Evidence from SEED for Oklahoma Kids Research Yunju Nam Youngmi Kim Margaret Clancy Michael Sherraden and Robert Zager Federal Reserve Bank of Dallas November 1 2011 Child Development Accounts ID: 910580
Download Presentation The PPT/PDF document "Creating and Testing Social Policy:" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Creating and Testing Social Policy:Evidence from SEED for Oklahoma Kids Research
Yunju Nam, Youngmi Kim, Margaret Clancy,
Michael Sherraden, and Robert Zager
Federal Reserve Bank of Dallas
November 1
,
2011
Slide2Child Development Accounts
Slide3Child Development Accounts (CDAs)Child Development Accounts are saving and asset building accounts, initiated by public policy.Ideally, CDAs are lifelong (begin at birth), universal (available to all), and progressive (greater subsidies for the poorest children).
(for policy concept, see Sherraden, 1991)
Slide4Asset Building for Development Often via EducationCDA policies are focused on asset building for child development, education, lifelong well-being.Saving behavior matters for CDAs, but this is not the primary focus.
Psychological and behavioral effects may include hope, control, future orientation, effort
(e.g., Elliott & Beverly, 2011).
By design, CDA policies can be very paternalistic, with automatic enrollment, restrictions on access until a certain age, and restrictions on use.
Slide5Inclusive 529 College Savings Plans
Slide6Inclusive 529 College Savings PlansSome state 529 plans are more progressive than others. A number of states have implemented inclusive policy strategies.Inclusive features make 529s more accessible to low- and moderate-income families.
Slide7Most plans require small initial contributions (median is $25).
Eleven states provide matching contributions
for
low-to-moderate income families.
States
offer a limited selection of funds with different risk and return
characteristics.
The trend toward low fees
continues,
but not all plans are low cost .
529 Plan Potential for Inclusion
(for 529 policy assessment, see Clancy et al., 2004, 2006, 2011)
Slide8Potential of 529 Plans for a Universal and Progressive CDA in the USEvery state has at least one 529 plan.Inclusive features that can be built into the policy—which would not happen via saving products in the market.
Centralized CDA administration facilitates outreach, a systematic database, and assessment.
Slide9SEED for Oklahoma Kids (SEED OK)
Research Design and Early Results
Slide10A Policy Test of CDAs:SEED for Oklahoma Kids (SEED OK)Policy and research initiative designed to test the idea of universal and progressive accounts, lifelong asset building
SEED research is multi-method: Experiment, Account Monitoring, and In-depth Interviews
Oklahoma selected for the SEED OK experiment through a competitive process
Slide11An experiment with random sample of newborns from a statewide population
Oversamples of African Americans, Latinos, and American Indians
Random assignment to treatment group (n=1,358) and control group (n=1,346)
Integrated into an existing policy structure—the Oklahoma College Savings
Plan, or OK 529
SEED OK Research Design
Slide12SEED OK Research Data
Type
Dates
Source
Birth records
April - Jun 2007 and
Aug - Oct 2007
Oklahoma State
Department of Health
Baseline survey
Aug 2007 - Apr 2008
RTI International
OK 529
account and savings records
Jan 2008 - June 2009
(quarterly through 2014)
Program Manager
(TIAA-CREF)
Slide13Oklahoma College Savings Plan (OK 529)State-sponsored 529 savings programTax deduction and tax-free growth of earnings
Can be used for post-secondary education at:
Colleges and universities
Graduate and post-graduate schools
Community colleges
Certain proprietary and vocational schools
Slide14SEED OK 529 Savings Plan AccountAuto-enrollment in the OK 529 for treatment group newbornsAccount owned by the state
Treatment child named as beneficiary
$1,000 initial deposit
Invested in the OK 529 Balanced Option
State-owned account can be used for post-secondary education until child reaches age 30
Slide15Other Features of SEED OK Design
Savings match for income-eligible treatments on their deposits of up to $250 per year for 4 years (
2008 - 2011)
Follow-up telephone interviews with
all treatments and
controls
in 2011 and
possibly again later
In-depth interviews with
select SEED OK participants from Fall 2009 through Spring 2010
and possibly
again later
Slide16SEED OK 529 AccountsSEED OK tracks three types of OK 529 accounts for the child: State-owned
Participant-owned (parent or caregiver)
Other private (relatives or friends)
As a policy concept, these can be viewed together as a single integrated 529 account.
