Municipalities all over the country are at the forefront of effectively establishing Children’s Savings Account (CSAs) programs in their communities.
CSAs are long-term savings or investment accounts designed to help youth save for postsecondary education. In its recent report, A Decade of Municipal Financial Empowerment Strategies: Findings from a 2024 Field Scan, the National League of Cities found that CSAs are a growing part of the financial empowerment portfolio of many cities nationwide.
As education costs continue to rise, investing in CSAs is becoming increasingly vital. Possessing a degree has been linked to higher rates of social mobility, allowing young people access to more opportunities in the future, both career and financial. CSAs offer a leg up to get the support and resources they need to succeed and an opportunity for the community at large to show its support for the economic success of all youth.
Local Opportunity – Children’s Savings Accounts
At the local level, CSAs are set up by municipalities or through partnerships with nonprofit organizations to help families of all income levels save for their children’s education after high school. Municipalities generally provide initial, or seed, deposits and partner with community organizations such as employers, service groups like Rotary International, the faith community and financial institutions to offer age-appropriate incentives or matching funds as the youth advance to high school graduation. Local financial partners usually hold the accounts. These partners can offer favorable interest rates on the accounts, offer residents the opportunity to make deposits in person at branches in their neighborhoods and provide evidence-based financial education to the youth and their caregivers.
Leveraging State Investment
As local leaders consider creating their own CSA program, they can leverage state-level investments from 529 account providers to advance educational savings. 529 accounts are named after a section of the tax code and can help families save for education expenses after high school. The accounts grow tax-free and allow families to invest in the stock market, which allows the savings to grow faster over time. The money saved in these accounts can be used for tuition at college or trade school, or related expenses that further the youth’s educational aspirations. CSAs and 529 accounts can be used in tandem, creating maximum benefit for families.
State investments in 529 accounts have expanded in recent years, and more state agencies are offering families an initial deposit when they claim an account after the birth or adoption of a child. Opening an account as soon as a child is born allows for a higher financial return on investment and potential for overall long-term success, as it allows more time for the child to explore educational opportunities.
For example, the Massachusetts BabySteps Program, offered by Massachusetts State Treasurer Deborah Goldberg and developed in partnership with local leaders, provides $50 to eligible Massachusetts families who claim their account within one year of their child’s birth or adoption. It’s through this partnership that the Treasurer’s team in the Office of Economic Empowerment (OEE) was able to build a better program and learned how to engage with local leaders to increase the number of residents who claimed the $50 for their children. Mayor Joseph Petty of Worcester, Massachusetts and his staff have been an integral part of these efforts, supporting a local coalition of parents, educators and community partners to raise awareness of the opportunity and making sure that the OEE team gained valuable visibility with residents at local events.
Additionally, local leaders have the opportunity as an employer to raise the visibility of these investments with their staff. They can integrate outreach about these efforts into their annual benefit awareness activities.
Opportunities For All Youth
CSAs are one strategy that allows a community to come together, support long-term investment in youth and influence their thinking about education after high school. Whether a municipality starts its own CSA program or leverages the investments from its state, local leaders can help their residents save for education after high school and prepare for a strong financial future.
Are Children’s Savings Accounts a Game Changer?
NLC’s brief explains how municipalities are leveraging CSAs to increase economic opportunity at the local level.
About the Authors
NLC Reengagement Network: 2023-2024 Census Report
How St. Louis Put Equity on the Scoreboard
- CitiesSpeak Guest
NLC Releases New Toolkit to Support Local Governments Looking to Advance Early Childhood Policy
Economic Mobility: How Cities Can Support Entrepreneurs Earning Less Than 100K
- Rosanna Mulcahy
- Safaya Fawzi
Introduction
