Los Angeles provides every first-grader with cash for college

TO GIANT EXERCISE in giving money to children is underway. On March 21, Los Angeles Unified, the second largest school district in the United States, enrolled all first graders in a free college savings account program, depositing $50 per child. With 44,000 students, Opportunity THE is the largest kids’ college savings plan in the country.

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Savings accounts for children (CSAs) usually help for a specific purpose, usually college or buying a house. There are many barriers to accumulating savings, especially for the poor. The most important thing is the lack of funds to save for later, but bad experiences with banks (worries about credit scores, for example, or fears about overdraft fees) also turn people off. An automatic program can encourage families to invest.

Chance THE will allow families to use the savings account to pay for college fees and associated costs such as tests and supplies. Funds can be used for any two-year or four-year program at an accredited institution. If families pay extra money and file county taxes, they will receive a matching contribution (up to $25 each year). If a student leaves the district, the funds are forfeited and any family contribution is returned. Families can opt out of the plan, but few are expected to do so.

Such efforts elsewhere have been successful. SEED for Oklahoma (OK SEED) began 15 years ago. Newborns were randomly selected to receive $1,000 for the state’s college savings plan and compared to those not selected. The families who received the money experienced long-term benefits. They were more likely to have opened an additional college savings account for their children, and they had higher expectations that their children would complete graduate school.

OK SEEDBeneficiaries haven’t yet graduated from high school, but other studies have found positive results from college savings, automatic or otherwise. One study found that poor kids hoping to graduate from college with up to $499 in their accounts are three times more likely to graduate.

Given that OK SEED, other automatic programs have been started. In 2011, San Francisco became the first publicly funded universal city. CSA project in America. Two years later, Maine was the first state to require parents to opt out if they wanted to avoid automatic enrollment; participation grew from 40% to 100%. Other states followed. A universal program is expected to launch this spring in New York City, the largest school district, and the governor of California intends to launch a statewide program soon. The seeds are spreading across the United States.

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This article appeared in the US section of the print edition under the headline “Seeds of Learning.”

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