Any control has complete access to open a 529 account in the SEED OK experiment.
Slide17SEED OK Accounts and Incentives
Account Type
Treatment
Control
State-owned account
OK 529 account opened automatically with $1,000
No state-owned OK 529 account
Participant-owned account
OK 529 account opening encouraged
Time-limited $100 account opening incentive
Savings matched, if income eligible
OK 529 account may be opened
No information or incentives offered
Other private account
Family, friend, etc. can open account for child
No incentives
Family, friend, etc.
can open account for child
No incentives
Slide18A Compromise to Test the PolicyThe CDA policy concept is a single, integrated account into which all deposits would flow.SEED OK uses an existing policy structure (OK 529), and so must use the current account structure.
In SEED OK, different deposits go into different 529 accounts, all with the child as the beneficiary.
This is cumbersome and imperfect—but allows us to test the policy concept.
Slide19SEED OK Key Research Questions Can Child Development Accounts increase: 529 account holding,
saving by participants, and
total 529 assets?
Later, SEED OK can assess (4) child development and well-being.
(see Nam et al., 2011)
Slide20529 Account Holding99.9% for treatments vs. 2.3% for controls, and 16.4% of participants have their own account Huge impacts―compare to:
62% take up of 529 account in MI SEED impact assessment, with $800 initial deposit, but requiring sign up
(Marks et al, 2009).
3.8% of OK households with children up to age 18 holding any OK 529 account
(State Treasurer, 2011).
Slide21Participant SavingsAverage savings of $43 by treatments vs. $13 by controls in their private accounts:Effect size (saving amount), so far, is positive but quite modest.
We know from qualitative research that families have a hard time thinking about college savings with newborns (especially during a recession).
Nevertheless, positive impact on “seeding” college savings for people who might not otherwise save. We will see if they save more going forward.
Slide22Asset BuildingMean 529 total assets are $1,080 for treatments vs. $40 for controls:Because asset building is a main SEED OK goal, this is strong and meaningful policy result.
To be sure, this outcome is structured and paternalistic—as all CDA policies are...but Social Security and 401(k) retirement plans are also structured and paternalistic.
Slide23Overall Account Openingand Savings Impacts
State-owned account: close to 100% success of automatic account opening with $1,000 deposit for treatment participants (one out of 1,361 declined account)
Impacts of SEED OK on account opening and on deposit and saving amounts are statistically significant for the state-owned and participant-owned accounts, but not for other private accounts
Slide24Summary and Conclusions:Child Development and Well-BeingThe long-term test will be whether CDAs eventually yield positive impacts on:parental attitudes and behaviors
child development in early years
child expectations for education
child educational performancechild health and other measures of well-being
Slide25Summary and Conclusions:Toward an Inclusive CDA Policy?If a universal and progressive CDA policy is desirable (in the way that universal Social Security is desirable), then SEED OK has demonstrated policy feasibility by using the 529 policy system.If the critical policy test is positive impacts on education and other measures of well-being of children, then SEED OK is still in the early stages.
Wave 2 of the survey has just been completed.
Slide26AcknowledgementsSEED OK:Policy Demonstration: Oklahoma Governor, Treasurer, and Department of Health; TIAA-CREFFunders: Ford Foundation, Charles Stewart Mott Foundation, Lumina Foundation for Education
Survey Research: RTI International
Slide27http://csd.wustl.edu/
mclancy@wustl.edu 314-935-8178
Resources and Contact Information