Child development accounts

Evidence Rating  
Expert Opinion
Evidence rating: Expert Opinion

Strategies with this rating are recommended by credible, impartial experts but have limited research documenting effects; further research, often with stronger designs, is needed to confirm effects.

Health Factors  

Child development accounts (CDAs), also called children’s development accounts or children’s savings accounts (CSAs), are accounts designated for a specific child to build assets over time through contributions from governments, society, family, friends, or the child. Accounts are generally started with an initial contribution, or seed money, from a sponsoring organization such as a government agency, nonprofit, or philanthropic foundation. Sponsoring organizations may also provide ongoing savings incentives (e.g., matching contributions) for participants from families with low incomes, along with age-appropriate financial education for the family and child. CDAs are often available through school-based initiatives, citywide public-private partnerships, or statewide efforts. Current statewide initiatives invest in state 529 college savings plans1.

Expected Beneficial Outcomes (Rated)

  • Increased asset accumulation
  • Increased college enrollment

Other Potential Beneficial Outcomes

  • Increased financial resources for higher education
  • Improved social emotional skills
  • Improved parental mental health
  • Improved financial literacy
  • Increased college completion

Evidence of Effectiveness

Child development accounts (CDAs) are a suggested strategy to expand financial and educational opportunities for children from families with low incomes or disadvantaged backgrounds1. CDA interventions may improve financial behaviors such as opening a savings account and budgeting, and increase savings amounts for participants2. Evaluations of SEED for Oklahoma Kids (SEED OK), a CDA intervention that included $1000 seed money and savings matches for families with lower incomes, indicates that universal CDAs can nearly eliminate disparities in 529 college savings accounts and asset holdings among groups of different socio-economic statuses3, 4, and between racial and ethnic groups. However, more advantaged children continue to have more assets3 and parents with the greatest financial knowledge save more than parents with lower financial literacy5, 6, 7. Interviews with participants in the Promise Indiana CDA suggest that initial seed money, deposit incentives, and withdrawal restrictions may influence savings8. Additional evidence is needed to confirm effects of CDA interventions.

Participation in a CDA intervention such as SEED OK can improve social emotional development in early childhood9, particularly for children whose mothers are unmarried10. Participation in such programs has also been associated with increased math and reading scores among children from families with low incomes11. In families with low incomes, CDA participation may also positively affect mothers’ mental health12 and may lead to a decrease in punitive parenting practices13 and an increase in positive parenting practices14. CDA participation may increase parents’ financial literacy15 and financial capability5. Both exposure to and participation in a CDA are associated with high parental educational expectations for their children, especially among families with low to moderate incomes and parents with no college education16, 17, 18.

A study of CDAs implemented as part of an economic empowerment intervention for AIDS orphans in Africa suggests CDAs may promote savings, increase children’s educational expectations, and improve their mental and physical health19, 20.

Overall, family assets and children’s savings appear to increase college attendance and completion15, 21, 22, 23, 24, 25, 26. Children and young adults with savings accounts, particularly accounts designated for schooling, are more likely to enroll and graduate from college than those without such accounts. Even school savings accounts holding less than $500 may increase college enrollment and graduation among children from families with low and moderate incomes23, particularly Black children24. In the longer term, holding savings accounts in adolescence appears to be associated with an increased likelihood of savings account ownership, greater total savings27, 28, 29, and greater asset accumulation for young adults, particularly those with low incomes27, 28.

CDA interventions may be most effective when enrollment is automatic and the interventions are integrated with other social services14. Automatic enrollment in CDAs at-birth may improve long-term financial readiness, regardless of parental educational expectations30. Other components that may improve the impact of CDA interventions include a centralized system with universal eligibility and automatic initial deposits, and targeted investment options with growth potential and restricted withdrawals5.

