Saving for college: perspectives from participants in a universal children’s savings program

ABSTRACT

As the cost of college education continues climbing, college affordability eludes many low- to moderate-income families. Children’s Savings Accounts (CSAs) have been proposed as potential resources to build assets and help save for postsecondary education. While a large body of CSA research consists of testing relationships between program participation and well-being indicators, few endeavors have been dedicated to understanding CSA participants’ program experiences. This study analyzes in-depth interviews with parents of children enrolled in a statewide CSA program to gain an understanding of families’ experiences of saving for postsecondary education. Specifically, this study aims to understand the implementation of the program related to participant enrollment and the extent to which the program influenced participants and encouraged saving for postsecondary education, if at all. Findings on parents’ experiences enrolling in the Harold Alfond College Challenge (HACC), perceived influence of HACC participation, and experiences of saving for postsecondary education offer insights on the design and implementation of future CSA programs.

KEYWORDS:

• Child savings accounts
• college education
• savings
• assets
• poverty

Introduction

Although the U.S. economy has largely recovered from the Great Recession, costs of basic necessities (e.g., housing and health care) and the engines of opportunity (child care and higher education) continue to rise and have outpaced wage increases over the last decade. Consequently, many U.S. households are left with few savings and assets to establish and maintain financial security (Sherraden 2013; Seefeldt 2015). Lacking access to basic financial services and affordable capital hinders a person’s ability to accumulate assets, a critical component of financial stability for individuals and families (Rubin 2007). Often a paycheck away from falling into financial stress, low- to moderate-income (LMI) families—defined as households with income less than or equal to 80% of the median household income of their region (Hogarth and O’Donnell 2000)—are confronted with diminished access to affordable financial services as well as few attractive saving opportunities. The lack of opportunity is particularly concerning when it comes to saving for college education. While most states provide 529 college savings plans, these disproportionally benefit higher income families who have more resources to contribute and are therefore more likely to be eligible for receiving tax deductions and other benefits (Reschovsky 2008).

Over the last decade, college costs have continued rising; estimates indicate that less than 5% of postsecondary institutions are affordable to low-income students even with financial aid (Burd 2016; Poutré, Rorison, and Voight 2017). Given that fewer students from LMI families enroll in and complete college (Burd 2016), there is an increasing need for providing opportunities to save for college among LMI families. Children’s Savings Accounts (CSAs) have been proposed as a potential tool that can help low-income families save for postsecondary education. CSAs are interventions aimed at equipping children with assets and fostering college-bound mindsets consistent with educational attainment. Such interventions typically provide children with long-term savings accounts and incentivize parents with saving matches to build funds for their children’s educational future. Incentives to help accounts grow are often funded by nonprofits or governmental agencies. Savings are expected to be used for college education and not for asset purchases such as a home or small business.¹ In the past several years, CSAs have gained increasing popularity among states, cities, and localities and have been widely implemented as a prominent policy tool to expand educational opportunities and reduce poverty (Loya, Garber, and Santos 2017).

Maine’s Harold Alfond College Challenge (HACC) is the first and one of the largest statewide CSAs in the United States (Clancy and Lassar 2010). HACC utilizes the state’s 529 plan (NextGen) to deliver the program and since 2008 has offered to children in Maine a $500 initial grant toward postsecondary education. Between 2008 and 2013, eligible children in Maine could apply for the HACC and receive the account and the initial $500 grant. To be eligible, children had to have been born in Maine between 2008 and 2013 and a NextGen 529 College Investing Plan account had to have been opened for them by their first birthdays. HACC offered matching grants, tax deductions, and financial education to incentivize parents to save through the NextGen accounts (Clancy and Lassar 2010), and family contributions to NextGen 529 accounts were eligible for 50% matches up to $100 per year with a lifetime maximum limit of $1000. In 2014, HACC changed its application-based enrollment to universal enrollment, granting each Maine-born child $500 at birth (O’Brien et al. 2017); the above-listed benefits did not otherwise change. Such enrollment policy change is mostly due to the modest participation rates during the opt-in time period. Data showed that only 40% of eligible children were enrolled in HACC when the program was opt-in and required an application to enroll (Clancy and Sherraden 2014). Research also showed that parents with higher levels of education and financial assets were more likely to enroll their children in the program (Huang et al. 2013).² The HACC program’s universal enrollment policy removes enrollment barriers and enables all families, including LMI families, to access financial resources that build savings for children’s academic futures and to accumulate assets that help families thrive. As one of the oldest and most prominent college savings programs in the country (Clancy and Sherraden 2014), HACC offers a rare opportunity for understanding financial inclusion efforts in the United States. Understanding enrollment experiences during the opt-in time period, in particular, can provide insights for other CSAs and similar asset-building programs. The current study aims to understand HACC participants’ experiences of enrolling in the program and their saving experiences while participating. The next section provides a brief review of literature relevant to this study. First we discuss the experimental evidence on CSAs present in the literature and findings pertaining to interim outcomes. We then review qualitative studies that focus on CSA participants’ program experiences. The remainder of the paper presents methods and results and concludes with a discussion of the main findings and implications for future research and policy.

