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LA City Council considers savings accounts for kindergartners

Empty classroom.
Empty classroom.
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Here's something that should make the first day of kindergarten even more exciting:

A free, $50 savings account for every child that enrolls. The LA City Council has been wanting to try it out for a while, and this week they got an estimate of the cost--an estimated $3 million a year.

But why put $50 in a bank account for a 5 year-old?

Our education editor Maura Walz came by to enlighten us.

Why give a kid 50 bucks?

"The idea is pretty simple: To help remove some of the barriers to college by helping families to start saving really early, and by making it easier to do that, especially for low-income families. 

The backers of this plan like to cite research from Washington University in St. Louis that found that low to moderate income students were something like three times more likely to enroll in college just by having a college savings account, even if there wasn't that much money in it. Just the mere existence of that college savings account made them much more likely to enroll in college, it made them much more likely to finish. 

So, that's sort of the idea. It's to get them saving early, make it easier to do it. Also, to teach financial literacy skills. It's sort of trying to set kids on that path and establish a college-going goal, really really early."

Has this been tried anywhere else before?

"San Francisco was the first city to do this. They started a program that's similar to the one that L.A. City Council and L.A. Unified School District officials are talking about. They started that in 2011 and then there have been a couple of other cities that the city council analysis cited that are doing various versions: St. Louis, Boston, Oakland, New York City... Those have started in the past year or two. It's a pretty new idea, at least in the United States."

What about money details? When does the child get access?

"We're still in the research phase. LA Unified officials are looking at it. LA City Council officials are looking at it. But we can look at what has happened in San Francisco. So, every child in the San Francisco Unified School District gets $50 to start. Low-income kids get $100. It's very easy to deposit money. You can go to a bank branch, you can mail it in, you can set up an automatic deposit and there's actually private funders there who are contributing to some incentives to save even more.

So, they've got like a dollar for dollar match for up to $100 and then there's another incentive where they get an extra $100 if they enroll in an automatic deposit program. So, there's this idea that if you make it really easy and you give some incentive that people will really participate."

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