Experimental Effects of Child Development Accounts on Financial Capability of Young Mothers

In the financial capability policy known as Child Development Accounts (CDAs), investment accounts with incentives enable families to accumulate assets for children's development and to achieve life-cycle goals. With data from SEED for Oklahoma Kids (SEED OK), a randomized statewide policy experiment, we examine the effects of a CDA intervention on the use of mainstream financial products among young mothers aged 18-24 (N = 825; treatment = 410 and control = 415). Results suggest that, 4 years after implementation of the CDA, asset- and debt-product use was higher among young mothers in the treatment group than among their counterparts in the control group. The treatment-control difference in the use of financial products partially results from the combination of young treatment mothers' access to the CDA policy, financial knowledge, and financial skills. The CDA policy creates opportunities for them to practice financial knowledge and skills, and has positive impacts on financial capability. This is the first experimental study to test the effects of CDAs on financial capability. Findings indicate that asset-building policy maybe an effective mechanism for delivering financial capability services (such as financial education, financial counseling, and financial coaching) to children and families.