OpinionWith Tough Economic Times Ahead, Let’s Still Give Our Children Hope

The Case for CalKIDS in a COVID-19 Era.
Fiona MaJune 2020

The high price of college is not going away, and families need to be prepared. 

In fact, the cost of a college education increased by more than 25% in the last 10 years. 

As California explores solutions to mitigate the economic consequences of COVID-19, it must prioritize long-term asset-building initiatives such as the California Kids Investment and Development Savings Program, also known as CalKIDS. 

Enacted in last year’s state budget, CalKIDS is designed to expand access to higher education through savings with tools like ScholarShare 529, California’s official tax-advantaged college savings plan. CalKIDS is administered by the ScholarShare Investment Board, an agency of the State of California, and automatically provides newborns in California with college savings accounts, including seed deposits and other potential financial rewards. 

The CalKIDS contribution can be a steppingstone to building a new savings behavior for families and serve as a tangible demonstration of the state’s commitment to supporting children in reaching the goal of higher education. 

Each CalKIDS account will be seeded with a minimum deposit held in the ScholarShare 529 college savings plan where money can potentially grow and eventually be used for a range of postsecondary expenses. This statewide program—which is part of a growing child savings accounts (CSA) movement—provides universal eligibility, automatic enrollment, opportunities for progressive subsidies for our most vulnerable Californians, and investment growth potential.  

Unfortunately, social policy for the most disadvantaged households almost exclusively provides short-term responses and neglects asset-building for long-term goals, such as college financing. COVID-19 is reminding state policy makers that CSA programs, such as CalKIDS and many local programs throughout the state, serve as an important lifeline for families to just begin the savings process. 

Studies demonstrate how CSA programs can produce positive impacts for financially vulnerable families during an economic downturn. Following the Great Recession of 2008-09, researchers found that mothers with children who participated in a CSA program were more focused to save for college and maintained confidence that affording a postsecondary education was reachable. 

CalKIDS, the nation’s largest CSA program, aims to launch in 2021 and will jumpstart college savings for approximately 450,000 California newborns annually.

If research shows us anything, this program will foster a college-bound culture for our youth. 

Academics have found that children with $500 or less designated for college savings are three times more likely to enroll in college and nearly four times more likely to graduate than children with no savings. Not only that, studies have found that children engaging with a savings account improve their mathematical abilities and test scores. 

With nearly 24% of California households living in asset poverty and 13% of California student loan borrowers experiencing severely delinquent debt, the research is clear on the need for financial empowerment and programs like CalKIDS to promote higher education and help families build assets. 

So, as we continue to explore our path towards recovery, let’s find opportunities to celebrate savings. 

Let’s spend time planning for our future by setting aside however much we possibly can for college, home ownership, retirement, or whatever our personal financial goals may be. 

CalKIDS is only a first step. Let’s consider what comes after COVID-19 and strive to uplift those who will need it the most. After all, we can’t afford to cut out the next generation if we truly intend to achieve a California for all.   

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Fiona Ma