Saving in a Children's College Savings Account Program for Lower-Income Households

Background and Purpose: This study is part of a larger quasi-experimental research project conducted between 2004-05 in the US called the Impact Assessment Baseline Survey by Saving for Education, Entrepreneurship, and Downpayment (SEED) – a national policy, practice, and research initiative. The setting of the survey was in a large community action agency that serves pre-school families in Oakland and Livingston counties in Michigan. Parents were given a chance to open incentivized accounts for their pre-school children that could later be used for pose secondary education. The purpose of this study was to assess individual and household characteristics, as well as program social services that influenced making personal savings in a children's college savings accounts program for lower-income households. This research is among the first to assess the roles and services provided by case managers in understanding how lower-income parents can be included in savings programs. It sought to answer the following questions: 1) what individual and household characteristics may help explain early personal saving in children's college savings accounts? and 2) controlling for individual and household characteristics, what is the association between social services and early personal saving in children's college savings accounts. Of particular importance to this study are the real challenges as well as opportunities that lower income households have in building assets for their children's futures.

Methods: Participants for this study were recruited via a computer assisted telephone interview (CATI) program. A total of N=790 study participants were interviewed for the study. Of these, n1=381 (48.2%) were assigned to the treatment condition and were offered the opportunity to open SEED accounts for their pre-school children. Only parents in the treatment group received program social services aimed at helping them open accounts and save for their children. Of the n1=381 parents in the treatment group, n3=235 (62%) decided to join the program by opening accounts. The analyses for this study included only the sub-group of n3=235 participants who joined the program by opening college savings accounts for their children. Data for the social services and outreach efforts provided to the parents was from the individual client files. Logistic regression was used to determine factors that were associated with making personal deposits in the accounts.

Results: Of the study sample n3=235, 148 (63%) parents did not make any personal deposits while 87 (37%) made deposits into the accounts. Because of the nature of the dependent variable, logistic regression was used in the analyses and findings showed that parent's race, level of education, and parental participation in the initial program orientation sessions were associated with making personal deposits. While education and orientation had lower odds ratios, white parents were 2.25 more likely to make personal deposits that minority parents. Efforts by asset researchers for a macro system where universal and progressive development accounts are established for all children may be completed by micro and meso causes of asset gaps in the US today.