Equity Analysis

Potential to decrease disparities: Suggested by expert opinion

Child Development Accounts (CDAs) are a suggested strategy to reduce disparities in savings and asset building for children across socio-economic status levels, as well as by race and ethnicity3, 14. Available evidence suggests that they can reduce disparities in 529 college saving account holdings and savings between groups of different socio-economic status and between racial and ethnic groups4. However, more advantaged children continue to have more assets3, 14 and disparities remain between racial groups, exacerbated by gaps in financial literacy and program knowledge6. If a CDA is not universal and families have to open an account, rather than having one automatically opened for them, the families experiencing the greatest social and economic disadvantages are the least likely to participate31.

Studies examining the impact of any type of school savings account suggest school savings accounts can increase college enrollment and graduation rates among children from families with low and moderate incomes22 and Black children24.

Historical Context

Child Development Accounts (CDAs) were first proposed in 1991 as a lifelong, asset-building tool for families to build savings for post-secondary education for their children and to interrupt the transgenerational poverty that contributes to disparities in wealth and education across income groups and racial identities2.

Differing rates of college enrollment and completion between income and racial groups reflect rampant inequality in education. Examples of the systemic barriers behind this inequality include the fact that college was almost exclusively for white men prior to the 1900s and that colleges established for Black students in the 1890s were a governmental endorsement of racial segregation. Furthermore, other programs designed to increase college enrollment, such as the GI Bill in 1944, primarily benefitted white veterans33. For families with low incomes and those from groups previously systematically excluded from education, low paying jobs and lack of generational wealth continue to leave them with little to no savings and assets, severely limiting their capacity to save for a child’s post-secondary education. This, coupled with a lack of access to basic financial services and affordable capital, restricts their child’s chances of expanding their opportunities, such as pursuing higher education, perpetuating and exacerbating existing disparities34.

The Saving for Education, Entrepreneurship, and Down-payment Initiative (SEED National Initiative) was the first coordinated test of CDAs and ran from 2003 to 2008. It was piloted in 12 community-based programs, with the largest in Pontiac, MI. A large-scale experiment, SEED for Oklahoma Kids (SEED OK), began in 2007 and will continue until the original participants are college-aged31.

Equity Considerations

  • Who would benefit from child development accounts (CDAs) in your community? How can the program be designed so that individuals historically excluded from education and wealth building opportunities would benefit the most?
  • What initial amount of seed money should be invested so the program would be effective at closing the racial wealth divide? How can the program allocate additional contributions so individuals from households with minimal wealth can benefit the most?
  • Do the goals of the CDA program match the goals of prospective participant families? How can CDAs meet the needs of families’ educational expectations for their children?
  • What are the rules and requirements for recipients to access and use their accounts? What do families need from CDA programs to effectively navigate and grow their accounts over time?

Implementation Examples

As of 2020, there are more than 70 child development account (CDA) programs operated and managed in the US, serving almost a half million children across 36 states. Seven states (California, Illinois, Maine, Nebraska, Nevada, Pennsylvania, and Rhode Island) have state-wide, automatic, universal CDA policies, established by legislation or administrative rule31. There was a 30% increase in participants from 2019 through 2020, ahead of the 20% average annual growth. This was driven largely by consistent enrollment in city- and state-wide programs with automatic enrollment32.

Municipally-sponsored initiatives include San Francisco and Oakland’s Kindergarten to College (K2C) savings account programs, which deposit an initial $50-$100 in seed money into an account for every kindergartener in the city. Maine’s Harold Alfond College Challenge opens a NextGen 529 with a $500 deposit for every baby born in the state. The Kansas Child Support Savings Initiative, a joint effort between the Kansas Department for Children and Families, Child Support Services Office, and the Kansas State Treasurer, allows noncustodial parents to open a 529 college savings account for their children and receive a reduction in child support arrears based on those deposits1.

Implementation Resources

Prosperity Now-CSAs - Prosperity Now. Children's saving accounts (CSAs).

