Creating a California Kids Account for Every Child
California State Senator Darrell Steinberg (D-Sacramento) has introduced a bill to create lifelong savings accounts for every newborn California child. Sponsored by the New America Foundation, the California Kids Investment and Development Savings (KIDS) Account Act is modeled on bipartisan proposals at the federal level to create a government sponsored savings account for every baby born.
“KIDS Accounts will serve as the springboard for building a culture of savings and financial literacy for all young Californians” says Anne Stuhldreher, New America Fellow and a key player in sponsoring the legislation. Close to 17 percent of California households have zero or negative net worth, and California is the 4th worst state in America in terms of asset poverty. KIDS Accounts will counteract this troubling trend in two ways. “First, it will create a platform for lifelong savings for every Californian. Second, it will provide a powerful financial education tool that families can use to teach their children the power and importance of saving,” says Stuhldreher.
The national savings rate is at its lowest point since the Great Depression and Americans are carrying record levels of debt. The KIDS Account Act would promote saving as a lifelong habit and skill. The Act would create a savings account at birth for the 560,000 babies born in California each year. The accounts would be endowed with a $500 investment from the state, and would grow throughout a child’s youth as the child, their family, and other individuals and organizations contribute to the account. The account could be accessed at age 18 to pay for a two- or four-year college, technical, or trade school, for a down payment on a home, or for a retirement savings account for the account beneficiary.
Great Britain launched a version of KIDS Accounts, called the Child Trust Fund (CTF), for each of the 700, 000 children born in the U.K. every year, beginning in September 2002. As a result, the percentage of those who electronically deposit monthly savings in bank accounts for children has since doubled, from 20% pre-CTF to 40% post-CTF. Legislation that would implement KIDS Accounts throughout the U.S. is currently pending in Congress. Known as the ASPIRE Act, the federal bill is co-sponsored by a bipartisan group of lawmakers that the New America Foundation works closely with.
“The KIDS Account Act will allow California to build a state with more savers, investors, and owners. And that’s something that will benefit not only the individual families involved, but the entire California economy” says Ray Boshara, New America Foundation Vice President and Director of the Asset Building Program.
See below for more information about Kids Accounts in California, existing federal proposals, current international policy, and related articles.