Literature review

Since Sherraden’s seminal work introduced the concept of asset-based welfare policy (Sherraden 1991), numerous pilot programs and initiatives have tested the potential of CSAs. While the goals of existing CSAs may vary, their ultimate outcomes are participants’ postsecondary education enrollment and successful performance therein (Loya, Garber, and Santos 2017). Since children enrolled in most CSAs have not completed postsecondary education, past studies have focused on interim metrics for assessing CSA programs. These interim metrics include categories like educational aspiration, socioemotional development, college access, academic success, and equity (Loya, Garber, and Santos 2017). CSA research has consistently shown positive associations between CSA participation and these interim outcomes. The most robust existing evidence is from the SEED for Oklahoma Kids (SEED OK), a large-scale experiment designed to provide and test a universal and progressive savings account for children. Studies examining parents of children enrolled in CSAs demonstrated that the program had a positive impact on their psychological well-being (Huang, Sherraden, and Purnell 2014) as well as their academic expectations for their children (Kim et al. 2015; Kim et al. 2017). Further, CSAs seem to have positive impacts on children, including greater socioemotional skills (e.g., Huang et al. 2014) and higher levels of savings and assets for postsecondary education held in participating children’s names (e.g., Beverly et al. 2015; Clancy et al. 2016; Nam et al. 2013).

In addition to causal relationships established by experimental studies on CSAs, there are some studies using national datasets suggesting correlations between savings account ownership and greater savings and access to assets (e.g., Elliott 2013; Elliott, Song, and Nam 2013) as well as higher educational aspirations (e.g., Elliott 2009; Elliott et al. 2010). While these studies showed positive relationships between program participation and interim outcomes, the relationships are only correlational given the studies’ non-experimental designs. Further, because data used by these studies are from existing national datasets that are not designed to examine CSA impact, findings are unable to speak to program experiences of CSA child and parent participants.

In sum, most CSA research tests relationships between asset holding and well-being indicators and evaluates program impact on interim outcomes. While it is important to identify interim outcomes and assess program impact, participants’ actual experiences with savings and postsecondary education warrants greater understanding. This is because these experiences are relevant to understanding CSA program elements (e.g., enrollment policy, saving incentives) and how each affects program participation and saving efforts. Moreover, such understanding will provide important, much-needed context to interpret the small-dollar savings, an outcome that was commonly observed in past studies (Loya, Garber, and Santos 2017). Until today, only a few studies have examined program participants’ experiences from a qualitative perspective. Interviews with adult participants (i.e., parents of children participating in savings programs) revealed that program participation brought parents hope and motivation to start saving for college, whereas inadequate income and consumption needs were common barriers to saving (Gray et al. 2012; Lewis, O’Brien, and Elliott 2017; Wittman and Scanlon 2015), as were spatial (e.g., distance to bank branches) and cognitive and behavioral barriers (e.g., not finding time to make a deposit, Wittman and Scanlon 2015). Interviews conducted with parents with children participating in savings programs reported that participants’ saving experiences varied greatly according to a child’s developmental stage, and saving efforts were affected by family financial conditions (Lewis, O’Brien, and Elliott 2017; Sherraden et al. 2013). Studies focused on experiences among youth found little or no self-reported program impact on family interaction (Scanlon and Adams 2008; Sherraden et al. 2013). In sum, few studies in the CSA field qualitatively explored participants’ saving strategies or program experiences in general. Youth participants interviewed in the Scanlon and Adams (2008) study reported growing cautiousness in spending and withdrawing money from savings accounts, however, saving strategies were not the main focus of this study. In the current study, we were particularly interested in gaining an understanding of participants’ saving experiences within the program.

