Testing Universal Child Development Accounts at Birth and Policy Impacts

Background and Objective: This study discusses design, implementation, and early findings from a statewide randomized test of Child Development Accounts (CDAs) in the SEED for Oklahoma Kids Experiment (SEED OK). SEED OK began in 2007 as a large-scale demonstration and test of universal, automatic, and progressive CDAs in a full population. SEED OK is a randomized experiment, with three primary objectives: (1) Can a universal policy of asset-building accounts be successfully implemented, i.e., can accounts be opened for and held by all or nearly all in the target population? (2) Can CDAs promote asset accumulation for children? And (3) can CDAs later affect attitudes and behaviors of parents and children, such as cognitive, behavioral, and educational outcomes?

Methods: The sampling frame for SEED OK consisted of the birth records for all children born in Oklahoma during a defined period in 2007. Among 7,115 eligible potential participants, caregivers of 2,704 infants agreed to participate in the study. Study participants—most of whom are mothers—were assigned randomly to the treatment group (n = 1,358) or control group (n = 1,346) after completing the baseline survey. Built on the existing Oklahoma College Saving Plan (OK 529 Plan), the SEED OK experiment provided treatment children an automatically opened college savings account with a $1,000 initial deposit. Treatment mothers received information and incentives designed to encourage them to open and save in an OK 529 account for their young children.

Results: Key findings are that CDAs can be implemented universally in a full population, that the SEED OK CDA improves a number of financial and non-financial outcomes, and that the impacts are often greater for disadvantaged parents and children. The most important financial outcome is asset accumulation in the OK 529 Plan.  Almost 100% of treatment children had OK 529 assets about 30 months after the intervention began, compared to 2% in the control group. The average amount of OK 529 assets was much higher among treatment children ($1,130) than among control children ($76). Evidence also suggests that the SEED OK CDA positively impacts mothers’ educational expectations for children and reduces depressive symptoms among mothers. The SEED OK CDA also has positive effects on social-emotional development for children, especially for some disadvantaged groups.

Implications: In contrast to college savings programs that require parents to open an account, SEED OK’s universal, automatic, and progressive CDA models a policy that can give all children the opportunity to hold accounts and accumulate assets. Policymakers have used findings from the SEED OK experiment to inform the design and implementation of new asset-building policies in several states, and to make existing policies more inclusive, effective, and sustainable. At the federal level, CDAs have been proposed several times, most prominently through the America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act. These policy discussions have recently been renewed. SEED OK research will play an important role in federal initiatives to make 529 policies more inclusive.