SEED OK: College Savings for Newborns

Background & purpose: The SEED for Oklahoma Kids (SEED OK) experiment is a large-scale study of universal Child Development Accounts with randomly-selected newborns in the state. All treatment participants received a $1,000 deposit in an Oklahoma College Savings Plan account (OK 529), opened automatically by the state. Participants also had the option to open their own 529 account with matched savings options for low- and moderate-income treatment participants. Control participants were not given an account or any additional information about 529s, but they could open their own accounts. This study examines whether the 529 accounts have an impact on family attitudes and behaviors regarding higher education and saving for children.

Methods: Approximately 2,704 children were randomly selected from a sample of infants born in Oklahoma in 2007 to participate in the SEED OK program. African Americans, American Indians, and children of Hispanic origin were oversampled to ensure sufficient statistical power for analyses with each group. From this group, a subsample of 300 cases, including 200 treatment and 100 controls, was randomly selected and stratified by child’s race. Quantitative and qualitative data included baseline telephone surveys conducted with a subsample of SEED OK participants (N = 300) and in-depth interviews with a subsample of mothers of the child enrolled in the SEED OK study (n = 40 treatment and 20 control). The 50-70 minute interviews explored experiences of parents saving for their young children’s future education.

Results: Individual and institutional factors associated with parents saving for their child’s education were identified. Most parents expressed a desire to save for their children’s future welfare but few have started the process of saving.  Reasons for low saving rates include economic strain, limited knowledge regarding financial products and services, and unrealistic perceptions of college costs and how much they need to save. They are focused on immediate needs and may put aside money for an emergency fund but little else. The program provided an institutional structure to begin thinking about and starting to save. Parents viewed the accounts as long-term savings that were ‘untouchable’ for any purpose other than their child’s education. Automatic enrollment with an opt-out option and an initial deposit played an important role as only one parent declined the account opportunity. Most SEED parents recalled receiving savings statements or deposit slips on a regular basis. Approximately 15% of parents specifically noted that the statements reminded them to make additional deposits.

The effects of program participation were numerous.  SEED OK parents said the program made them more aware of the need to plan for their child’s future education. Most parents expressed appreciation for the opportunity to save and expressed the belief that their child would consequently be able to go to college. Moreover, some believe the presence of the account will motivate their child to work hard and go to college. Most wanted to save and believed saving is beneficial and has positive implications for their future education and other developmental opportunities.