Illinois Approves Child Development Accounts for All Newborns

Faculty; Social Work

Illinois became the most recent state in the U.S. to adopt universal Child Development Accounts on August 23, when Gov. J.B. Pritzker signed legislation to open a 529 college savings plan account with deposits for every child born or adopted in Illinois after Dec. 31, 2020.

“We are excited to provide this opportunity for children in Illinois,” said Illinois Treasurer Michael Frerichs. “Every child should have an opportunity to afford to attend college. We think starting a college savings account will set the expectation that college is achievable and will put our children on the road to success.”

The gubernatorial signing is the third in a little over a year for statewide Child Development Accounts (CDAs), joining Nebraska and Pennsylvania. It signals encouraging momentum for child accounts, according to Margaret Clancy, policy director for the Center for Social Development (CSD) at Washington University in St. Louis. Also noteworthy, these three examples represent red, purple, and blue states. During a very partisan political era, CDAs find support across political parties.

“This marks three statewide CDA legislative victories within just over 12 months, and more states are considering this asset-building policy for children,” Clancy said. “Using the 529 college savings plan as a platform to implement statewide CDAs has been very successful, both economically and politically.”

CSD has been a national leader in CDA research and CDA policy innovation around the world. Research in a CDA policy model in Oklahoma has shown that mothers’ outlook and parenting improved, as did their education expectations for their children. Children’s social–emotional development also improved, regardless of whether or not the families saved additional amounts. Other research finds that children with an account in their name are likely to have higher educational attainment.

In Illinois, the Sargent Shriver National Center on Poverty Law, based in Chicago, was one of twelve partners in the SEED demonstration of CDAs in the early 2000s. Careful research in SEED has laid the groundwork for CDA policy in Illinois and elsewhere. Clancy has worked with the Illinois Asset Building Group, the Woodstock Institute, the Heartland Alliance, and Bright Start Direct, as well as the state treasurer’s office, to develop the CDA policy concept in Illinois.

When it is implemented in 2021, the Illinois program will have the largest annual cohort of CDA participants in the nation, with about 160,000 newborns each year. The largest amount of CDA assets is currently in the state of Maine, at more than $134 million.

The Illinois House passed the Child Development Account legislation on April 3, and the Senate passed it on May 31. It uses the Illinois Higher Education Savings Program for the purpose of “expanding access to higher education through savings.” Among its provisions:

  • The treasurer will open a CDA and set aside a $50 seed deposit for each child born or adopted in Illinois after Dec. 31, 2020.
  • The parent/guardian must claim their child’s CDA fund by the child’s 10th birthday. A child must be an Illinois resident to access the funds for postsecondary education, and use the funds by his or her 26th birthday.
  • The treasurer is authorized to partner with private, nonprofit and/or government organizations to provide additional incentives and deposits into CDAs.

CSD Director Michael Sherraden—who in 1991 first proposed universal asset building beginning at birth—said research testing CDA policy, and documented success in statewide CDAs have been key steps in moving toward a national policy. “Since 529 college savings plans already exist and are very stable, these can become the backbone of a national CDA policy that reaches all U.S. children,” he said. “A nationwide CDA policy could eventually develop into a lifelong asset-building policy for the nation. This policy vision would emphasize asset accumulation and achieving life goals.”