Association for Public Policy Analysis & Management

Envisioned as a way to improve well-being through financial stability, child savings accounts (CSAs) have been linked to important educational outcomes for children. Much of the US-specific research on CSAs comes from the Saving for Education, Entrepreneurship, and Downpayment (SEED) initiative that implemented CSAs in 12 sites across the country. This study is part of a unique mixed methods long-term follow-up of pre-school participants from Michigan SEED (MI-SEED) who are now entering high school. In order to understand the long-term impacts of MI-SEED, our study explored two key questions: (1) What are strategies that families use to manage their finances? (2) How are families approaching saving for higher education now that their children are nearing high school?

Methods:

The MI-SEED program was designed as a quasi-experimental comparison of seven treatment and seven control Head Start centers. Caregivers of children at all 14 centers were invited to complete a baseline interview in 2004 and a Wave 2 survey in 2008. Caregivers with children enrolled in treatment Head Start centers were offered a CSA with an initial $800 deposit, matched by a $200 state deposit, and were also encouraged to take advantage of a 1-to-1 match for additional personal savings, up to maximum of $1,200. The 2014/2015 component followed up with several families who took part in the original study. We conducted 50 in-depth semi-structured interviews (29 treatment participants with accounts, 3 treatment participants without accounts, and 18 control participants) with participants recruited from the list of prior survey respondents. Interviews were transcribed verbatim and coded thematically by three independent coders. We also obtained 529 college savings account lifetime deposit, lifetime withdrawal, and current total balance information from TIAA-CREF, which was then merged into the survey database.

Findings:

Most families started out extremely poor when the study began in 2004. Both treatment and control site participants identified that they had been negatively impacted by the dramatic economic downturn in Michigan. However, treatment families were largely able to hold on to the original SEED deposits. Only three of the 29 treatment families with accounts we interviewed had made withdrawals since 2008. The modal family had gained approximately $200 in total value and the average account gain was over $800. In contrast, the majority of control family participants had no dedicated child savings. Participant interviews uncovered four thematic findings: (1) many families are struggling financially, (2) there are significant barriers towards savings for many low-income families, (3) significant consumption pressures lead to the use of alternative financial services, and (4) families have suggestions for improving savings outcomes.

Conclusions/Implications:

For low-income families that are struggling to pay basic expenses, saving is hard. Treatment families value initial deposits made for their children’s education and typically don’t withdraw these funds, demonstrating their interest in college savings. Although a primary purpose of MI-SEED was to save for a long-term endeavor, and some families did, given economic circumstances, maintaining any savings at all is a strong result.