Planting the seed of desire to go to college early in a child's life with a savings account produces lasting positive effects. This idea has galvanized the asset building movement in recent years.
As Robert Friedman, the godfather of the asset building movement, told us:
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.
Few people have been more intent on realizing the promise of this blockbuster idea than Benita Melton. And few foundations have stuck with children's savings accounts for as long as the Charles Stewart Mott Foundation, which has promoted these accounts as an essential tool in the effort to reduce poverty and bring more marginalized young people into the middle class.
Benita Melton has been with the Mott Foundation for 20 years. As a program officer in the Pathways to Opportunity program, she oversees grantmaking for child savings accounts and other opportunities that connect low-income children and families with tools for asset building.
Melton sees this work as growing out of a theory of grantmaking that relies on identifying both strong leaders and strong ideas. At the time when work on child savings accounts started, Melton described how very little had been tried in this area—it was new and untested terrain. But there were some strong leaders in the sector, including Bob Friedman from the Corporation for Enterprise Development and Michael Sherradden, whose seminal work Assets and the Poor, helped the foundation understand the issue more fully.
Melton described how, early in the asset building movement, she and her colleagues at the Mott Foundation realized they had a powerful role to play in advancing children's savings accounts. "It's the aspirational and the practical that holds unique appeal for us around children's savings accounts."
With the rising cost of college, the foundation saw savings accounts as a good way to bring more money into the picture for struggling families. In the process, families would feel more hopeful about the future education of their children because they knew they had a practical resource for dealing with the cost issue when the time came.
"Research has shown that both parents and children have higher aspirations and expectations that they will go to college when they are engaging with and using these accounts," said Melton, echoing Friedman.
"On the other side of the coin, we are a very practical grantmaker," Melton continued. "We like practical solutions to the problems we are trying to address. The college board suggests the average unmet need for college costs is about $4,000 to $6,000 annually, so if we get families to start saving and save regularly, if we have matching incentives provided by public or private sources, families over time can build enough resources not to pay for college in its entirety, but they can provide an important set of resources for their child."
I asked Melton about which projects in building child savings accounts were the most dramatic examples of the power of the work, but she understandably didn't want to choose favorites. "We like to think all the projects we have funded have served an important purpose around the life cycle of this idea," she said, stressing the relative novelty of the child savings account concept in the asset building arena. "The oldest kids participating in these new accounts are fourth graders in San Francisco," she said, to give a concrete sense of how new this work is.
Melton gave a quick summary of the progression of the foundation's work on children's savings accounts. At first, Mott funded mostly demonstration project in this area. As the work progressed, "we supported a lot of educational efforts to build awareness about the idea, and to share what we were learning from sites on the ground."
"Later, we began to fund research on these accounts and their potent impact on education," she continued. Now, she says:
as we are gaining momentum, we really are trying to scale this idea. If we can get more kids and more accounts, we would hope to see additional positive impacts on education, and so we're approaching the scaling of this idea. I feel like we're at that moment, that inflection point, where the idea is starting to build momentum, and as we build momentum, really understanding what makes these programs work well, particularly citywide and statewide models.
As advice to grantseekers, Melton stressed the idea of alignment with the foundation's priorities. In regard to child savings accounts, she added that the ability to operationalize the idea is critical, so it's important to have design and implementation questions worked out, particularly regarding how to collaborate on a citywide or statewide level.
San Francisco and Maine were beacons in this work, but now a lot of other communities are coming online in Nevada, Indiana, Connecticut, and Rhode Island, just to name a few. So now we are trying to take the lessons from these new places and keep sharing lessons learned as we build momentum.
Melton suggested that interested nonprofits study some of the foundation's recent grants to get acquainted with the details of the work. Melton referred to Mott's recent grant to the National League of Cities, which is trying to get as many new cities behind children's savings accounts as possible and is providing technical assistance to cities interested in setting up such accounts for residents.
Melton emphasized the pivotal role that mayors can play in building momentum for child savings accounts. She cited the Cities for Financial Empowerment project started by Bloomberg as extremely important to the asset building and child savings accounts efforts. "A lot of mayors see more need to help families manage their finances."
Melton wants to see more mayors of cities setting up financial empowerment offices that include services like help with child savings accounts. "Even if it goes through the state," she noted, "programs still get implemented at the local level."
As for getting other players into the action, Melton said one set of stakeholders that Mott is particularly interested in engaging is "the college completion folks."
"CSAs are by no means a stand-alone concept," stressed Melton. "They work much better in the context of a broader approach or a layered approach to college enrollment and completion, so we are particularly reaching out to people already doing college completion work or thinking about doing this work, figuring out how to layer on college savings accounts."
All that makes a lot sense. As we've reported, there's a lot of activity right now among funders looking for ways to boost the woefully low college completion rates among low-income students—many of whom drop out for financial reasons. Of course, others never start college at all, believing that the cost is prohibitive. Melton and others see CSAs as a potential game changer in this regard.
"We are trying to help this idea catch fire," said Melton. "There's a lot of attention being paid to helping people get some kind of education, and that might be 2-year or 4-year college, or it may be an apprenticeship or internship, or some kind of certificate program. And there's a lot of focus on student debt. This affects all families, particularly low-income families. Child savings accounts offer one very important solution to this problem... We want to help more kids not write off college because of the cost."
Melton emphasized that there's still much to be learned about children's savings accounts:
We will continue to try to refine the model. We're still early in the idea. We need to gather more information and tell more stories about the experiences of families with these accounts. And then, when kids in these programs get to college age, we will move from a hypothesis to more empirical evidence about what's really happening.