While research on CSA participants’ saving experiences is limited, much research has explored barriers to saving among low-income families. This line of research concluded that besides low income, unpredictable fluctuations in income streams cause great uncertainty in household financial stability, making it difficult to budget and save (Morduch and Schneider 2017). In addition, child care, health care, and other necessary costs could drain financial resources and make saving particularly challenging for families with children and those with medical concerns (Edin and Lein 1997; Sherraden, McBride, and Beverly 2010). Another obstacle to saving is the lack of financial services and products that suit LMI families’ needs as well as protection and growth of resources (Barr 2004; Servon 2017). In sum, literature on saving barriers among low-income families indicates that, in order to save, families must be diligent about budgeting and managing their low, volatile income streams and, at the same time, have access to financial products that suit their financial situations.

The current literature provides a glimpse into the financial lives of low-income families and their saving experiences; however, more research is needed to understand how CSA participation affects saving for postsecondary education. Such knowledge is relevant to effective program implementation, as many CSAs aim to benefit low-income families who often struggle to make ends meet and have few financial resources at their disposal. With most studies focused on barriers to saving, identifying effective saving strategies that participants adopted can inform CSA policies that aim to engage participants in saving activities. Additionally, HACC is unique in its enrollment policy and educational focus. Changes in its enrollment policy offer an opportunity to learn about participants’ enrollment experiences. Furthermore, unlike other savings programs with a broad saving agenda (saving for a small business, home purchase, education, or retirement), the HACC places emphasis on saving for college education. Given its focus, we were interested in understanding participants’ perceptions of how the program influenced their educational expectations for their children and saving initiatives. The current study analyzes data from interviews with HACC participants. Three primary research questions were developed and are of central interest in the interviews: First, how did parents of children in the program experience enrollment? Second, how did parents of children enrolled in HACC perceive the program’s impact? Lastly, what were the parents’ experiences saving for their children’s postsecondary education in this program?

Methods

This study is based on one-on-one, in-depth interviews conducted in 2017 with 22 parents whose children participated in the HACC program during the opt-in period. The study was approved by the Institutional Review Board at the University of Michigan. The following provides a detailed overview of the research design and the instruments used in the study.

Participant recruitment

Because of limited access to HACC program participants, we used a convenience sampling method to recruit study participants. Potential research subjects were reached through schools that children participating in HACC attended at the time of this study. Program staff was consulted to identify potential participants living in different areas. Researchers sent letters to parents, conducted screening phone calls to verify HACC participation, and then coordinated interviews with parents of children enrolled in HACC. Inclusion criteria was having at least one child enrolled in HACC at the time of this study. Initially, 45 parents were contacted for interviews. A total of 35 parents agreed to participate in the study, and 22 parents completed interviews. Additional efforts, such as financial incentives and outreach in rural areas, were made to reach parents with different income and education levels. All participants were Maine residents with children enrolled in HACC during the opt-in period.

Interview guide

The interview guide was designed to explore HACC participating parents’ program experiences and perceptions. Questions were developed and refined after being piloted with participants in similar CSA savings programs at two other research sites. The final interview guide contains 15 questions related to participants’ family background; family communication about postsecondary education, money, and savings; savings barriers and facilitators; experience in the HACC program; and perceived influence of savings. The guide was adjusted around the research questions and focused on understanding participants’ experiences with the program and their experiences of saving for postsecondary education in particular.

