Ray Boshara New America Foundation Washington, DC 202-986-2700 boshara@newamerica

1. Children’s Savings Accounts Forum on Building Wealth for the Next Generation in Puerto RicoCaguas, Puerto RicoOctober 11, 2006 Ray Boshara New America Foundation Washington, DC 202-986-2700 boshara@newamerica.net www.newamerica.net www.AssetBuilding.org

2. Why Assets? • Assets have not been part of the solution to fighting poverty – for adults or children. “Asset poverty” is greater than “income poverty,” and wealth inequality is greater than income inequality. • Lack of income means you don’t get by. Lack of assets means you don’t get ahead. • Imagine your or your family’s life without assets – savings, a home, an education, a small business, investments, and a nest-egg for retirement. • When people – including the poor – have assets (even small amounts) it changes their economic lives, their behavior, their attitudes, and their hopes for the future. • Productivity gains in the economy are going to those who own, not those who earn. You must earn, and you must own.

3. Why Children’s Savings Accounts? • If owning assets is a good thing, then owning them earlier in life is even better. • With CSAs, the “asset effects” start early, and affect the entire household. • The “time value of money” turns small, regular savings into large balances later in life. • CSAs allow families, churches, communities, governments and others to easily invest in a child’s future and reward good behavior. CSAs are a “magnet.” • CSAs make financial education meaningful – they provide an “ongoing teachable moment.” • Those with assets at age 18 will have more opportunities, will already be on a path toward lifetime savings, and can depend less on their families, their communities, and their government for their livelihood and well-being as adults.

4. CSAs in the United States • No national policy – yet • Five proposals in U.S. Congress: • ASPIRE Act to create “KIDS Accounts” • Baby Bonds • PLUS Accounts • 401Kids • Young Savers Accounts • SEED Initiative / Oklahoma experiment using 529s

5. Existing Singapore: Baby Bonus & Child Development Accounts UK: Child Trust Fund Canada: Education Savings Program Hungary: Baby Bonds Proposed / Pilots Korea: Child Development Accounts New Zealand: KiwiSaver Plus Australia: Nest Egg Accounts Uganda: Child Development Accounts demonstration project CSAs Around the World

6. Recommended Features of CSAs • Universal – everyone has an account • Progressive – more for the poor • Lifelong – “birth to death” platform for savings and asset accumulation • Simple – easy to understand and use • Portable – not tied to employer, nations(?) • Private sector friendly – market-oriented, profitable • Leverages voluntary contributions from all sources, possibly tied to good behavior • Integrated with financial education programs • Restrictions – a good debate

7. Future Generations • Any nation’s economic success, and the security it offers for retirees, depends on the economic success of its children. • Budget deficits, aging populations, and ballooning entitlements greatly reduce their chances for economic success. Presently a $28,000 per child “birth tax,” and $8 spent per senior on every $1 per child – these numbers will increase. We need a “birth bonus.” • Record inequality – economies are growing, but not everyone is sharing in that growth. • Great societies promote equal opportunity for each generation. Not equal outcomes, but equal opportunities. • With CSAs, we can help ensure that inequality of outcomes in one generation does not become inequality of opportunity in the next.