Before Trump’s accounts, there was SEED OK: How children were affected

The soon-to-be-launched Trump Accounts are a new long-term savings and investment vehicle aimed at children, but they’re not the first of their kind.

In 2007, thousands of families in Oklahoma were randomly selected to participate in the state’s college savings program. In many ways, Saving for Education, Entrepreneurship, and Low Pay for Oklahoma’s Children, also known as SEED OK, provides a bird’s eye view of so-called child development accounts, or CDAs, and their potential.

About half of the freshmen in the program received a $1,000 grant deposited into an Oklahoma 529 college savings account. The other half received no account or initial deposit.

A 2021 analysis of the Center for Community Development at Washington University in St. Louis, who designed and implemented the project in partnership with the Oklahoma State Treasurer’s office, found that families with accounts had positive results, from savings to behavioral changes. For example, children with CDA were more engaged in their education, and both children and their parents had higher educational expectations, the study found.

Low-income children especially benefited, according to a summary of the 2021 study by the center. CDA increased the likelihood that financially vulnerable families would save for future college expenses, the study found.

“SEED OK is a test of these kinds of startup ideas for wealth building, including Trump’s accounts,” said Jin Huang, co-director of the Center for Community Development. For three decades, “our institute has been exploring wealth creation in different projects,” he said. “I think SEED OK provides very strong evidence about the potential outcomes we can achieve.”

Now many of the first group are graduating from high school and deciding what to do next.

“In the treatment group, after 18 years, 100% of the treatment children still have possessions,” Huang said. “The total amount of wealth creation is also much, much higher.”

In addition to larger account balances compared to those who did not receive seed money, many participants focused on college, he said.

“If we have an institutional background that encourages all children and families to accumulate wealth, that changes their thinking, that changes their perspective,” Huang said. “Policy intervention raises parents’ educational expectations for their children.”

Typically, about 40% of students in Oklahoma enroll in college directly after high school, Huang said. In this test, the share will be closer to 64%, he estimated.

Monica Rachelle and her son, Hayden, were selected to participate and receive seed funding. “We got it when we were in the hospital” she just gave birth, he said. Rachelle said at the time she knew nothing about the program, and had no educational goals for her newborn.

In the years that followed, this narrative was a constant reminder that college was his, he said.

Rachelle is a single mother and a health worker at a local hospital. “This job is good, but I don’t pay the doctor,” he said. He took on more shifts and started saving, he said: “The door opened.”

Hayden did well in school and found meaningful extracurricular activities, she said. He was accepted to several four-year colleges, including one of his top choices: the University of Colorado Boulder.

“No one in our family has ever received a bachelor’s degree, now you have the opportunity to be the first,” said Rachelle. “I’m proud of him.”

Maine used a similar program a decade ago where all Maine children born on Jan. 1, 2013 or later, were automatically awarded a $500 grant from the Alfond Scholarship Foundation in a 529 plan to help pay for college, trade school or other postsecondary education.

With this grant money, families are twice as likely to report that they expect their child to attend college, according to the National College Attainment Network. Other states, including Pennsylvania and California, have also experimented with early investment programs.

“They serve as good comparisons of what we know works and what doesn’t from the field,” said Madeline Brown, a policy fellow at the Urban Institute, a Washington-based think tank.

First, having a college savings account “changes the way parents look at their kids,” Brown said. And now, “kids go to college and use these dollars.”

In many ways, these programs paved the way for Trump Accounts, new tax-deferred accounts for children.

“The most important finding we have about wealth creation is that the SEED OK policy evaluation is sustainable and risky,” Huang said.

All parents or guardians with children born between 2025 and 2028 who open a Trump Account, also known as a 530A account, will receive an initial deposit of $1,000 from the US Treasury Department.

After its official launch on July 4, parents, guardians, grandparents and others can contribute up to $5,000 a year in after-tax dollars up to a year before the beneficiary turns 18.

Advocates of the Trump administration’s new savings plan say Trump Accounts could have the same long-term benefits as some of the government-based programs that came before.

“What we’ve found is that if a child has a small amount like this, there is a greater chance that he will graduate from high school, go on to college, start a business, start a family, and not be incarcerated,” said technology executive Michael Dell during the CNBC Invest in America Forum in April. “It improves the mental health of the child, it improves the mental health of the parent. So, we thought this would be great.”

Dell and his wife, Susan, pledged $6.25 billion to provide an additional $250 seed deposit for children born between 2016 and 2024 — who would not qualify for the Treasury’s $1,000 contribution.

TrumpAccounts.gov projects that accounts can grow to $6,000 over 18 years, assuming no other contributions are made other than an initial $1,000 Treasury deposit. By itself, however, that would not be enough to make a significant dent in future college costs.

After participating in SEED OK, Hayden’s initial deposit and Rachelle’s donations grew to several thousand dollars over the years, but her savings did not come close to what they would need to cover the tab for college, even at a public institution. For out-of-state students at the University of Colorado Boulder, tuition alone is approximately $46,000 for the upcoming academic year. After including room and board and books, the cost jumps to $66,500.

Rachelle said they will use student loans to make up the difference and that Hayden is enrolled for the fall semester. “He got one of the few spots in his program, and we couldn’t pass up this amazing opportunity,” she said.

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