The Forman S. Acton Educational Foundation created the “Acorn Fund” at the Community Foundation of South Jersey to establish the accounts.
“This is an important step in making sure Salem’s youth have every opportunity to pursue their dreams,” said Kathryn Markovchick, president of the Acton foundation.
Michael Sherraden, director of the Center for Social Development (CSD) at Washington University in St. Louis’ Brown School, praised the initiative.
“Our research shows that having assets for college may trigger positive changes in parents’ attitudes about their children’s future,” Sherraden said. The SEED for Oklahoma Kids experiment is a crucial policy test in the United States, offering the first model of universal and progressive Child Development Accounts (CDAs) and informing policies at local, state and national levels.
An initial contribution of $275,000 will fund the Salem City CDA for children in pre-K through high school. Nearly 1,200 students will be eligible to enter the program in April, and all children who live in Salem City in the future will be automatically eligible for a contribution to a CDA in their name, according to a press release.
“The Salem City CDA is unique in that families with children of all ages can participate, which is fantastic,” said Margaret Clancy, CSD policy director. She advised the Salem City foundations on the structure of the accounts. “Typical CDA programs focus on a particular cohort, such as newborns or kindergarten children.”
As with the largest CDA programs in the U.S., Salem City uses the state’s 529 college savings plan. Available as early as birth, CDAs aim to encourage lifelong asset accumulation. Investments in 529s grow tax free, and withdrawals are not taxed if used for qualified education expenses. In addition, many states allow contributions to be deducted from state income taxes.
“This is a remarkable program that can be used as a model for other communities throughout the state,” said Sidney R. Hargo, executive director of the Community Foundation of South Jersey.
Several states and municipalities have provided 529 college accounts for children. Maine’s College Challenge was the first statewide, universal CDA in the nation, with the program now automatically depositing $500 into a 529 account on behalf of every child born in Maine. The Nevada College Kick Start program automatically deposits $50 into a 529 account for every public school kindergartner in the state. Both states’ 529 plans offer savings matches to state residents, as well.
The Acton Educational Foundation was formed in 2014 through the will of Forman S. Acton, a computer scientist, engineer and educator who sought to provide children in his hometown with access to education.