North Carolina ranks 32nd among all states for child poverty, with one in five children growing up in households with incomes below the federal poverty line. Growing up in poverty has lasting repercussions, and in a state where child poverty rates are so high, children in North Carolina are particularly at risk for a wide range of behavioral, social, emotional, and health problems.
But the poverty rate only measures household income. What if we explored household financial security in North Carolina by examining what households âownâ versus what they âearn? Ultimately it’s money, but economic theory shows that what people own (their wealth or savings) works very differently from income. Here’s how:
- Saving helps households get ahead and stay ahead through investments in housing, education and small businesses,
- Savings provide flexible resources that can be used for long-term investment or short-term emergency, and
- Savings allow money to be passed from one generation to the next.
Racial disparities in family wealth
Unfortunately, wealth inequality overshadows income inequality in the United States According to recent data from the Urban Institute, the median white household has ten times more wealth (over $ 170,000) than the median black household (approximately $ 17,000).
Another way to look at wealth and inequality is to look at the share of households that do not have enough assets or savings to stay in poverty for three months, if they were to lose their source of income. returned. By this measure, North Carolina is also among the ten worst states, with 26% of households classified as “poor in assets.” Additionally, more than two in five black households (40.3%) are considered asset poor in North Carolina. While assets and savings are essential to helping households grow and stay ahead, what can North Carolina do to address our shocking level of asset poverty?
Sow savings in childhood
A promising strategy for creating wealth for all households is to invest in children’s savings accounts (also known as baby bonds). Children’s savings accounts (CSAs) are savings or investment accounts for children and youth. The accounts are seeded with an initial deposit and offer additional incentives to save. Most CSA accounts are limited to savings for college or post-secondary expenses.
Fourteen states currently provide some sort of initial deposit and / or savings match to encourage households to save into their state’s 529 University Savings Plan account. Additionally, three states (Maine, Nevada, and Pennsylvania) automatically provide an initial deposit to open a $ 529 college savings account for all children from birth or kindergarten.
The opportunity now: ARP funds
California is the new kid on the block, having recently appropriated nearly $ 1.8 billion to offer kids savings accounts for young people. CHWs will receive up to $ 1,000 and will be provided to approximately 3.7 million low-income public school students in Grades 1 through 12. Additionally, California approved $ 107 million for birth-based CSAs for all newborns in 2022. It is important to note that California’s funding for this effort includes $ 1.8 billion from the federal American. Rescue Plan (ARP).
North Carolina policymakers should consider allocating a portion of the state’s $ 5.4 billion ARP funds to North Carolina children’s wealth building accounts. What better way to use one-time federal funds than by investing in building long-term wealth for North Carolina children?
Learn more about children’s savings accounts at Prosperity Now. Want to go further ? Contact your state legislator and urge them to allocate a portion of the state’s US bailout funds to help establish CSAs for children in North Carolina.