1. Childrens Savings Accounts Forum on Building Wealth for the Next Generation in Puerto Rico Caguas, Puerto Rico October 11, 2006 Ray Boshara New America Foundation Washington, DC 202-986-2700 boshara@newamerica.net boshara@newamerica.netboshara@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. 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 dont get by. Lack of assets means you dont get ahead. Lack of income means you dont get by. Lack of assets means you dont get ahead. Imagine your or your familys life without assets – savings, a home, an education, a small business, investments, and a nest-egg for retirement. Imagine your or your familys 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. 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. Productivity gains in the economy are going to those who own, not those who earn. You must earn, and you must own.

3. Why Childrens Savings Accounts? If owning assets is a good thing, then owning them earlier in life is even better. 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. 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. 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 childs future and reward good behavior. CSAs are a magnet. CSAs allow families, churches, communities, governments and others to easily invest in a childs future and reward good behavior. CSAs are a magnet. CSAs make financial education meaningful – they provide an ongoing teachable moment. 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. 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 No national policy – yet Five proposals in U.S. Congress: Five proposals in U.S. Congress: ASPIRE Act to create KIDS AccountsASPIRE Act to create KIDS Accounts Baby BondsBaby Bonds PLUS AccountsPLUS Accounts 401Kids401Kids Young Savers AccountsYoung Savers Accounts SEED Initiative / Oklahoma experiment using 529s SEED Initiative / Oklahoma experiment using 529s

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

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

7. Future Generations Any nations economic success, and the security it offers for retirees, depends on the economic success of its children. Any nations 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. 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. 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. 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. With CSAs, we can help ensure that inequality of outcomes in one generation does not become inequality of opportunity in the next.