Child Development Accounts and saving for children's future: Do financial incentives matter?

Abstract

This study examines savings outcomes in the first large-scale demonstration of Child Development Accounts (CDAs) in the United States-the Saving for Education, Entrepreneurship, and Downpayment (SEED) initiative. It is also the first empirical study, to our knowledge, to investigate associations between savings outcomes and incentives in an asset-building program for children. This study enhances knowledge about saving in CDAs, incentives in public policy in general, and incentives in savings policy in particular. Results can inform CDA policy design.

Predicting Savings From Adolescence to Young Adulthood: A Propensity Score Approach

“…By 2007, SEED participants had accumulated an average of $1,518 toward their long-term goals, including net deposits and the SEED match contribution (Mason et al, 2009). When examining savings among SEED participants, researchers found that, similar to research findings for adults, the total amount saved was significantly predicted by household characteristics such as a single head of household and heads of households with education at the bachelor's level or higher (Mason, Nam, Clancy, Kim & Loke, 2010). In contrast to the weak evidence for race as a predictor of savings among adults (Conley, 1999), Mason and colleagues (2010) found a significant relationship between young people's race and savings amounts.…”

“…However, two studies have examined the relationship between parents' savings and, more generally, young people's amount saved. Mason et al (2010) found that parents' savings was not associated with young people's savings amount. However, these researchers did not examine parents' savings that were designated for young people's use.…”

“…Mason and colleagues' results indicated that, as compared with being Black or Latino, being White or Asian was a positive predictor of the total amount saved. Moreover, these researchers found that home ownership was a significant predictor of the total amount saved (Mason et al, 2010).…”

“…Fifth, other variables, which have been shown to be important predictors of savings in adulthood (e.g., household income, household size, net worth, or home ownership), have not been consistently controlled for in studies on young people (Furnham, 1999;Warnarr & Van Praag, 1997). Finally, most research efforts on young people's savings have used nonexperimental or quasi-experimental designs (Elliott, Jung, et al, 2010;Mason et al, 2010). However, research using an experimental design with random assignment to reduce potential selection bias may be one of the best ways to examine the relationship between young people's savings at different time points (Engel & Schutt, 2005;Rosenbaum, 2002b).…”

“…Therefore, most of the research findings have been descriptive only and research has continued to overlook the exploration of what factors predict savings among young people. Fourth, our thorough search of the literature revealed little research that has examined which factors might predict the amounts of young people's savings (Leiser & Ganin, 1996;Mason et al, 2010;. Fifth, other variables, which have been shown to be important predictors of savings in adulthood (e.g., household income, household size, net worth, or home ownership), have not been consistently controlled for in studies on young people (Furnham, 1999;Warnarr & Van Praag, 1997).…”