Brian Pon, a financial planner from San Francisco, has fond memories of an unusual bonding experience with his son Robert. "It was really an enjoyable thing," he said. "I walked to the bank with my son and a 10 dollar bill, and we entered the bank together, I plopped him on the counter to make the deposit... the bank tellers just loved seeing him do that."

Pon and his son, now nine years old, were making their first deposit into one of over 30,000 accounts set up under the city’s Kindergarten to College (K2C) program. Every child who enters a San Francisco public kindergarten gets an account, starting with an initial $50 from the authorities to spend on college or other post-high school education.

Pon believes that, as well as teaching his son about managing money, the account has enabled them to start speaking about Robert's future prospects at an earlier age than they otherwise might have: "I don't think I would have had the conversation with him if we hadn't had this fund," he said. "However small it is, at least we have this conversation that 'this is for your college'."

José Cisneros, San Francisco’s Treasurer, said that officials were struck by 2010 research from the St. Louis-based Center for Social Development showing that children with college savings accounts were up to seven times more likely to attend college than those without an account.

“It started a whole thought process, then probably a dialogue, that really cemented the concept of college into that kid's mind as they grew up,” Cisneros said.

Meanwhile, many lower-income families “didn't even have bank accounts for the parents,” Cisneros added. “Hard to imagine, or probably pretty much impossible - the fact they would have a college savings account for a child." Automatically granting these families an account could encourage saving among people who would usually not engage with such a program.

But only 18% of the account holders have started saving so far

So the city decided to step in, launching the project with a pilot in 2011, with accounts expanded to all kindergarten entries in the school year 2012-2013. They run it in partnership with the local school district, which helps by providing the necessary information on students and promoting the accounts.

The K2C program is also an example of a public body partnering with the financial sector for mutual benefit. Citibank, which opens the accounts and works alongside the city to provide customer services, was chosen over Bank of America in a request for proposals process, thanks to its experience running philanthropic programs. The city gets expert support—for example, the bank built and maintains the website on which K2C users can check their accounts. Meanwhile, Citi gets new customers and millions of dollars of balances.

Families who add money to their account will get additional funds—both from the city and private philanthropists—with the proviso that they lose the top-up funding if they’re not spending it on post-secondary education of some kind by age 25.

So far, about 18% of the account holders have started saving, amassing about $5.5 million dollars of their own money (not counting money they have gained through incentives). The number is not insignificant, but also not astronomical, and Cisneros hopes to drive it higher, through measures including a renewed publicity drive from the school district.

Rather than target lower-income families only, the city deliberately made the policy universal. With about $750,000 set aside each year for the project (covering staff, infrastructure and the city’s financial contribution to the accounts), the budget is, in Cisneros’s own words, “significant.”

"Before this program came along, teachers in our public school district were afraid to bring up the concept of a college savings account"

Kitty Stewart, Associate Director of the Centre for the Analysis of Social Exclusion at the London School of Economics (LSE), said that while “it’s certainly a good thing to encourage and enable families to build up assets for their children," for some children in very low-income households money now, rather than the potential to build up money over time, could be more helpful.

"Living on a low-income is damaging to children’s development—that’s very clear," Stewart said. "If this is part of a bigger package of investment in family support... that’s great. But if there are families living in income poverty today, this may not be the most effective use of state funds to give children the best opportunities."

Meanwhile, Stewart pointed out, the poorest families may not have the money to save even with the incentives. Pon believes that even without his professional expertise the K2C system would still be easy to understand. But the fact remains that the very poor will not have money to set aside, even with inducement from the city.

Keeping it universal

The open-to-all-comers nature of the policy is a principle Cisneros strongly defends. “While you might argue that some kids won’t necessarily need our accounts or even our $50 to help them with college, I think there’s a lot of efficiencies we gain by just going with the entire enrolled population,” he said.

“There’s also something that I think is really really kind of invaluable that comes with universality,” Cisneros continued. “Before this program came along, teachers in our public school district; they were afraid to bring up the concept of a college savings account, or maybe even college itself.

“They knew full well that many kids in their classroom didn’t have a college savings account and might never have one,” the Treasurer added. “Since the onset of our program, now every teacher can say ‘Hey, let’s all talk about our college savings account'.”

Meanwhile, he adds: “Our public school district, in very many ways similar to most urban public school districts, is primarily comprised of kids from low- or maybe medium-income families.”

Since San Francisco opened its first accounts in 2011, similar schemes have been launched in Nevada and Ohio, with uninspiring results; both saw lower proportions of parents using the accounts in their early days than San Francisco, according to a report in Governing.

But no program has yet run long enough to make a definitive judgement about parents’ potential interest in this type of scheme. "Personally I'd love to see us even have more families saving," Cisneros said, "I'd like to get to 30, 40, maybe even 50% of the families."

As international debates about access to higher education continue to run, it will be interesting to watch his progress.

(Picture credit: Pexels)

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