Asset Building and Child Development: A Policy Model for Inclusive Child Development Accounts

Abstract

Extreme wealth inequality imposes significant constraints on financially vulnerable families, especially on the development of children in those families. Child Development Accounts (CDAs)—investment accounts offering financial access, subsidies, and incentives to provide assets for children—are designed to reduce wealth inequality over time and promote human development. We review existing evidence from a test of a CDA policy in a population sample. Findings show that, in addition to stimulating account holding and asset building, universal and automatic CDAs for postsecondary education have positive effects on outlooks for and behaviors of parents and children. This long-running CDA experiment suggests ten design elements for a universal, progressive, and potentially lifelong CDA policy. Informed by findings from this experiment, seven states have adopted some version of this model. These innovations illustrate potential policy pathways to reducing asset inequality and improving child development.