Wealth Building and Child Development: Long-Term Effects of Child Development Accounts

• In Event: Asset-Building Polices, Economic Security, and Individual Development Over a Life Course

Abstract

Background and Purpose: Policies and research recognize that asset building for children shapes child development. Policymakers and researchers increasingly favor universal child asset-building policies, with a growing consensus on federal early wealth-building principles. This article examines a policy experiment testing Child Development Accounts (CDAs) to promote asset building, child development, and educational attainment. Opened at birth, CDAs are investment accounts offering structured asset accumulation and postsecondary education subsidies. 

Methods: SEED for Oklahoma Kids (SEED OK) is a statewide CDA policy test with a probability sample of 2,704 infants born in 2007. Child-parent dyads were randomly assigned to treatment (n = 1,358) or control (n = 1,346) groups. The Oklahoma treasurer’s office automatically opened a state-owned OK 529 account for each treatment child, depositing $1,000 invested in an age-based option. The experiment also offered a $100 initial deposit for family-opened OK 529 accounts and savings matches for four years for low- and moderate-income treatment families. SEED OK mothers completed three surveys. Analyses use financial account data and the Wave 3 survey (67% response rate) to examine CDA impacts on asset building, parental educational expectations, family college preparation, parent-child engagement, children’s hope, and children’s behavior problems. 

Results: After 17 years, only 5% of SEED OK control children held OK 529 college assets. In contrast, 100% of treatment children had these assets due to automatic CDA enrollment. By the end of 2024, treatment children averaged $5,025 in CDA college assets, nearly three times the control group's average. Pre-COVID data showed treatment mothers were more likely to expect graduate school attendance (OR = 1.37, p <.10) and maintain educational expectations (OR = 1.41, p <.10). CDAs positively impacted college preparation (b = 0.09, p <.05) and were associated with greater parent-child educational engagement (b = 0.64, p <.10) and child hope (b = 0.28, p <.10). Treatment children also showed about a 0.12 standard deviation lower sum score in behavior problems (p <.10), primarily affecting anxiety. 

Discussion and Implications: The SEED OK findings confirm the significant and lasting positive impacts of early asset building on child and family well-being. The contrast in college asset ownership highlights the powerful effect of universal and automatic CDAs. Improvements in parental educational expectations, college preparation, parent-child engagement, children's hope, and reduced behavioral problems underscore the holistic developmental benefits. This comprehensive evidence has demonstrably influenced the growing momentum towards wealth-building policies for children at state and federal levels, informing the design of initiatives aimed at fostering greater equity and opportunity from birth. The success of automatic enrollment and initial seed deposits suggests key design principles for future universal child asset-building policies.

Authors

• Jin Huang, Saint Louis University
  Presenting Author

• Sicong Sun, University of California - Los Angeles
  Non-Presenting Co-Author

• Yingying Zeng, University of Georgia
  Non-Presenting Co-Author

• Michael Sherraden, Washington University
  Non-Presenting Co-Author