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Can $ 100 change a child’s life trajectory? A new collaboration between the city of Atlanta’s public schools and a nonprofit focused on financial inclusion could help provide the answer.
As part of the program, which will be administered by the non-profit Operation HOPE, low-income parents will open savings accounts for their new kindergarten students. The city will make an initial deposit of $ 50 to start each child’s savings journey, which Operation HOPE will match with $ 50 in a retail investment account.
The nonprofit also plans to bring financial literacy into the classroom, said CEO John Hope Bryant. The intention is not only to give children in low-income households a head start on saving for college, but to ultimately break the cycle of poverty, he said.
Bloomberg
“It’s really not a $ 50 savings account. It’s symbolic of what that $ 50 savings account is like, â€said Bryant. “Once you own stocks, once you have an account, now you watch it grow and participate in the ‘financial system.
Other cities and states in the United States have implemented their own versions of savings programs for children. The city of Boston first piloted a program in 11 schools in the city in 2016 and extended throughout the school system three years later.
Pennsylvania’s Keystone Scholars program deposits $ 100 into a $ 529 college savings plan for every baby born in the state. Families in Pennsylvania can also sign up for Fund My Future, which involves parents in monthly draws for cash prizes when they make a deposit to their child’s account.
Proponents of children’s savings programs cite research showing that their very existence seems to motivate children to think more seriously about their future. Students who have some form of college savings, no matter how much or how little, are three times more likely to go to college and four times more likely to complete than those who don’t, According to research of the Institute for Nonprofit Higher Education Policy.
Maybe that’s because the parents of these kids will likely talk to them about money and potentially discuss other future plans and expectations, said Tim Flacke, co-founder and executive director of Commonwealth, a non-profit organization. profit focused on financial security.
“The effect on college aspiration doesn’t seem to be so much related to what’s in the account,†Flacke said. “It’s the fact that someone created the account for you when you were a kid.”
Commonwealth worked with the City of Boston to conduct research on families who used its program. A key conclusion is that families appreciate flexibility, the Boston Saves program therefore operates on a technological portal that essentially allows families to participate using the bank of their choice.
An ongoing challenge with children’s savings accounts has been making sure parents continue to contribute after opening the account. Some programs, like Pennsylvania’s Fund My Future, use prize savings to encourage ongoing contributions.
“It sounds a lot like diet and exercise,†said Jeremy Resnick, co-founder of the Fund My Future program and executive director of Propel Schools, a charter school system that piloted the program. “We’ve never had to convince people that saving is a good idea. We just need to make it a little easier and bring it closer to our priority. “
The Atlanta program, which is slated to start in spring 2022, will be the first time Operation HOPE has worked on a children’s savings account program, said Bryant, who founded the organization in 1992. The organization at Nonprofit is largely focused on finances including low and middle income people. As part of one of its key programs, called Hope Inside, Operation Hope partners with banks place trained financial advisers inside branches.
Operation HOPE designed the Atlanta curriculum, and financial literacy will be a key part of that, said Bryant. Because the nonprofit already provides financial advice, it is well equipped to introduce financial literacy programs to Atlanta schools, he said.
“It’s literally about taking the infrastructure we already have and rewriting some of it to hook it up to Atlanta public schools and scale it up,†said Bryant. “It’s an easier job for us because of the business we’re already in. “
Parents will have a choice to opt out, rather than accept, when they enroll their child in kindergarten at one of the city’s public schools.
Savings accounts will be held at a bank insured by the Federal Deposit Insurance Corp., and parents will have a choice of institution. So far, Bryant has recruited Truist Financial, with $ 530 billion in assets, and the black-owned Citizens Trust of Atlanta, with $ 655.7 million in assets, and he plans to onboard more banks on the program. Investment accounts will also be held in one of the association’s partner financial institutions.
The city is allocating $ 2 million for the program, which Bryant says will last a few years. Operation HOPE is set to administer the program until at least 2030, he said, and will secure financial support from its private sector partners, mainly banks.
With parental permission, Operation HOPE also intends to follow participating children through high school to better understand the link between financial literacy and broader academic achievement.
While small deposit accounts don’t necessarily immediately improve a bank’s bottom line, efforts to get kids to save can be seen as an opportunity for banks to form a strong emotional bond with potential customers.
“It’s hard to imagine anything that is more central to a client’s values ​​and priorities than the long-term well-being of their children,†said Flacke.
Bryant argued that savings accounts will ultimately put these children on a more prosperous life path. This should be important for financial institutions that are truly invested in their communities, he said.
“It’s about business development. Business is long term, â€said Bryant. “The city is trying to increase its tax base. He wants more voters and more able-bodied citizens, and the way you do that is to invest in your future citizens. “
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