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Abstract
Financial Education and Financial Access: Lessons Learned from Child Development Account Research
Highlights
In the mid-1990s, a small group of academics and financial executives sat around a conference table trying to understand why, in a period of rapid economic growth, personal bankruptcies continued to escalate
Child Development Accounts (CDAs) represented the parents’ first real opportunity to accumulate assets for their children’s future development, as most were only modestly integrated into the financial mainstream. These findings suggest the need for both financial education and access to financial products and services that are structured and incentivized to be truly inclusive of the low-income parents of preschool children
SEED CDAs established for the preschool children had initial deposits of $800 from the program that were available to parents, yet relatively few families made withdrawals, despite the difficult financial circumstances they faced and the length of time before their preschool children would be needing the accounts to pay for postsecondary education or training
Summary
In the mid-1990s, a small group of academics and financial executives sat around a conference table trying to understand why, in a period of rapid economic growth, personal bankruptcies continued to escalate. Recent research has shown that children from low- and moderate-income families who had school savings were at least three times more likely than those without such savings to be on course to attend and complete college.[9] A Federal Reserve study of the impact of financial education on members of the military, which found that it resulted in limited behavioral changes, found that many soldiers benefited from having had a high school savings account, including increased likelihood of shopping for major purchases, a lower propensity to pay overdraft fees, and a lower likelihood of never paying off their credit card balances.[10]. The remainder of this article discusses SEED and findings from selected SEED studies
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