Interviews ranged in length from 30 to 40 min. Protocol was developed to guide the interviewers, who had completed training and were supervised by a program coordinator during the interview process. Interviews were conducted in person, and data on parents’ demographic information was collected at the end of the interview with a paper-and-pencil survey. Because the interview questions were very structured and interviewers received standardized training, we consider the risk of using different interviewers in biasing the responses rather small. In advance of an interview, each study participant received a consent form that described the purpose of the interview and promised confidentiality. All interviews were taped in a secured, confidential space at their child’s school.

Data analysis

Taped interviews were transcribed verbatim and checked for consistency and accuracy.

Transcripts and documents were read multiple times by the authors of this study prior to and during coding. Four researchers participated in the coding process. Standard qualitative analysis techniques were adopted using the qualitative software ATLAS.ti. Specifically, inductive thematic analysis was employed for this study and began with using an open coding technique: coding the transcripts to inductively develop notes (Braun and Clarke 2006). Each interview was coded by two researchers. A coding list was developed collectively based on prior research and specific research questions. Based on initial codes, researchers developed themes separately, then together identified the common themes that answered the research questions. Particular attention was paid to parents’ overall program experiences and their experiences of saving for their children’s future education. All respondents were identified by pseudonyms to preserve confidentiality.

Findings

Sample characteristics

Fifteen out of 22 (68%) interviewees were married. A majority (20 out of 22) of the sample was white, and over a third (35%) of the sample had a household income of $59,999 or less; 24% had a household income of $100,000 or higher (the median household income in Maine in 2016 was $53,079). While there were other themes that emerged from analyses, the following section presents the most prevalent and relevant themes, namely, parents’ experiences enrolling in HACC, perceived influence of HACC participation, and experiences of saving for postsecondary education.

Parents’ experiences enrolling in HACC

One of this study’s aims was to gain an understanding into HACC’s opt-in enrollment policy and how participants joined the program. Given the modest enrollment rates during the opt-in time period, we sought to learn about participants’ experiences of signing up for the program and to understand which recruitment efforts worked. Extensive marketing and outreach efforts were made to reach potentially eligible participants during the opt-in time period. Potential participant parents were targeted in hospitals and prenatal classes, pediatricians’ offices, and educational institutions, businesses, and nonprofit organizations (Clancy and Sherraden 2014). Interviews with parents revealed their experiences with program platform and enrollment time.

Hospitals and Head Start are productive program platforms

Parents told us that hospitals and organizations like Head Start added legitimacy to the program and discussed the way these settings facilitated learning about it. Consider these comments:

It was nice that it was presented to us through the hospital because we could see that it was a legitimate thing. You get a lot of flyers and things in the mail when your child’s born and so you are kind of like “Is this worth it?” I think it was a positive, oh, this seems like a really great opportunity. The hospital really took extra steps to make sure that parents were taking advantage of it [the program]. (Amanda)

The way I found out is through the Head Start program, because both of my girls did attend that program. I was just really glad that the program hooked up with Head Start to introduce the program to people and to actually allow them to right there set up accounts and stuff. (Erin)

Birth is a difficult time to enroll

Prior to automatic enrollment, HACC required an application to be submitted within the first year of the child’s birth. When parents shared their experiences of enrolling in the program, some of them stressed the hectic nature of becoming a new parent and implied that HACC’s time restriction on enrollment could be a hurdle. Consider this comment:

Motivating people to do things just seems generally hard, even when there’s a great incentive … especially with new babies, like, finding the time to actually enroll them. I think when [child] was enrolled, you had to do it within the first year of when your child was born. You’re kind of busy at that time. (Amanda)

While the hospital setting lent legitimacy to the program, new parents were occupied and overwhelmed with childcare tasks, easily lost track of time, and left the program paperwork incomplete. As Dana mentioned,

I mean especially if the hospital is giving the information, you know, taking it all in [is challenging], especially for new parents. I mean you have all this stuff, and you are overwhelmed and having children, then you get home and your papers get all … [it] just piles up.

