New Report: Child Development Accounts as an Early Childhood Intervention

Properly designed Child Development Accounts (CDAs) can have lasting, positive effects on children's educational development and can improve their long-term economic outcomes. That's the argument of a new paper we're releasing today, "Investing in Children: Child Development Accounts as an Early Childhood Intervention," which was authored by two scholars at the University of Kansas' School of Social Welfare, Terri Friedline, an Asset Building Program Research Fellow, and Nik Schuetz. While much discussion of CDAs (also known as CSAs or Children's Savings Accounts; the terms are interchangeable) treats the accounts in isolation, Friedline and Schuetz argue that, to be most effective, CDAs should be situated within the broader context of other early childhood interventions like pre-K and Head Start.

Learning about the importance of saving and of creating a saving routine can have lasting effects on a child's relationship with money and savings. The amount of money saved in CDAs or similar accounts, while important, is actually less influential in terms of child development than the act of saving itself.

However, much more is involved in designing effective interventions. From an early age, children must be made aware that they have savings in their own name. While parents may help their children generate savings and keep a savings routine, having an account in a child's own name produces effects that are "distinct from accounts in which parents save on their children's behalf." It's just like homework. A parent may feel a certain obligation to do the heavy lifting for a child in order to help her accomplish a difficult task, but in the long run, letting a child struggle through and take pride in the accomplishment is the best course of action.

To read an executive summary with the main findings and to download the full paper, click here.