Last year, the Federal Reserve Board of San Francisco released a report that tried to determine if getting a college degree was still worth it. The answer was a resounding "yes." The bank determined that over the course of a worker’s lifetime, there would be an average earning difference of $830,000 between those earning a college degree compared to those just getting a high school diploma.
However, with too many graduates coping with debt, now at a per capita average of close to $30,000, it’s more important than ever for parents and children to start saving early, and a number of funders are working this issue. The challenge of building up college savings combines two keen funder interests: first, expanding access to higher education; and second, helping low-income households build wealth.
Last year, in a conversation with Robert Friedman, the godfather of the asset building movement, he told us that children's savings accounts (CSA) were super-hot with funders right now and provide more benefits than one might imagine. Friedman said:
kids with a college savings account in their own name are three times more likely to attend and four times more likely to finish college than kids without accounts, even with as little as $500 in the account. Basically, if you expect that you are going to go to college, you'll go to college. You find a way.
These benefits explain why a number of foundations are behind CSAs, from local funders like the Alfond Scholarship Foundation in Maine (as we reported here) to big national foundations that have long been stalwarts in the asset building movement, like the Charles Stewart Mott Foundation, which has an initiative that zeroes in on the link between assets and education.
One of Mott's partners in this work is the National League of Cities Institute, and the foundation recently renewed support for the institute for work on children's savings accounts.
Why look to a group that operates at the city level to push forward the ball on CSAs? Because city governments have become increasingly active in working to build financial literacy and security among urban residents. In 2010, for example, San Francisco created "Kindergarten to College," which it describes as the "first publicly funded, universal children’s college savings account program in the United States." Under the program, every incoming kindergartner in the city’s public schools is given a CSA that's been seeded with $50 in government funds.
Can this kind of account become as common as state-level 529 college savings accounts? Who knows? But there's a lot of energy right now at the municipal level for tackling inequality and boosting economic mobility. The National League of Cities is engaged in that action through its Youth, Education, and Families Institute, an outfit with a "history of assisting city leaders to implement programs to build residents’ economic stability," as the NLC's Heidi Goldberg recently wrote. Earlier this month, NLC launched a new project that Goldberg says aims "to improve the ability of young people (ages 14 – 24) to effectively manage their finances—from saving to building credit and keeping debt manageable."
There may be no better way to help young people learn to manage money than to actually give them savings early on in life, and the earlier the better. And if you believe Bob Friedman, CSAs don't just build financial skills; they nurture hope, too.
The Mott grant to NLC, according to the foundation, aims to enable it:
to work with a select group of municipal leaders to explore options for integrating financial strategies generally and savings accounts in particular into broader efforts to promote college access and success. The overall goal of this project is to develop a strong new set of city-level examples that illustrate the potential of children's savings accounts as a promising strategy to increase families' financial preparedness for college.
Mott is a long-time funder of the assets building movement, as we said, and one that has definitely bought in to the idea of children's savings accounts. But, judging by its grants, the foundation also sees lots of work to be done to advance CSAs—not just by building new alliances with government, but also researching how these accounts work in practice.