The Case for Extending Financial Inclusion to Children

Children are significantly more likely to maintain a relationship with financial institutions and have greater financial assets later in life when they own a savings account earlier in life. However, some children gain access to savings accounts while others do not—an inequity that tends to be based on parents’ socio-economic status. This paper explores the case for extending financial inclusion to children by improving access to basic financial services. Such an approach may offer a number of economic benefits, especially among those children whose parents have limited financial resources. Policy innovations that make savings accounts widely available to children may be a valuable tool to trigger increased savings behavior that can continue into adulthood and lead to improved financial outcomes over the long-term.

This paper builds a case for extending early financial inclusion to children by discussing how early financial inclusion might accelerate their capabilities to save and presents research findings on the current state of children's savings. The paper discusses policy innovations and recommendations for designing an infrastructure that extends financial inclusion to children. The paper also presents research findings by Friedline and colleagues that inform how children experience early financial inclusion by predicting their financial outcomes, including savings accounts and amount saved.

Finally, research findings are used to describe how policies might be re-envisioned to develop infrastructure around children's savings and maximize benefits to children whose parents have few financial resources. The paper expands on the ASPIRE Act (a legislative proposal that would provide every American child with a savings account at birth for post-secondary education, homeownership and retirement) by proposing infrastructure improvements that more successfully extend financial inclusion to all children.

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