> Posted by Meghan Greene, Manager, CFI

FAB (Financial Access at Birth) has been working with volunteers from Credit Suisse who helped dig deeper into the assumptions behind FAB and identify cutting-edge research on child and youth finance.

The Financial Access at Birth initiative (FAB) aims to equip every child in the world with a funded savings account at birth – an ambitious goal that would certainly require input and support from government entities. With that in mind, we set out to examine and learn from government-led examples of child and youth finance.

Governments have approached child and youth finance in many different ways. Some regions are testing universal funded savings accounts, and others are testing conditional cash transfers (CCTs) that provide incentives for educational achievement. Some programs are led by city or state governments in partnership with private entities, while others are fully implemented and funded by national governments. With such a diversity of approaches, are any overarching lessons emerging? The Credit Suisse volunteers studied examples from the United States to Colombia to South Africa to find a cross-section of the various asset-transfer or asset-building programs. They found the following takeaways:

Government-led programs can scale quickly, but are vulnerable to political or economic change. 

  • The United Kingdom was visionary in its 2005 launch of “Child Trust Funds,” which offered an account for every newborn with an opening balance of at least £250, with additional cash transfers available over time and for low-income households. However, the prolonged recession took its toll on this government-funded program, and it was a victim of the tough economic times: the UK ended payments into the trust funds in 2010. The Chief Secretary to the Treasury, David Laws, explained that the intended building of assets was illusory: “At present, the child trust fund is based on the claim that young people will build up an asset which they can use later in life. But since government payments into the scheme are essentially being funded by public borrowing, the government is also storing up debts which will have to be repaid by the same young people.” The cancellation of the program was estimated to save the government budget £520 million a year.

In the focus on cutting costs, don’t forget marketing and outreach.

  • Funded savings accounts or conditional cash transfer programs may face funding challenges. However, implementing agencies need to factor in overhead funds to conduct advertising and marketing outreach. In Caguas, Puerto Rico, the city launched “Baby Bonds,” which offered parents of all new babies a $250 voucher to open a savings account. While the city had enough funding for the accounts themselves, the city lacked funding to market the program, according to a Washington University of St. Louis report. As a result, initial uptake was lower than expected.

Ensure that your product is clear and understandable to the potential customers, but also ensure the components are manageable on the back end.

  • Opportunity NYC Family Rewards, a partnership between the City of New York, Seedco, MDRC, and private funders, offered conditional cash transfers to families in select communities of New York to incentivize children’s education, health, and workforce outcomes. During its initial year, the potential monetary rewards were many and varied, ranging from $25 per parent-teacher conference, to $50 for obtaining a library card, to $25/month for school attendance. Realizing that these many options were confusing for both participants and complex (and costly) for administrators, options were streamlined. The Opportunity NYC program ended in 2010, though monitoring and evaluation continues.

Build in evaluation from the outset. Reliable data is important for long-term credibility.

  • The CCT and savings programs are often intended not only to increase household income, but to have broader effects on personal outlook, asset accumulation, and educational achievement. Mexico’s Oportunidades program has been hailed as a model for CCT programs both in developing and developed countries.
  • The program offers monthly grants for educational attainment, basic health care, and a fixed monetary transfer for food consumption. Part of its success can be attributed to its rigorous evaluations of its impact. Given the program’s ambitious goals for poverty reduction, administrators from the outset emphasized the importance of clear data, both to measure effectiveness and to ensure that the program could survive changes in government. This design allowed for the use of a control group. The very positive evaluation results have helped ensure the expansion of the program, which is estimated to reach one quarter of Mexico’s poor population.

Appropriate government engagement depends on program goals.

  • In Oklahoma, the SEED OK program automatically opened funded college savings plans for randomly selected children. As one might expect, children in this group had a much higher rate of savings plan ownership than those in the control groups, who did not receive an automatically opened plan. In line with an increasing array of behavioral studies, asking potential participants to opt-out rather than opt-in had a significant effect on uptake. Government involvement was essential in setting up such choices. Ultimately, the question of whether, and how, governments should be involved depends on the goals for the intervention itself: does the project aim to be universal? Would achieving scale drive down costs? What are the implications for depth?

There are many other examples of government-led efforts at child and youth asset programs. Please stay tuned for in-depth looks at some successful programs around the world. Sincere thanks to Credit Suisse, and especially the team leader, Nina Edwards, for the passion, commitment, and curiosity for FAB.

Image Credit: Better Than Cash Alliance

Have you read?

Financial Access at Birth: A Real Possibility

Youth and Financial Inclusion: A Head Start to Financial Citizenship

Youth and Financial Inclusion: How Can We Give Them a Head Start?