In the United States, the largest Child Development Account (CDA) programs have been built on existing college savings plans, often called 529 plans after the relevant section of the Internal Revenue Code.
The state of Maine’s College Challenge is the first statewide, universal CDA in the nation; the program automatically deposits $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.
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.
Our policy brief “College Savings Plans: A Platform for Inclusive and Progressive Child Development Accounts” describes the features of direct-sold 529s that make these plans especially well-suited to CDAs. The brief explains why 529 plans are the best existing platform for inclusive, progressive CDAs. Read more here.