(Sacramento, CA) Today, Assemblymember Adrin Nazarian introduced AB 34, a universal, opt-out, progressive Children’s Savings Account for all California newborns. The State will directly invest in every child born in California to close the growing wealth inequality gap.
“We must be bold and invest in the next generation of entrepreneurs, scientists, and leaders,” stated Assemblymember Adrin Nazarian. “Wealth inequality is closing the door on middle and lower-income advancement nationwide. By creating an opt-out child savings account, we can jump start our children’s financial independence.”
The intention of the bill is to create more wealth equity for middle and lower income California children. Studies have found that children with $500 or less saved for college are four times more likely to graduate college (Assets and Education Initiative 2013). In addition, most children in middle and low-income households do not have the capital necessary to open a business or place a down payment on a home. A child savings account will provide many more children with financial assets, a more equal playing field, and a transformative sense of possibility and hope for the future.
The Child Saving Account will consist of four types of contributions:
- Universal Seed: An initial State deposit to every child born in California.
- Progressive Seed: An additional deposit for a child whose family makes less than $75,000 in Adjusted Gross Income (AGI).
- Parent Contribution: Parents can make deposits into their child’s account. For families with an AGI less than $75,000, California will match contributions at a 1:1 ratio up to $100.
- Community Investment: Community groups, non-profits, or foundations can contribute to the child savings accounts.
The Child Savings Account will be a 529 plan which is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
The 529 design will allow for:
- A single platform for state seed dollars, parent contributions, and community deposits.
- Parents to view account details and the total account value in one place.
- Ability to contribute through direct deposit, electronic contributions, and mail.
As Frederick Douglass stated, “It is easier to build strong children than to repair broken men.” AB 34 will, from birth, invest in our children’s future, encourage a saving habit in families, allow for the community to directly participate in its children’s success, and, ultimately, help lift people out of poverty.
Several states and cities throughout the United States are testing similar programs. A report by the Urban Institute stated: Maine, Nevada, and Rhode Island automatically deposit funds in 529 plans for all young children. Children in Maine are granted $500 through an investment by the Alfond Scholarship Foundation, Nevada College Kick Start program provides an initial deposit of $50, and children born in Rhode Island receive a $100 Collegebound baby grant. Oregon and Illinois are also working to put children’s savings accounts into place.
“Automatic children savings accounts build wealth and reduce debt,” stated Assemblymember Adrin Nazarian. “I want the next generation of California children to not be buried in debt but instead to be choosing between starting a new business, investing in their first home, or reducing their school loan debt.”
Adrin Nazarian represents the 46th Assembly District, serving the San Fernando Valley communities of Hollywood Hills, Lake Balboa, North Hills, North Hollywood, Panorama City, Sherman Oaks, Studio City, Toluca Lake, Valley Glen, Universal City, Van Nuys, and Valley Village.