CSAs are the Next Big Thing You’ve Never Heard of
By Claire Sorrenson, Marketing and Outreach Associate for the 1:1 Fund. The 1:1 Fund supports the college dreams of low-income children by ensuring that those dreams are matched with savings in the bank. Learn more about the 1:1 Fund’s partner CSA programs here.
Children’s Savings Accounts (CSAs) are long-term asset-building accounts, established for children as early as birth and allowed to grow over their lifetime.
Accounts are seeded with an initial deposit and built by contributions from family, friends, and the children themselves. At age 18, the savings in CSAs are used for an asset-building purpose – typically financing higher education.
Here are 7 reasons why you should care about CSAs (and why they’re the Next Big Thing in the asset-building world):
- College is still a good investment. Let’s clear the air here: all the recent scary news (Student loans now top a trillion dollars! Student debt surpasses credit card debt!) might have parents and students wondering if college is still a good investment. Short answer? Yes. Long Answer? Yes! Earlier this year, a report from the Federal Reserve Bank of New York showed that, over their lifetime, workers with a bachelor’s degree earn over $1 million more than those with only a high school degree. College is still the surest route to financial security…
- …But less than 10% of students from low-income families graduate from college. Without college savings and facing the prospect of large amounts of debt, these students often drop out of college or never attend to begin with.
- Children’s Savings Accounts can bridge that gap. Regardless of their family income level, kids with $500 or less saved for college are 4 times more likely to graduate from college. College savings help kids build college expectations, improve future financial capability, and do better academically.
- Saving is fun for kids. One young student saver in New York was so excited by the prospect of saving that he launched a fundraising campaign amongst his family and friends, asking for donations to his savings account in lieu of Christmas and birthday gifts. Those donations, combined with matching incentives from the program, helped him save $800.
- And the CSA movement is gaining momentum. The city of San Francisco is entering its fifth year of Kindergarten to College, a program that automatically opens seeded savings accounts for every incoming kindergartener in the SF School District. Nevada College Kick Start went statewide in February 2014, providing 35,000 public school kindergarteners with 529 savings accounts containing a $50 deposit. These programs are the first of their kind, but others are following suit, including Maine, Ohio, and Texas.
- Your favorite celebrity might be on board! Justin Tuck, NFL All-Pro Defensive End, together with his wife, Lauran, has pledged $150,000 in seed money to help start college saving funds for kids in New York. Musician Will.i.am paid for the college educations of four young men. And other celebrities have been urged to join the CSA movement.
- Matching incentives provide extra motivation to save. One organization is ensuring that kids’ college dreams are matched with savings in the bank. The 1:1 Fund raises matching dollars for programs around the country. For example, in San Francisco’s Kindergarten to College program, the city provides a $50 initial deposit into every student’s account, with an additional $50 for students who qualify for free or reduced lunch. When a family contributes $100 to their child’s account, that $100 is matched with funds raised by the 1:1 Fund. Besides the powerful argument to be made for matching incentives, the matching structure provided by the 1:1 Fund gives donors the unique opportunity to directly invest in kids’ futures.