Association for Public Policy Analysis & Management

There is great interest in supporting youth, especially those from less advantaged backgrounds, to attend post-secondary education.  One mechanism to encourage education attendance is through child saving accounts (CSAs) or child development accounts (CDAs), specialized saving accounts that help families build assets for their children’s education. Previous research indicates that education saving accounts can increase the college intentions of both parents and children, improve academic performance, and even contribute to healthy child development. This paper uses comparative data from the United States and Canada to explore how family characteristics and variations in policy incentives for child saving accounts contribute to whether families engage in this type of saving.

We conduct a comparative analysis using data from the U.S. National Financial Capability Study (2009 and 2012) and the Canadian Financial Capability Study (2008 and 2014).  Using probit regression, propensity score matching, and decomposition analyses, we explore the household and demographic characteristics, and the financial attitudes and behaviors that are associated with education saving within the national child savings plans -- the 529 Education Plan in the U.S. and the RESP (Registered Education Saving Plan) in Canada -- and how these relationships differ between the two countries.  We also incorporate data on variation in child saving account features (e.g. seeded accounts, matched contributions, tax incentives) between states within the U.S. in order to identify whether changes in program incentives over time impact participation in these accounts.

Descriptive statistics identify vast differences in rates of education saving among households with minor children in the U.S. (33.8%) and Canada (68.5%).  Results from probit regression models identify being female, income, and education attainment as significant predictors of education saving.  Preliminary results from the matched sample suggest age and financial knowledge are associated with education saving in the U.S. but not in Canada. Results from the decomposition analyses will be incorporated into the completed paper. 

In era with college costs that continue to rise, it is important to support the capacity of families to prepare for their children’s education with attractive and accessible saving options. Policies which successfully promote the broad adoption of child saving accounts through mechanisms such as integration with existing education and service systems could expand access. Programs that seed accounts or provide matched contributions to support the development of these savings among families with limited income and other disadvantaged populations may have particular merit.