Investing Now in the Future of Our Children

Many Oregonians face a personal savings crisis that society cannot afford to ignore. For example, nearly half of households headed by adults 55 or older in our state lack such retirement assets as pensions and annuities. Furthermore, among low-income households in Oregon headed by an adult older than 55, nearly three out of five households (60 percent) are without retirement assets.

One new idea to address this savings crisis in Oregon that should be given serious consideration by Oregon's congressional delegation is called the ASPIRE Act. Under this bipartisan bill, every child issued a Social Security number in America in 2007 and beyond, including about 45,000 kids annually in Oregon and 4 million nationwide, will automatically receive a $500 deposit into a "Kids Account." Children living in households below the national median income will receive an at-birth supplemental contribution of up to $500.

Low-income kids will also receive a dollar-for-dollar match, not to exceed $500 a year, for voluntary contributions to the accounts. These voluntary contributions, which may come from any source, are after-tax and limited to $1,000 a year and may be used by family members, local organizations, corporations and others to reward academic achievement, community service or other good behavior.

Kids Accounts would be created within the Treasury Department in a system modeled after the highly successful federal Thrift Savings Plan, but account-holders would have the option to roll their accounts into a private-sector financial institution of their choice.

The cost for this bill has been estimated at $37.5 billion during the first 10 years. By way of comparison, the annual cost to the government of allowing pension contributions to be excluded from income is $150 billion.

Kids Accounts are premised on the idea that one cannot start early enough to save for college, a home and retirement. Why, after all, wait until someone finishes high school or college to begin saving? Why miss those first 20 or so years of accumulation? Why not teach kids financial knowledge the way we teach them language and music, starting as early as possible?

Recent research shows that parental wealth is positively associated with cognitive development, physical health and socio-emotional behavior of children. Interestingly, these studies are finding that household assets may be a stronger predictor of children's academic achievement than income.

Finally, Kids Accounts will enable generations of kids to build a financially responsible, brighter and more secure future. And young adults equipped with financial knowledge and "mobility assets" will need government less throughout their lives, thus reducing government outlays over the long term. In fact, previous efforts by the U.S. to broaden asset ownership were well worth the investment: The GI Bill returned $7 to the nation for every $1 invested, and a full quarter of adults living today have a legacy of asset ownership directly traceable to the Homestead Act.

Kids Accounts are the Homestead Act for the 21st Century and a bold idea that will benefit Oregonians for generations to come.