In sum, hospitals and Head Start seemed to be effective platforms for reaching potential participants, yet parents found it difficult to apply for the program before the child’s first birthday. After the first birthday, children were no longer eligible to apply for and enroll in the program. Based on reporting from parents with enrolled children, we speculate that the time restriction may have contributed to the modest participation rates before the program changed to automatic enrollment in 2014.

Perceived influence of HACC participation

To understand parents’ perspective about how HACC participation influenced enrolled families, we asked participants to recall their financial life after enrolling in the program. We were particularly interested in learning about parents’ experiences regarding saving for postsecondary education and their vision for their children’s academic future. Analyses of transcribed interviews generated three themes regarding parents’ perceived influence of HACC participation; namely, envisioning a savings plan for education, family financial socialization, and igniting saving efforts. The following provides details about each theme.

Envisioning a savings plan for education

HACC’s emphasis on paying for postsecondary education is reflected in parents’ comments that the program had influenced them to start saving for their children’s educational future and that the seed money from the HACC gave some parents a starting point to envision a savings plan and college education for their children’s academic future. Parents told us the following:

It [the HACC program] gives parents the idea right at birth to think about [college education] from day one. You should be thinking about planning for and saving for your child’s education … . It really forces parents to think about it and that if you are going to be given money, then there’s an expectation on you as well. (Jada)

Well, we were really hoping to kind of put aside a nice nest egg for him so when he graduates from high school, he’ll have some money set aside that is just for his [college] education. Yeah, [the HACC grant is] just the opportunity to do that. (Amanda)

Family financial socialization

Family financial socialization is the process by which individuals gain financial knowledge, skills, and attitudes from their families. Many participants mentioned that HACC participation initiated family conversations about savings in general and saving for postsecondary education in particular. Those who had not considered discussing money and savings with their children reported that HACC grants initiated family conversations about money. Such conversations enhanced awareness about savings and college education for parents and children. Consider these comments:

I think it [having a HACC grant] just means having conversations with my child earlier than maybe I would have, maybe even earlier than my parents had with me. I know what their expectations are. Yeah, I think maybe that’s what it means, and I think [it] also gets family members involved in a way that they wouldn’t have otherwise maybe until that kid is graduating [from] high school. (Cynthia)

We have a lot of conversations about what things in the future they would be saving their money for. College is one of them … We do [talk with children about saving money] in the context of their regular savings accounts. They understand that they have a college account. (Belinda)

Several parents expressed that participating in the HACC program offered them an opportunity to expose their children to banking and other financial activities. After enrolling in the program, some parents took their children to bank branches and made deposits earmarked for their HACC accounts. Parents told us:

I don’t know that they understand what [it is that] they’re doing, but it still is exposure. We go to the bank, we put [in] the money; they love the change machine. They pop the money in, and it counts; that’s really cool, so they’re at least experiencing it and understanding what the bank is. (Dana)

I want her to learn to start saving money ASAP, which is why she does have a savings account, and I don’t just go deposit the money for her. She comes with me, and we do it together, so she understands this is adding up. (Maria)

Igniting saving efforts

Our interviews showed that the HACC program, and its seed money in particular, encouraged some families to consider saving for college for the first time. Specifically, the initial $500 grant gave these families a starting point to plan for their children’s academic future. Consider these comments:

I explain it as a way for parents to be able to start a college fund, and it gives you a good start, because it puts money in there that you don’t have to take out of your pocket. So like I said in the beginning, because that money was put in there to start with, that really gave me the boost and the incentive to be able to add to it. (Erin)

I think I would just describe it as, like, a very generous start to people who may not have already planned on, like, starting a savings for their child. It gives you kind of an opportunity to, like, have some money in there first and then you can continue. (Sterling)

For parents who had already started financial planning for their children’s postsecondary education, enrolling in a savings program and receiving the seed money fueled existing saving efforts. Consider Belinda’s comment below:

To me, we would have set up a college savings account for our children anyway, but it was kind of the catalyst to do that right away, and I mean, the additional funds are obviously appreciated, and I think for a lot of people that don’t have the ability to contribute to it regularly, it’s an initial investment and a great start for families. (Belinda)

Overall, the interviewed parents reported that HACC participation encouraged financial socialization at home and provided a financial and mental boost for parents to save for postsecondary education. While the finding on setting educational expectations was unsurprising given the program’s emphasis on saving for college education, other findings highlight family financial socialization, a program influence that is not routinely measured by evaluative studies on savings programs.

