State Senators Darrell Steinberg, D-Sacramento, and Robert Dutton, R-Riverside, introduced a bill last week called the California Kids Investment and Development Savings (KIDS) Account Act which would create a $500 state-sponsored savings account for every baby born in California on or after Jan. 1, 2008.
As the national savings rate is at its lowest point since the Great Depression and Americans are carrying record levels of debt, “KIDS Accounts will serve as the springboard for building a culture of savings and financial literacy for all young Californians” says Anne Stuhldreher, a fellow at the New America Foundation, which sponsored SB 752. “First, it will create a platform for lifelong savings for every Californian. Second, it will provide a powerful financial education tool that families can use to teach their children the power and importance of saving.”
The state would open each account with $500, and the children’s families could then contribute throughout childhood. No withdrawals could be made until the child turns 18, when the money could be used to pay for a two- or four-year college, technical, or trade school; for a down payment on a home; or for a retirement savings account. Take it out earlier or for any other purpose, and you’d have to pay $500 back to the state.
Great Britain launch a similar Child Trust Fund program in September 2002 for each of the 700,000 children born there each year. Since then, the percentage of those who electronically deposit monthly savings in bank accounts for children has since doubled, from 20 percent to 40 percent. A similar bill to implement such a program across the United States, the ASPIRE Act, was introduced in Congress in 2005; alas, neither of the lawmakers who carried it — U.S. Sen. Rick Santorum, R-Pa., and Rep. Harold Ford Jr., D-Tenn. — are still in office.
California’s bill puts the price tag for taxpayers at $270,000,000 per year; it notes that this is less than half of 1 percent of the state’s $100 billion annual budget. But it ain’t chicken feed, either. It’s hard to say whether lawmakers — especially Republicans — will be pleased by the idea of giving taxpayer money back to taxpayers’ kids, or irate at a $270 million-per-year budget hit. And at least a few are sure to have a problem with children of illegal immigrants getting the money.
On the plus side, having the next generation of Californians learn the importance of savings would be great; perhaps some of them will grow up, be elected to public office and get the state out of the fiscal bind we’ve put them in with budget deficits, bond debt and unfunded pension liabilities.