Like many busy mothers of young kids, Sylvia Suarez never thought too much about college for her two boys, much less saving for it. College simply seemed a long way off.
Until this school year. Under a pilot program at Tahoe Elementary School in Sacramento, Calif., Suarez got the motivation — and free cash — to get started. “It was a wake-up … that we need to save for them to go to college,” said Suarez, whose sons are 6 and 11.
She is one of 82 parents or guardians participating in a small but growing “Kids to College” savings program created by SAFE Credit Union and Sacramento City Councilman Kevin McCarty.
Launched in the 2011-12 school year, it’s a simple concept: Parents who take two one-hour financial literacy classes can receive up to $200 — free — in a college savings account for their kindergartner. The accounts are theirs to keep — and hopefully add to — until the child turns 18, when they can be used for college expenses.
“A lot of these families don’t have college savings. They don’t have a ton of financial information at their disposal. … This is a fabulous bridge to bring those together,” said McCarty, who patterned the “K2C” program after similar programs in other cities.
College savings accounts for kids aren’t a new concept. Other countries, like Singapore and South Korea, have endorsed or launched so-called universal children’s savings accounts, some set up at birth or when kids reach school age. In the U.S., Congress has explored the idea of universal $500 accounts for newborns, but it has never made it into law. In 2007, state Senate President Pro Tem Darrell Steinberg, D-Sacramento, introduced legislation to create a similar program of $500 savings accounts for every California newborn, but it never got out of policy committee.
Of course, plenty of parents do their own saving-for-college accounts through state-sponsored 529 plans, Coverdell or other investments.
In Sacramento, the fledgling “K2C” program is now operating in five public elementary schools in McCarty’s City Council district. It was inspired by a similar, but far more ambitious, K2C plan in San Francisco.
There, the city’s Office of Financial Empowerment runs what it calls the country’s first publicly funded, universal college savings plan. The $50 savings accounts are given to every kindergartener enrolled at more than 70 elementary schools in the San Francisco Unified School District.
In the nearly four years since the program started, the city has opened 13,693 of the $50 accounts. (Those qualifying for federal free-lunch programs receive an additional $50 in their accounts, plus there are matching contributions for a child’s first $100 deposit and for consistent savings.) All accounts are held at Citibank and cannot be accessed until high school graduation. If the money isn’t used for college by the time the child turns 25, it can be spent on other things.
“It’s still very early in the program, but we’re very encouraged by the high rate of savings among families, lower-income families in particular,” said Greg Kato, a spokesman with the San Francisco Treasurer’s Office. He said the city has invested $850,000 into the accounts, including some matching contributions for savers coming from nonprofit partners.
The program’s goals are multifold: encourage more children to pursue a college education, motivate more families to save for college, instill more financial literacy into the classroom curriculum, and help reach the city’s “unbanked” population.
In Sacramento, McCarty’s program is more modest, with funding provided by SAFE, the Sacramento Community Region Foundation, the Nehemiah Foundation and private donations. A parent receives $75 for each of two classes, plus a $50 bonus if they complete both sessions.