HACC parents’ experiences of saving for postsecondary education

During the interviews, parents were also asked about their experiences of saving for postsecondary education since their enrollment in HACC. Building upon previous literature on saving strategies, we explored strategies that participants used to save money and the challenges that participants encountered in this program. The following section details the common themes that emerged regarding saving strategies and challenges.

Budgeting and restricting spending

Similar to findings from qualitative studies on savings programs (e.g., Gray et al. 2012), we found that parents frequently budgeted and were financially disciplined in order to set aside money for postsecondary education. Some examples of parents prioritizing savings through budgeting and restricted spending are shown below:

We save money all the time for the kids, and I mean it’s every little thing. If we have a yard sale, whatever money we get from that goes into their educational funds. We think about every little bit of money we can put aside for that. We do the monthly contributions and I think that way, we don’t have to say, “Oh, we’re going to get to it,” it just automatically comes out, and we’ll put it in. (Jada)

I am really anal about my money, so everything I do I write down, and I make those decisions on a daily basis of no, we don’t need that, no, we won’t get that. Saving for something, I do try to spend less money throughout the months of September, October, November, so that in December I can go on a Christmas shopping trip. I am not spending anything Monday through Friday. It’s just weekends. (Daphne)

Just meticulous budgeting. There’s understanding, to the penny, what’s coming in and going out and trying to negate any unnecessary expense like cable. I don’t have cable, I don’t have Netflix. I don’t pay for anything that’s not a necessity. (Maria)

My husband and I are very thrifty, and we try the best that we can. We’ve put it [saving for their child’s education] at the forefront of our priority, just regularly setting it aside, I think that is the key, not even letting yourself have access to it whether it’s $20. It just makes the difference. (Belinda)

Involving family and friends

In addition to budgeting and restricting spending, some parents reported leveraging the HACC to engage families and friends in saving efforts. Interviewed parents had used birthdays and similar occasions to encourage extended family and friends to contribute to their college education savings accounts. For these parents, HACC participation served as a channel to expand contribution streams. Consider these comments:

Yeah, I think maybe that’s what it means, and I think it also gets family members involved in a way that they wouldn’t have otherwise, maybe, until that kid is graduating high school. We’ve already had people contribute just at birthday parties and things like that because they know that we’re part of that program. So, I feel like it just kind of brings that all together for everyone. I would say like I said earlier, just involving everybody. I have a really big family, and so I think their ability to sort of already contribute and feel like they are contributing. I am trying to move past birthdays that are all presents. Much to my child’s sadness, I am sure, and anger most likely. When she turns 5, I want it to be experiences for her, not things, and so I think this contributes to that mentality that like you can plan for her future and help us plan for her future, and not having everything just be junk and stuff. It does contribute to that philosophy that my husband and I have. In that way, that’s been nice. (Cynthia)

Usually, like for a lot of my family members will give $50 for the kids’ birthday, and it’s supposed to go [into] their college account. I usually just put [it] in their checking account; that’s not the money I touch. (Daphne)

Low income as an obstacle

As parents talked about strategies for saving for college education, they mentioned several challenges encountered along the way. Insufficient income was the most commonly mentioned barrier to making regular contributions to their savings accounts. Some parents mentioned that they struggled to make ends meet and often had little left to save. Despite interest in making regular contributions to their savings accounts, parents’ saving efforts were hindered by the scarcity of financial resources. Consider these comments:

I mean there [are] limits, and I have them. I can earn [as] much as I can; I get paid by the hour. There [are] only so many hours in a day. So, you can only make so much. But I do know it’s a great idea, and I know and thank him [the funder]. Of course, I have to do it the hard way. I’d have to get rich by the lottery or something. (Melinda)

It’s [saving for college] a huge priority, but I have to say, I mean, my husband and I don’t make enough to make regular contributions ourselves, and so it’s something I wish was really possible, and it’s just the state of how things are in our lives. (Cynthia)