AEI-KU 2013 - Assets & Education Initiative (AEI). Building expectation, delivering results: Asset-based financial aid and the future of higher education. Lawrence: The Assets and Education Initiative, University of Kansas School of Social Welfare; 2013.

CSD-Sherraden 2018 - Sherraden M, Clancy MM, Beverly SG. Taking child development accounts to scale: Ten key policy design elements. St. Louis, MO: Washington University, Center for Social Development (CSD); 2018: Policy Brief 18-08.

Footnotes

* Journal subscription may be required for access.

1 Prosperity Now-CSAs - Prosperity Now. Children's saving accounts (CSAs).

2 Birkenmaier 2021 - Birkenmaier J, Kim Y, Maynard B. Financial outcomes of interventions to improve financial capability through children’s development accounts: A systematic review. Journal of the Society for Social Work and Research. 2021.

3 Sherraden 2016* - Sherraden M, Clancy M, Nam Y, et al. Universal and progressive child development accounts: A policy innovation to reduce educational disparity. Urban Education. 2016:1-28.

4 Huang 2017a* - Huang J, Kim Y, Sherraden M, Clancy M. Heterogeneous effects of child development accounts on savings for children’s education. Journal of Policy Practice. 2017;16(1):59-80.

5 Huang 2021a - Huang J, Sherraden MS, Sherraden M, Johnson L. Experimental effects of child development accounts on financial capability of young mothers. Journal of Family and Economic Issues. 2021.

6 Nam 2018 - Nam Y, Hole E, Sherraden M, Clancy MM. Program knowledge and racial disparities in savings outcomes in a child development account experiment. Journal of Family and Economic Issues. 2018;39:145-162.

7 Huang 2015b* - Huang J, Nam Y, Sherraden M, Clancy M. Financial capability and asset accumulation for children’s education: Evidence from an experiment of child development accounts. The Journal of Consumer Affairs. 2015;49(1):127-155.

8 Lewis 2017* - Lewis M, O’Brien M, Elliott W. Immigrant Latino families saving against great odds: The case of CSAs and the Prosperity Kids program. Race and Social Problems. 2017;9(3):192-206.

9 Huang 2014* - Huang J, Sherraden M, Kim Y, Clancy M. Effects of child development accounts on early social-emotional development: An experimental test. JAMA Pediatrics. 2014;168(3):265-271.

10 Huang 2017* - Huang J, Kim Y, Sherraden M, Clancy M. Unmarried mothers and children’s social-emotional development: The role of child development accounts. Journal of Child and Family Studies. 2017;26(1):234-247.

11 Elliott 2018* - Elliott W, Kite B, O’Brien M, Lewis M, Palmer A. Initial elementary education findings from Promise Indiana’s Children’s savings account program. Children and Youth Services Review. 2018;85:295-306.

12 Huang 2014a* - Huang J, Sherraden M, Purnell JQ. Impacts of child development accounts on maternal depressive symptoms: Evidence from a randomized statewide policy experiment. Social Science and Medicine. 2014;112:30-38.

13 Huang 2019a* - Huang J, Nam Y, Sherraden M, Clancy MM. Impacts of child development accounts on parenting practices: Evidence from a randomised statewide experiment. Asia Pacific Journal of Social Work and Development. 2019;29(1):34-47.

14 Huang 2019* - Huang J, Beverly SG, Kim Y, Clancy MM, Sherraden M. Exploring a model for integrating child development accounts with social services for vulnerable families. Journal of Consumer Affairs. 2019;53(3):770-795.

15 Huang 2010* - Huang J, Guo B, Kim Y, Sherraden M. Parental income, assets, borrowing constraints and children's post-secondary education. Children and Youth Services Review. 2010;32(4):585-594.

16 Rauscher 2017* - Rauscher E, Elliott W, O’Brien M, Callahan J, Steensma J. Examining the relationship between parental educational expectations and a community-based children’s savings account program. Children and Youth Services Review. 2017;74:96-107.

