Rochelle Watsonⁱ

The SEED Initiative is a six-year national policy, practice and research endeavor to develop, test, inform, and promote matched savings accounts and financial education for children and youth. The initiative seeks to set the stage for universal, progressive American policy for asset building among children, youth and families. Through the SEED Initiative we aim to learn about the psychological, social, behavioral, and economic effects of SEED accounts; how to engage working-poor families; which public programs are most likely to garner support; and to learn about the systems able to deliver accounts efficiently to millions of children. With these and other questions in mind, the initiative was designed as an integrated, multifaceted effort consisting of twelve partnerships nationwide to test and document specific aspects of children's savings programs. Eleven community partners are establishing more than 800 accounts and engaging in different age cohorts, savings incentives, financial education approaches, and financial institutions. One pre-school demonstration and impact assessment partner is working with 500 accounts and another 500 controls from HeadStart programs in Michigan.

SEED participants are selected by the community partners. Special accounts are established in the name of the child or youth; most partners are using regular savings accounts but families at two sites are saving directly into 529 college savings plans and another partner is using an investment account. In most cases, accountholders receive an initial deposit to their SEED accounts and contributions are made by family members, community members, and the accountholders themselves. Each participant receives a 1:1 match on their monthly deposits and is eligible to receive an array of benchmark incentives to make additional deposits. Benchmark incentives may include completion of a financial management course, earning good grades in school, volunteer hours, or other desirable activities. As with IDAs, accountholders also participate in financial management courses.

The SEED program has experienced several key achievements since its inception. Thanks to significant funding from the Ford Foundation and others, CFED selected three additional community partners to participate in the SEED Initiative. These new sites are Cherokee Nation in Tahlequah, OK, People for People Inc. in Philadelphia, PA, and Fundación Chana Goldstein y Samuel Levis in Puerto Rico. As of December 31, 2004, participants have saved over $130,000 and leveraged over $260,000, including matching funds.

Another achievement of the SEED program is the early success of JUMA Ventures, a community partner in San Francisco, CA that has the highest savings rate of any SEED site. The SEED program at JUMA affords us the opportunity to document, at an early stage how the youth will use their SEED funds once they complete the program. Over $9,100 has been paid out in matched withdrawals for computers and to pay for college expenses. The average time for a matched withdrawal is 450 days and the total range of savings is between $3,000 and $3,500.

On May 26, 2005, a group of bi-partisan legislators on Capitol Hill gathered to discuss children's savings accounts and financial education. This press conference featured a SEED accountholder and his mother from the People for People program in Philadelphia, PA, who shared how the SEED program has made a difference in his pursuit to become an entrepreneur after high school. Other events will be planned throughout the year to highlight accomplishments and lessons learned.

What's next?

CFED will continue to influence policy makers to consider asset building and the SEED Initiative on a large scale, establishing savings accounts as a vehicle to break the cycle of inter-generational poverty for all American children, starting at birth. CFED is working with the New America Foundation, a nonprofit public policy institute, to educate national stakeholders to advocate for universal children savings accounts. The America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act of 2005 would create a savings account for every American child at birth. ASPIRE would give children born in 2007 and beyond a one-time $500 contribution into a savings account. Children born to families earning below the median income would be eligible for a supplemental contribution of up to $500. A child's parent or guardian could invest the money in the account on the child's behalf. Contributions could be made by the child or his/her family or friends up until the accountholder reaches age 18. The government would also match a portion of the contributions for some lower-income children. This legislation would make sure that all kids, regardless of their parents' financial circumstances, have the tools they need to shape their own futures. See the New America Foundation's AssetBuilding.org website for more information on the ASPIRE Act of 2005.

CFED has also explored the merits of expanding the current SEED initiative. With support from the Ford Foundation, Charles Stewart Mott Foundation, and Met Life Foundation, national partners are in the process of testing the potential of a large scalable model of universal accounts for children starting at birth. The Center for Social Development (CSD) at Washington University, in partnership with CFED will contract with one state to model children's savings accounts at birth, known as the Universal Model. The Universal Model will utilize a state's existing 529 plan in an experiment to randomly select 1,000 infants to open accounts and another 1,000 controls. Each infant will receive an initial deposit of $1,000 and can earn up to $1,000 in incentives to attend college. The research is designed to examine what factors facilitate saving, the barriers to saving, and the impact of SEED on saving for children. The state chosen to participate will be announced in Fall 2005.

To learn more about the SEED initiative, visit our website at http://seed.cfed.org/.

i Rochelle Watson is a senior program manager for CFED's Washington, D.C. office. She is responsible for providing training and technical assistance to twelve national community partners to ensure the operation of high quality, children and youth matched savings account program called the Savings for Education, Entrepreneurship and Down Payment (SEED) Initiative. Currently, her work includes researching and documenting SEED accounts, account innovations, and financial institution participation in SEED to provide evidence of the potential profitability of children's savings accounts. She is also involved in CFED's field development activities to support the development and delivery of Individual Development Account (IDA) programs.

Prior to joining CFED, Ms. Watson served as the Asset Development Manager at a nonprofit community development financial institution in Los Angeles where she managed two IDA programs.