Promising Roles of the Didim Seed Savings Accounts Program for at-Risk Children's Financial Capability

Background: Government bodies and community-based organizations have offered several asset-building programs in Korea. One of the most profound policy efforts is universal Child Development Accounts, Didim Seed Savings Accounts(KCDA thereafter), which began in 2007. KCDA accounts were opened for all children younger than 18 in institutionalized child welfare system (e.g., orphanages, group home, or foster care) to promote financial capability and positive development. After the age of 18, they can use the accumulated savings for significant purposes in the transition to adulthood, for instance, post-secondary education, vocational training, housing, or small business start-up. Different from other countries (e.g. the United Kingdom, Singapore), the targeted population of the KCDA is mainly children in child welfare system living without family of origin. One unique feature, sponsorship program, is created to encourage financial sponsors (either individuals or business corporates) to make financial contributions to the savings accounts on behalf of the children participants. The number of children with the CDA account is estimated approximately 45,683 as of 2011, gradually increasing from 30,741 in 2007. Despite the program expansion, there is limited empirical evidence. To address the knowledge gap, this study examines children’s educational expectations and their experiences with KCDA program.

Methods: We conducted a pilot study in 2014. Using a convenience sampling method, we recruited 340 children (aged 13 to 18) from 17 residential child welfare facilities, also known as orphanages, in metropolitan areas of Busan, South Korea. Data come from two self-administered surveys completed by children and representative agency staff, in addition to KCDA savings records. We present descriptive results and logistic regression findings to answer our primary questions.

Results: Children participating in the KCDA program report a low rate of college expectations (53%). Logistic regression estimates that their college expectations are significantly associated with the length of living in the current residential facility and academic self-efficacy. Their KCDA savings records show that average month of program participation (i.e. holding the account) is 7 years; average total savings amounts (excluding savings match) are about USD 300; their monthly savings in KCDA account are approximately USD 35. Financial sponsors are the primary saver making deposits for the majority of children (86%). Most children agree to the positive roles of the CDA for their financial capability. Over 90% indicate that they are in favor of the CDA because they can save more with savings matches and financial sponsors; they believe the accumulated savings will be useful for significant expenditures in the transition to adulthood. Also, more than the half of the children expresses needs for higher matching rates and well-designed financial education program.

Conclusion: Our study demonstrates the first empirical evidence from children participants regarding their future expectations and experiences with the KCDA program. The findings suggest that the KCDA program may be a promising intervention to advance at-risk children’s future outlooks and financial capability in Korea. We will discuss policy implications and challenges of implementing CDA programs in the context of Korea.