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Kindergarteners get a jump on college savings

Gerard Van der Leun

At the Castro branch of Citibank in San Francisco, kindergartener Mat Larizadeh is making his very first bank deposit. Mat walks with his mom, AoddiAttasara, up to the teller window. He’s much too short to see what transpires up there, but he knows the amount is $50 – and that it has something to do with his education. After the transaction, the two make their way over to a table where a plate of cookies, a stack of coloring books, and a clear plastic piggy bank await them.

They’re getting those goodies today thanks to the Kindergarten to College savings program: a collaboration between the San Francisco City Treasurer’s Office and the school district. The seeds for the program were sown by a study Treasurer Jose Cisneros read about a few years ago.

The study showed that if a child was raised with a college savings account in the child’s name, that child was much more likely to go to college than a child without savings. And surprisingly, it didn’t seem to matter if there was actually enough money in the account to fully pay for college.

“It seemed that what was happening was the kid’s aspirations were being built up and affected by just the fact that the account was there,” says Cisneros.

Cisneros and his staff got to thinking: what if they could bring that to all the kids in San Francisco? Cisneros says most parents want to save for their kids’ college education, but that it’s particularly hard for low-income families.

“It’s hard to put money away,” he says. “Time kind of moves by, and pretty soon the kid is in high school, they’re facing college.”

Suddenly it’s too late to save.

Cisneros oversees a special department that focuses on low-income San Franciscans called the Office of Financial Empowerment. About two years ago, the department created a program where every family in the school district with a child entering kindergarten would get a savings account. This account is set up automatically – no paperwork to fill out, no hoops to jump through.

Parents receive a letter at the beginning of the school year telling them the account is there, and that there’s some seed money already in it. Each account starts out with $50 – or $100 for families that qualify for free or reduced lunch. From there, various incentives are in place to try to encourage families to put away more. There are matching funds, and bonuses for regular deposits. Direct deposits can be set up.

Wen Kai Guan, whose son goes to Gordon J. Lau Elementary, appreciates that convenience.

“I put money in, every paycheck. Every paycheck period, I direct deposit,” he says.

Each individual Kindergarten to College savings account is actually a sub-account under one large one held by the city and the city is the official account-holder of record. This means the accounts are still accessible for families that might not have the right documentation due to immigration status, or might not be able to spare the money for an initial deposit.

Cisneros hopes the program will have an added benefit: increasing financial literacy, especially among low-income families. He says there is a misperception that low-income families do not have the possibility or ability to save for a long-term goal like their children’s college education.

“What study after study has shown,” he says, “is that individuals and families at all income levels can find a way to save, if they’re educated, and know how, and are given the right accounts and tools to do that.”

It’s a good goal, but it’s unclear how it will bear out in the city. According to the Office of Financial Empowerment, out of about 8,000 Kindergarten to College Savings accounts, only about 1,000 are receiving regular deposits – roughly 12 percent. That may seem pretty low, but consider the dismal personal savings rate of the American public as a whole: in 2012 it was 3.75 percent. In 2005, it was down to one percent. Compared to that, Kindergarten to College’s 12 percent actually looks pretty good.

Olivia Johnson, whose son is a kindergartener at Bessie Carmichael Elementary, thinks it’s a smart investment for the city.

“We’re all going through financial struggles,” she says. “I mean, you have parents who [are] trying to figure out whether I feed my children or do I pay my rent or mortgage this month.” She says that any help the city can give to students is welcome.

Even as the costs of college continue to rise, higher education is still a big step on the path to a good income, and a comfortable adulthood. With the Kindergarten to College program, kids are getting their feet on that path early, with a little push to a better future.