Children's Savings Accounts: Why Design Matters

Brief

Children's Savings Accounts: Why Design Matters

Abstract

One way to achieve an ownership society is to endow all children with savings accounts starting at birth. This report shows that specific design features of a children's savings account program will impact the distribution of wealth. For example, non-taxability of account earnings distributes significantly more benefits to higher-income groups than to lower-income groups. Also, because many families experience mobility over their lifetimes, a significant portion of benefits conditioned on low annual income will accrue to middle- and higher-income families. Regardless, these accounts could be important in getting children banked and teaching them the value of saving and compound interest.

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