17 Kim 2017* - Kim Y, Huang J, Sherraden M, Clancy M. Child development accounts, parental savings, and parental educational expectations: A path model. Children and Youth Services Review. 2017;79:20-28.

18 Zheng 2020 - Zheng H, Starks B, Ellis J, O’Brien M, Elliott W. An examination of parental college expectations’ mediating role between children’s savings accounts and children’s educational attainment by income level. Sociology Mind. 2020;10(03):165-186.

19 Curley 2010 - Curley J, Ssewamala F, Han CK. Assets and educational outcomes: Child development accounts (CDAs) for orphaned children in Uganda. Children and Youth Services Review. 2010;32(11):1585-1590.

20 Ssewamala 2009 - Ssewamala FM, Han CK, Neilands TB. Asset ownership and health and mental health functioning among AIDS-orphaned adolescents: Findings from a randomized clinical trial in rural Uganda. Social Science & Medicine. 2009;69(2):191-198.

21 Elliott 2013a* - Elliott W, Constance-Huggins M, Song HA. Improving college progress among low- to moderate-income (LMI) young adults: The role of assets. Journal of Family and Economic Issues. 2013;34(4):382-399.

22 Elliott 2013b* - Elliott W, Song H, Nam I. Small-dollar accounts, children's college outcomes, and wilt. Children and Youth Services Review. 2013;35(3):535-547.

23 Elliott 2013c* - Elliott W, Song H, Nam I. Small-dollar children's saving accounts and children's college outcomes by income level. Children and Youth Services Review. 2013;35(3):548-559.

24 Friedline 2013a* - Friedline T, Elliott W, Nam I. Small-dollar children's saving accounts and children's college outcomes by race. Children and Youth Services Review. 2013;35(3):548-559.

25 Elliott 2011* - Elliott W, Destin M, Friedline T. Taking stock of ten years of research on the relationship between assets and children's educational outcomes: Implications for theory, policy and intervention. Children and Youth Services Review. 2011;33(11):2312-2328.

26 Zhan 2011* - Zhan M, Sherraden M. Assets and liabilities, educational expectations, and children's college degree attainment. Children and Youth Services Review. 2011;33(6):846-854.

27 Friedline 2013* - Friedline T, Elliott W. Connections with banking institutions and diverse asset portfolios in young adulthood: Children as potential future investors. Children and Youth Services Review. 2013;35(6):994-1006.

28 Friedline 2013b* - Friedline T, Song HA. Accumulating assets, debts in young adulthood: Children as potential future investors. Children and Youth Services Review. 2013;35(9):1486-1502.

29 Friedline 2012* - Friedline T, Elliott W, Chowa GAN. Testing an asset-building approach for young people: Early access to savings predicts later savings. Economics of Education Review. 2012;33:31-51.

30 Kim 2018a* - Kim Y, Huang J, Sherraden M, Clancy MM. Child development accounts and saving for college: Mediated by parental educational expectations? Social Science Quarterly. 2018;99(3):1105-1118.

31 Huang 2021 - Huang J, Sherraden M, Clancy MM, et al. Asset building and child development: A policy model for inclusive child development accounts. RSF: The Russell Sage Foundation Journal of the Social Sciences. 2021;7(3):176-195.

32 Cisneros 2021 - Cisneros J, Clancy MM, Elliott III W, et al. The case for a nationwide child development account policy. St. Louis: Center for Social Development (CSD), Washington University; 2021: CSD Policy Brief No. 21-20.

33 Thelin 2022 - Thelin JR, Edwards JR, Moyen E, Berger JB, Calkins MV. Higher education in the United States: Historical development & system. State University Education Encyclopedia. 2022.

34 Chen 2020a - Chen Z, Elliott W. Saving for college: Perspectives from participants in a universal children’s savings program. Journal of Children and Poverty. 2020;26(2):151-166.

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