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Testing Universal Child Development Accounts: Financial Effects in a Large Social Experiment

Washington University in Saint LouisWashington University in Saint LouisWashington University in Saint LouisSaint Louis University

This article examines the financial effects of Child Development Accounts (CDAs) designed to build assets for every newborn. Data come from a randomized experiment with probability sampling from a full state population 7 years after the intervention began. As expected, the CDA has a large effect on asset accumulation for college, primarily because of the automatic initial deposit and subsequent investment earnings. Automatic program deposits are likely to enable low- and moderate-income families to accumulate assets for college. Because of the potential for market growth, deposits made early in a child’s life and held in an investment vehicle are likely to have the greatest influence. These findings and policy implications are important because growing up with designated college savings likely shapes children’s educational expectations, which in turn likely shape academic behavior and achievement. Moreover, demonstrating full inclusion—accounts and assets for all newborns—sets the stage for widespread participation in asset building and more equitable distribution of public resources.