find early savings accounts help low-income kids reach college

20.09.2011
Anyone who has saved for a college education, whether for a child or for themselves, can attest it's not easy to put money away.

A team of researchers from the University of Kansas and colleagues have shown that when savings accounts are started for children of low-income families and financial education is included, not only are the families more likely to save, but students can be more likely to attend college and graduate.

Deborah Adams, William Elliott, Edward Scanlon and Toni Johnson, faculty members in the KU School of Social Welfare, have authored numerous articles and studies documenting the effects of child development accounts on building assets of families living in poverty.

"The idea behind asset building is helping low-income families into the financial mainstream," Adams said. "It takes both income and assets to build financial security, but for too long we've acted like that doesn't matter for poor people."

Since 2000, the researchers have worked with community organizations and schools to start child development accounts for low-to-moderate-income children in 11 sites around the country. The program, called Saving for Education, Entrepreneurship and Downpayment (or SEED), was designed to test the efficacy of asset-building accounts and inform public policy regarding such accounts for all children.

The SEED program established accounts for students from kindergarten through fifth grade in certain sites, while working with adolescents and high school students in others, coupling that with financial education in many cases. The goal was to get tangible assets in the hands of lower-income families and evaluate the effects. In program sites, community organizations would deposit $500 to $1,000 in the students' accounts to start, and some offered matching contributions to a certain level for parental deposits for the first four years following account opening.

The researchers found that when money is set aside for college, families save more, find creative ways to save even when money is tight and view attending college as a more realistic possibility.

"We've found that it's not necessarily the amount that's saved," Adams said. "When you have savings, people start to do some mental accounting and find ways to put money aside. Parents at all socioeconomic levels want to see their kids do well. About 80 percent of the parents in our surveys said they believed their kids would finish college, and positive attitudes about the value of higher education grew more positive over time among parents of the children with the savings accounts."

Johnson said findings from the SEED study she conducted in Chicago echo the survey results. In her study, she talked with lower-income parents of elementary school children who had SEED accounts and learned that they were already actively thinking and planning for ways to help their children be prepared for college when they were older.

In a study published in the American Journal of Education, Elliott analyzed data regarding savings and its effect on students attending college

"Overall, findings suggest that policies, such as Child Development Accounts that help parents and youth accumulate savings — especially savings for college — may increase college attendance and graduation completion rates," Eliott and co-author Sondra Beverly of the Center for Social Development at Washington University wrote.

Scanlon, who has studied the perceptions of youth and adults participating in matched account programs, said regardless of the use designated for savings, participants with direct deposit accounts reported that saving required less effort. Many of the teens and parents he worked with also had expressed frustration with banks and confusion over related fees. Making designated college savings plans like 529s more user-friendly would likely be an incentive for many families to save more, he said.

While the SEED program has positive financial benefits, the researchers also found that child development accounts can also have positive attitudinal, behavioral and social effects.

"In-depth interviews with 27 parents at two SEED sites found perceived impacts on well-being," Scanlon and collaborators wrote. "These included perceived positive effects on self esteem, self efficacy, hope for the future, future orientation, sense of security, fiscal prudence and interaction with other children about finances and college."

SEED and child development accounts have obvious benefits for the individuals who take part in them, but the researchers argue that they can also be beneficial to the American economy as a whole. Government has made education loans increasingly available over the past few decades. While they have enabled many to attend college, they have often also resulted in students graduating with massive debt. Saving for education, and other uses, in advance can decrease dependence on credit, an ongoing factor in the recession the United States has been in since 2008.

They also argue that policy should be made to not only encourage citizens to save, but make it easier for them to do so. A growing number of countries have universal savings accounts that are established for children at birth with an automatic, one-time contribution and incentives for low-income families to earn more by contributing. The accounts can typically be used for education, home ownership, job and professional training or retirement purposes.

The KU research team's colleagues have also found that nearly 70 percent of American parents of all geopolitical backgrounds support the idea of universal child development accounts. They also found that participation in the SEED program was much greater when participants could be defaulted in. The finding mirrors the results of research on the retirement savings of employees in 401(k) plans. A relatively new federal policy allows companies to automatically establish 401(k) plans for employees unless they opt out.

Legislation has been introduced in the United States to establish such a program. The America Saving for Personal Investment, Retirement and Education (or ASPIRE) Act, was introduced in the 111th Congress and is now awaiting introduction in the 112th Congress. Adams has addressed the Congressional Savings and Ownership Caucus, presenting research findings to the bi-partisan group on children's development accounts. More recently, Elliott has been called upon to provide further information on the accounts by the New America Foundation to help inform Congress.

Adams and her colleagues are engaged in research on asset building for a number of reasons, in addition to their interest in the potential of assets to enhance financial security. Some of their early findings suggest an increase in hopefulness and future orientation among children, youth and parents participating in SEED.

"A young person who participated in one of our studies and was about to graduate from high school put it best when he said, 'If I wasn't in this program, I don't think I'd be thinking about college right now,'" Adams said. "'I would just be thinking about graduating and then, when I graduate, I would be lost.'"

Mike Krings | EurekAlert!
Further information:
http://www.ku.edu

More articles from Studies and Analyses:

nachricht Smart Data Transformation – Surfing the Big Wave
02.12.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT

nachricht Climate change could outpace EPA Lake Champlain protections
18.11.2016 | University of Vermont

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Novel silicon etching technique crafts 3-D gradient refractive index micro-optics

A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.

Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...

Im Focus: Quantum Particles Form Droplets

In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.

“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...

Im Focus: MADMAX: Max Planck Institute for Physics takes up axion research

The Max Planck Institute for Physics (MPP) is opening up a new research field. A workshop from November 21 - 22, 2016 will mark the start of activities for an innovative axion experiment. Axions are still only purely hypothetical particles. Their detection could solve two fundamental problems in particle physics: What dark matter consists of and why it has not yet been possible to directly observe a CP violation for the strong interaction.

The “MADMAX” project is the MPP’s commitment to axion research. Axions are so far only a theoretical prediction and are difficult to detect: on the one hand,...

Im Focus: Molecules change shape when wet

Broadband rotational spectroscopy unravels structural reshaping of isolated molecules in the gas phase to accommodate water

In two recent publications in the Journal of Chemical Physics and in the Journal of Physical Chemistry Letters, researchers around Melanie Schnell from the Max...

Im Focus: Fraunhofer ISE Develops Highly Compact, High Frequency DC/DC Converter for Aviation

The efficiency of power electronic systems is not solely dependent on electrical efficiency but also on weight, for example, in mobile systems. When the weight of relevant components and devices in airplanes, for instance, is reduced, fuel savings can be achieved and correspondingly greenhouse gas emissions decreased. New materials and components based on gallium nitride (GaN) can help to reduce weight and increase the efficiency. With these new materials, power electronic switches can be operated at higher switching frequency, resulting in higher power density and lower material costs.

Researchers at the Fraunhofer Institute for Solar Energy Systems ISE together with partners have investigated how these materials can be used to make power...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ICTM Conference 2017: Production technology for turbomachine manufacturing of the future

16.11.2016 | Event News

Innovation Day Laser Technology – Laser Additive Manufacturing

01.11.2016 | Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

 
Latest News

UTSA study describes new minimally invasive device to treat cancer and other illnesses

02.12.2016 | Medical Engineering

Plasma-zapping process could yield trans fat-free soybean oil product

02.12.2016 | Agricultural and Forestry Science

What do Netflix, Google and planetary systems have in common?

02.12.2016 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>