Imagine you’re a busy parent of an infant child. You just went back to work after a brief parental leave. You get up early every day with your child who isn’t sleeping well. Every morning you get on the bus, put in 8 hours at the office, pick your child up from daycare, bring them home, change them, feed them, make dinner for yourself. Then you start the nighttime routine that takes 30 minutes to an hour depending on how fussy they are that night. You maybe have 30 minutes to yourself while you watch TV with your partner or catch up with your sister on the phone.
Somewhere along the line you see a flier that encourages you to open a savings account for your kid’s college education. You know it’s a great idea. You’ll apply tomorrow. But tomorrow comes and goes like today and in addition to the normal daily routine, this week you also have to go 13 rounds with the health insurance company, pay the bills and take care of your own credit card debt. “I’ll apply tomorrow” turns into “I’ll apply this weekend.” Then that turns into, “I’ll apply sometime.” Before you know it, your child is older and you haven’t applied to that children’s savings program you heard about.
Compare that to getting a piece of mail that says a savings account has already been opened for your child, with a small first deposit. Your account access is easy to set up, easy to understand, and easy to do when you have a free minute.
That’s the difference between automatic enrollment and opt-in enrollment. And it’s one of several structural differences we are considering for Oregon’s future Children’s Savings Account program.
The Oregon Asset Building Coalition Steering Committee and Technical Advisory Committee are deep in the design phase of our CSA campaign. How children are enrolled is one of the key questions we’ve identified.
Thankfully, we have examples to look at in other states which have implemented CSAs.
For instance, as reported in the CFED Investing In Dreams Blueprint, Maine had a similar decision to make when it came to automatic enrollments.
“The Harold Alfond College Challenge provides all children born as Maine residents with an initial $500 investment in a NextGen 529 college savings account. When the program began in 2008, parents were required to complete a two-step application and enrollment process to open a NextGen account and receive the $500 initial seed deposit. Research indicated that parents in Maine with more education, other investments and a financial advisor were more likely than those who were less financially sophisticated to enroll their children in the College Challenge. This research prompted the program to transition to an automatic enrollment model in 2014. College Challenge now automatically enrolls every baby who is a Maine resident for the program at birth, making the program both automatic and universal—ideal features for scale. As a result of the switch to automatic enrollment, the participation rate has grown from around 40% of eligible children during the opt-in enrollment period to 100% in 2015. Over the next five years, program staff expect that about 62,500 Maine children will receive approximately $31,250,000.”
Auto-enrollment seems to have a clear advantage when it comes to getting families to participate. It is also related to other questions about when families and children could get access to financial education and what institutions should hold the savings accounts.
There’s plenty more to come as we plan the design of CSAs. You can email Jill Winsor (jwinsor@NeighborhoodPartnerships.org) if you want to learn more.