With SEED, Americans Can Begin Life with a Nest Egg of Their Own

Saving and investing have always been bedrock American values—a way both to get ahead financially and to have something to fall back on in a crisis. Nowadays with easy credit, many Americans have abandoned the savings habit and have lost sight of the economic benefits that accompany thrift. However, SEED (Saving for Education, Entrepreneurship, and Down Payment), a model initiative in Chicago, aims to make sure that all Americans, especially those of lower income, build and nurture their nest eggs.

A measure of the state of personal savings in America is the new “Nest Egg Index” released by A.G. Edwards. The Nest Egg Index ranks America’s 200 top-performing communities based on residents’ personal savings and investing behavior. The index shows the geographic regions where people are succeeding and face the greatest difficulty in building and nurturing their nest eggs.

In Chicago the news is not much better. According to the Nest Egg Index, Chicago ties with Newburgh, New York, for 39th, above the national average but behind neighbors such as Detroit, Des Moines, and Minneapolis-St. Paul.

The Nest Egg Index examines only broad measures of wealth and well-being, such as home ownership, retirement plans, and the proportion of households that save and invest. Anyone who has examined data on wealth and savings knows that the fundamental challenge is the yawning gap between the haves and the have-nots. Moreover, almost 40 percent of all children live in families that are “asset poor”—meaning that, should their source of income dry up, they lack the financial reserves to survive for three months at the poverty level.

Initiatives such as SEED accounts aim to change that for the next generation. At the William M. and Charles H. Mayo Elementary School 75 children have established nest-egg savings accounts that are managed by J.P. Morgan Chase Bank. The SEED accounts are matched savings accounts that start with a deposit of $500, reward accountholders with a match for their own savings, and are restricted to secondary education. Chicago is one of 12 nationwide sites of the SEED initiative—a national experiment to develop, test, inform, and promote matched savings accounts and financial education for children and youth.

The SEED initiative aims not only to help these 75 elementary school students in Chicago establish a nest egg and use it to save toward their dream of college or trade school but also—through the experience of these children and careful research—to make this kind of SEED account a reality for all children in America. Already the Aspire (America Saving for Personal Investment, Retirement, and Education) Act, cosponsored by Sens. Rick Santorum (R-PA), Jim DeMint (R-SC), and Charles Schumer (D-NY), has been introduced in Congress to do just this. Aspire calls for Kids Accounts (Kids Investment and Development Accounts) to be opened for every newborn child in 2007 and beyond, with the goal of encouraging savings, expanding opportunities, and promoting financial literacy. Kids Accounts would be seeded with an initial deposit by the federal government, with progressive matches on private contributions to the accounts, just like the SEED accounts in Chicago.