Creating a Financial Stake in College: A Series

“Creating a Financial Stake in College” is a four-part series of reports that focuses on the relationship between children’s savings and improving college success.

This series examines: (1) why policymakers should care about savings, (2) the relationship between inequality and bank account ownership, (3) the connections between savings and college attendance, and (4) recommendations to refine children’s savings account proposals. This series of reports presents evidence from a set of empirical studies conducted by Elliott and colleagues on children’s savings research, with an emphasis on low-income children, relevant to large-scale policy proposals.

Here are the four reports:

I. Why Policymakers Should Care About Children's Savings

Report I presents a case for why policymakers should care about promoting savings, especially among children from lower income families. The report presents evidence on the relationship between children’s savings and college success and provides the context for a broader discussion of designing children’s savings policies and ensuring that they offer children a meaningful financial stake in college.

II. Does Structural Inequality Begin with a Bank Account?

Report II presents evidence that structural inequalities have created an unequal playing field for low-income families and their children to build assets. Children in families with higher incomes and greater assets are more likely to have relationships with banks and access to other institutional structures that support savings (Beverly & Sherraden, 1999; Sherraden, 1991). Because children’s savings is an important predictor of children’s educational outcomes (e.g., Elliott, 2011; Elliott & Beverly, 2011a, b), inequity in institutionalized opportunities to save and accumulate wealth among children may weaken the effectiveness of the education institution to act as the “great equalizer” in society. Thus, children’s savings accounts must be carefully structured to address these inequities for children from low-income families. An institutional theory of savings perspective is helpful to identify the types of structures and mechanisms that promote savings, some of which may be particularly relevant to an examination of how children learn to interact with their finances.

III. We Save, We Go to College

Report III presents additional evidence of a link between savings and children’s college progress. College progress is conceptualized here as students being “on course” for achieving the American Dream via the education path. “On course” is operationalized as being enrolled in or having graduated from a two-year or four-year college by age 23. This report offers evidence of the role children’s savings plays in reducing “wilt”. Wilt occurs when children who have not yet graduated from high school, but who expect to graduate from college sometime in the future, are not currently enrolled and have not graduated from college shortly after high school. Thus, these children “wilt” due to lack of resources as a growing plant loses vitality due to lack of sun and water. If children who expect to graduate from college are more likely to actually attend college when they have savings, we can consider financial barriers rather than a lack of desire as a critical barrier in the path to a college degree.

IV. Ideas for Refining Children's Savings Account Proposals

This report suggests that Children’s Savings Accounts (CSAs) are a type of formal institution designed to alter children’s savings and educational behaviors. Specifically, CSAs have the potential to serve as a policy vehicle to allocate resources (intellectual and material) to low- and moderate-income children so that they can compete in the 21st century. In today’s highly technical, specialized, global world, effort and ability are no longer enough for low-income families to lift themselves out of poverty. Access to high-quality institutions and the resources they provide are critical to being able to compete. Beginning in the 1990s, CSAs were proposed as a way to create an inclusive and accessible opportunity for lifelong savings and asset building. CSAs have been discussed as a potentially novel and promising asset approach for helping children think about their future and prepare for college.

These summaries were originally published by the New America Foundation.  They are reprinted here with permission.