Just extra money to do it, really. I would love to say that I can have a savings account for myself, and the emergencies, plus this college fund over here for Zoe, which I can say. It’s just, there’s not a lot of money [left] right now. (Jandel)

Low income was a difficult barrier to overcome for certain groups, including single parents, older parents, and parents with student loans. Shouldering multiple responsibilities, these parents found their financial resources stretched thin, and saving for children’s education seemed far-fetched. For instance, single parents who raised a family on one income often found that financial resources were lean and saving for children’s future education was out of reach. Consider this comment below:

It is very challenging to save for kids. You have their education funds, because it’s expensive and as a [single] parent, it’s very challenging to meet all the needs for them. But saving when adding, it’s something that I am working on right now, ‘cause now I don’t make the money I wanna make. It’s hard for me to add anything. But I hope I come out where I can invest in their future financial lives. (Michelle, a single parent)

We also found that parents who had multiple financial obligations perceived that the need to save for children’s education often competed with the need to use resources for other obligations, such as retirement planning and paying off student loans. Consider the comment below:

Well, I mean, given the fact that I started having kids at 38 and 40, my kids are gonna be going to college at the same time that I’m gonna be possibly retiring or somewhere around there. So it’s kind of like I’m doing double savings. So it’s a little bit [challenging]. (Robin, an older parent)

Right now, our student loans and everything else and every time something happens with our car or our house or whatever, we don’t put anything extra. I am still paying for my college loans, and I graduated 15 years ago. Yeah, it’s [saving for child’s education] just a kind of a daunting thing. (Linda, a parent with student loans)

Overall, we found that interviewed parents perceived that HACC participation catalyzed their saving efforts and motivated them to engage family and friends in contributing to the savings accounts. Multiple strategies such as financial discipline (e.g., budgets and restricted spending) were reported, yet contributing to dedicated college savings accounts remains a daunting task for some low-income parents and for those with strenuous financial responsibilities. While HACC participation may have helped some families start saving, it seemed not particularly helpful for other families with limited resources and competing demands.

Discussion and implications

This paper analyzed transcripts of interviews conducted in 2017 with parents participating in HACC. Guided by three research questions, we coded the transcripts and found several themes related to program enrollment experiences, perceived program impact, and parents’ experiences saving for postsecondary education. Findings from this study suggest that the requirement that children needed to be enrolled before their first birthdays in order to receive the HACC grant caused barriers. Some parents reported that the first year of a child’s life was a difficult time to keep track of and complete the program application. This suggests that when designing enrollment policies for CSA programs, consideration should be paid to the life circumstances of the targeted population. While automatic enrollment ensures inclusive enrollment, programs with a limited enrollment period should consider allowing for an extensive enrollment period.

Our findings also suggest that parents perceived that HACC had a positive influence on formulating a savings plan toward postsecondary education, fostering family financial socialization, and bolstering saving initiatives. Interviewed parents believed that participating in HACC led to envisioning a plan for saving for their children’s education. Such influence may elevate educational expectations among some parents who themselves didn’t have a college fund or never went to college. Given that educational expectations are a strong predictor of academic success (Aprile and Mistry 2007; Mistry et al. 2009) and that such expectations can translate into support for academic preparation and achievement (Elliott and Beverly 2011), future research should pay close qualitative attention to possible correlations between having a savings account and educational expectations. This research is much needed in the HACC setting given that support for and realization of postsecondary education are the program’s intended outcomes (Elliott, Destin, and Friedline 2011).

Theoretical and empirical research both suggest that family setting has a multifaceted role in family financial socialization (Gudmunson and Danes 2011; Gudmunson and Beutler 2012). However, with few exceptions, little research has been done to understand how participating in a savings program may influence family financial socialization (e.g., Lewis, O’Brien, and Elliott 2017). Findings from our study demonstrated that family conversations about finance and banking occurred frequently between interviewed parents and their enrolled children. Consistent with findings from studies assessing asset building programs (e.g., Kim et al. 2015; Kim et al. 2017), the finding from this study that the program encouraged family financial socialization suggests that future research should consider financial socialization measures when assessing program impact.

