CU-Backed Proposal Would Create Federally Subsidized Child Savings Accounts

WASHINGTON – In an initiative modeled after the fledgling Individual Development Accounts, the non-partisan Aspen Institute proposed a child savings account yesterday with which the federal government would provide a $500 certificate to participating newborns that would provide long-term savings incentives and help spur the national savings rate. “Americans are saving too little. In part, that’s because they start too late and, like everything else, they should start saving when they are young,” said American Airlines FCU President John Tippets, who participated on the Aspen Institute’s Initiative on Financial Security, which developed the new savings idea. The proposal, similar to the IDAs that are providing matching savings accounts for low- and moderate-income families, would provide federal subsidies for new-born accounts that would accumulate tax-free until the saver is 18, when the funds could be used freely. Family, friends and other parties could deposit as much as $2,000 a year into the account, while low- and moderate-income families would be eligible for matching funds up to $1,000 a year if they were qualified to participate in the IDA program. Dozens of credit unions are participating in the IDA program, which provides matching funds for eligible low- and moderate-income savers. The concept of government-sponsored child savings accounts is already being piloted in the United Kingdom and is growing in popularity, said Lisa Mensah, executive director of the savings project. Tippets said the program will require legislation to enact. Also on the panel was William Bynum, president of ECD/HOPE, which runs HOPE Community FCU, as well a representatives from LaSalle Bank, H&R Block, the National Congress of American Indians, and several others.