Start Early: Who's Supporting Children's Savings Accounts?

photo:  Marlon Lopez MMG1 Design/shutterstock

photo:  Marlon Lopez MMG1 Design/shutterstock

When we spoke to her in 2015, Benita Melton of the Charles Stewart Mott Foundation pointed to the power children’s savings accounts. Studies have found that saving early—at elementary school age or younger—can be a powerful incentive to embrace higher education. Children with $500 earmarked for college are around three times more likely to attend, and four times more likely to graduate, than those with no savings.

That’s a pretty compelling leverage point for philanthropic impact. Higher education funders have good reason to take note, as do any funders interested in building family assets. But CSAs are also just one of a broadening range of paths funders can take to put opportunity in the hands of those it has bypassed. And this idea has been around for a long time. As we enter 2018, have CSAs finally caught on with funders more broadly, particularly private ones? And what do prospects look like for this section of the asset building movement?

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The folks at the Mott Foundation, it seems, have also been thinking deeply about those questions. That’s why, starting about a year ago, it backed a research effort to see where support for CSAs is coming from and where it’s headed. Released by the Asset Funders Network with help from Prosperity Now (formerly CFED), the final report “provides the first-ever snapshot of the depth and breadth of the philanthropic support for the emerging field of CSA initiatives.”

The study, authored by Rebecca Loya of Brandeis University, relies on self-reported data from 62 CSA programs contacted between December 2016 and January 2017. From 2015 through the end of 2016, private funders committed about $35.5 million to CSA programs across the country. While CSAs have been around since 2000, “the field has grown dramatically in recent years, so that by the end of 2016, more than 312,000 children in 29 states were enrolled in CSAs,” according to the report. With the impact of early saving in mind, by the way, it only looks at CSAs that enroll children from birth through elementary school. 

While CSAs do benefit from public funding, private foundations and corporations have ramped up their support quite a bit, lately. Foundations take the lead spot, providing funding to 71 percent of CSAs, while businesses gave to 40 percent. We’ve been following some of the leading CSA funders, including the top three grants from 2015-2016, which also happen to correspond to the top three privately funded CSAs. 

Coming in at over $12 million is the Harold Alfond College Challenge, a fascinating bid by the Alfond Scholarship Foundation to give every child born in Maine after January 1, 2013, access to $500 in a 529 plan college savings account. The initiative involves a direct partnership with the state, which matches parental contributions to the account up to a certain point. 

Then there’s Jonathan Gray’s $10 million commitment to boost NYC Kids Rise, a public-private partnership involving Mayor de Blasio and college savings accounts for thousands of New York children. And on the other coast, Marc and Lynne Benioff have put in $3.4 million for Brilliant Baby, which offers similar CSAs in Oakland, California. 

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While these major commitments stand out and underscore how this idea has engaged some big individual donors, they’re not the norm. Most CSA programs involve “several funding organizations aligning their efforts and funding different aspects of the CSA—the seed, the match, or the account costs.” For instance, corporate funders, the bulk of which are financial institutions, often contribute by waiving fees and providing accounts free of charge. 

That brings us to another point. While this particular report doesn’t focus on it, public sector support (or, at the very least, involvement) is often a key part of the recipe. That’s certainly the case where 529 plans are concerned. On the local and state levels, a great many CSA initiatives rely on public-private partnerships and similar models. At the same time, private support has helped them penetrate beyond the urban coasts. Community foundations have been a big part of that story, as have financial players like Citi and Wells Fargo. In Indiana, the Lilly Endowment has supported all 14 Promise Indiana CSA programs. The report also lauds United Way and similar “pass-through organizations” as important boosters for CSAs on the local level.

Needless to say, the Mott Foundation is also a committed CSA funder. It supported the Harold Alfond College Challenge, Promise Indiana: Wabash County, and San Francisco Kindergarten to College during the study period. 

Although a $500 savings account might look paltry to some, especially considering the often astronomical cost of a degree, folks like Melton and asset building guru Bob Friedman see the psychological effect as crucial, and all the more so when it’s operating throughout a young person’s life. As Friedman put it, “Basically, if you expect that you are going to go to college, you'll go to college. You find a way.”

Related: Bob Friedman Explains How the Asset Building Movement Got Its Mojo—And Its Dough