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Policy Changes Key to Narrowing Savings Gap

Changes in federal policy could mean families can ensure better futures for their children. (401(k)2012/Flickr)
Changes in federal policy could mean families can ensure better futures for their children. (401(k)2012/Flickr)
January 21, 2016

DES MOINES, Iowa – As Iowans look to the first-in-the-nation presidential caucuses in less than two weeks, a new policy brief from the Annie E. Casey Foundation suggests changing federal rules to allow universal children's savings accounts.

It also supports other methods that can help families of color reverse historic trends that make it hard for their children to go to college and eventually own a home.

Beadsie Woo, a senior association with the foundation, says government can help solve the problem.

"The racial wealth gap is growing, and that's putting children of color at a huge disadvantage,” she states. “Policies that make it easier for families to save can go a long way to helping children have better futures."

The brief notes that a family's assets tie directly with overall indicators of child well being, including academic performance and self-esteem.

By having a universal savings account at birth, a young person could later use the funds to go to college, start a business or buy a home.

"There are commonsense federal policies that can create more opportunities for families to save, and those change the life course for their children, Woo stresses. “Children whose families can save will do better in school and have stronger outcomes through access to opportunities."

Iowa still has limits on the amount of assets a family can hold and still be eligible for the Temporary Assistance for Needy Families program.

Woo says the eight states that have eliminated the asset test have seen positive outcomes.

"We see that those families are more self-sufficient because they have their own savings to draw on,” she points out. “Over time, the number of people enrolled in benefits decline."

Nationally, since the start of this decade, the net worth of white families has increased by 2 percent, while that of black families dropped by 34 percent, and that of Latino families is down by 15 percent.

Jeff Stein, Public News Service - IA