Socioeconomic Status and Participant Savings In Child Development Accounts: Early Evidence From SEED for Oklahoma Kids

Background and Purpose: The SEED for Oklahoma Kids (SEED OK) experiment is a large-scale study of universal and progressive Child Development Accounts in the state. SEED OK aims to investigate the policy innovation of giving every child an account at birth, and to test whether the initiative has an impact on ownership of accounts, savings for children, family attitudes and behaviors, and child development outcomes. Study participants (N=2,625) were randomly selected from the full population of newborn children and randomly assigned to treatment and control groups. Using a default enrollment strategy (automatic account opening), SEED OK opened a state-owned 529 college savings plan account for the child of every treatment participant. In addition, treatment families were encouraged to open their own Oklahoma 529 account, and low- and moderate-income treatment families received matches for deposits into these participant-owned accounts. In this study, we focus on savings for children, asking whether early SEED OK savings amounts vary by socioeconomic status (SES). More specifically, we ask: 1) Do the impacts of SEED OK differ by SES? (2) Among SEED OK treatment participants, are socio-economically disadvantaged groups more or less likely to open, and save in, Oklahoma 529 college savings plan accounts? Methods: Data come from birth records, a baseline survey, and 529 account data from January 2008 through September 2010. Early SEED OK participation is measured with multiple indicators of 529 account ownership and savings in 529 accounts. We use several indicators of SES, such as: income/poverty status, parent education, race/ethnicity, marital status, banked status, home ownership, financial assets, credit card ownership, public assistance receipt, primary language at home, and internet access at home. To examine the first research question, we run multivariate regression analyses separately by SES subgroup and compare treatment impacts across SES groups. To answer the second question, we conduct regression analyses with SEED OK treatment participants only and identify SES variables that predict account opening and early SEED OK savings. Results: Results suggest that SEED OK increases account opening and savings for children. In general, the account opening rate, and savings amounts, are significantly higher for the treatment group than for the control group. More importantly, SEED OK has positive impacts on the outcome measures even among disadvantaged SES groups—groups that have been less likely to open 529 accounts and less likely to save for children's college expenses. Conclusions and Implications: By using data from a random sample and a rigorous experimental design, this paper provides solid evidence on the early impacts of universal and progressive CDAs opened at birth. Because SEED OK aims to support asset accumulation by low- and moderate-income SES households, evidence of different impacts by SES will provide new insight regarding the potential policy value of CDAs.