In this study, parents reported that HACC helped them materialize savings plans. Such influence is particularly meaningful for those who would be unlikely to plan if not enrolled in HACC. This finding suggests a possibility that the HACC grant can foster financial security and planning for families struggling financially—an opportunity that may not have been available otherwise. Parents who had already started saving reported that the HACC grant and matching incentives enhanced their existing savings efforts. We also found that when it comes to saving strategies, parents budgeted, spent frugally, and engaged family and friends in savings endeavors. While identifying factors that contribute to active engagement is beyond the scope of this study, the finding that some HACC parents saved for their children’s college educations by engaging family members and friends implies that the program may have a spillover effect that goes beyond participating parents and children.

Low income emerged as a critical obstacle to saving for some interviewed parents. Parents living from paycheck to paycheck reported having few financial resources to set aside. Limited financial resources made regular savings contributions a lofty goal for some study participants. While our findings on savings obstacles are consistent with existing qualitative research (e.g., Gray et al. 2012; Beverly and Barton 2006; Lewis, O’Brien, and Elliott 2017), we identified that low income is particularly burdensome for interviewed parents with certain household and financial profiles (e.g., single parents, older parents, parents with student loans). These findings may imply that, despite universal enrollment, HACC favors those who have more resources to save and benefits participants unevenly. While HACC’s universal enrollment may address unequal access to savings tools, program designs such as match ratios may fall short of equalizing benefit distribution. This indicates that if the goal of a savings program is to benefit lower income families, the program should consider designing savings incentives that facilitate these families’ savings activities and reinforce that their lack of disposable income is not a financial hurdle to saving for postsecondary education.

Limitations

Like all studies, this one has several limitations. Given the nature of thematic analysis, the themes that emerged are descriptive and should not be used for explanatory reasons. For example, we were unable to explain why nonparticipants did not enroll in HACC during the opt-in period. In addition, HACC is the first statewide college savings program in the United States, and has several unique program features (e.g., saving goals and enrollment policy). Therefore, participants’ program experiences likely differ from that of participants in other savings programs and are thus not generalizable to participants in other savings programs. Furthermore, this study used a convenience sampling approach to recruit participants and ended up with a small sample size and all female and predominately white study participants. This suggests that the experiences reported in this study are unique individual experiences and are therefore not meant to represent the totality of HACC participants’ program experiences.

Conclusion

This study attempted to gain an understanding of participants’ experiences in the HACC program, a statewide universal savings program. Based on in-depth interviews with 22 parents whose children were enrolled in HACC, we found that settings such as hospitals and Head Start can be an effective platform from which to recruit participants. Findings imply that universal enrollment may be preferable to application-based enrollment to achieve an inclusive program. While parents reported the HACC’s positive influence over saving efforts and financial socialization, obstacles to saving such as insufficient income are difficult to overcome. Findings from this study suggest that similar programs in the future should consider employing universal enrollment policies and saving incentives to engage low-income families, and future evaluation studies should seek to assess family financial socialization as a potential program outcome.

Disclosure statement

Dr. Elliott is a member of the Journal of Children and Poverty’s Editorial Advisory Board.

Notes on contributors

Zibei Chen, PhD, is a postdoctoral research fellow at the Center on Assets, Education, and Inclusion (AEDI), at the University of Michigan’s School of Social Work. Her research focuses on understanding financial behaviors and decision-making and interventions that promote financial inclusion and economic security for low- to moderate-income individuals and families. She is currently involved with evaluating children’s savings account programs.

William Elliott, PhD, is a professor at the University of Michigan’s School of Social Work. He is the founding director of the Center on Assets, Education, and Inclusion (AEDI) and a leading researcher in the fields of children’s savings, student debt, and wealth inequality.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 More details can be found in Prosperity Now 2019.

2 It is also important to state that the grant money (and any earnings) is never directly given to the family but instead is transferred directly to an institution of higher education and removed from the account if not used by the time the beneficiary reaches age 28.