“Freedom to Think What Could Be Best for Our Family”: A Guaranteed Income Experiment in <i>CollegeBound</i> St. Paul/A Children’s Savings Account Program

Abstract

The City of Saint Paul’s CollegeBound Boost (Boost for short) program is the first to test combining Children’s Savings Accounts (CSAs) with a monthly guaranteed income payment ($500 per month) and targeted quarterly CSA deposits ($250 per quarter) to families living at 300% of the poverty line or below. The goal of this study is to understand policy implications of focusing on meeting basic needs today versus security and growth needs for tomorrow in the lives of the poor. Semi-structured interviews with 32 Boost participants reveal that families characterize their financial situation as just “making it” through use of budgeting, welfare, family help, extra work, and borrowing. Congruent with a financial needs’ theory of saving, we find that across study groups participants, in part, spend and save according to a hierarchy of needs (first spending on survival such as food and bills, followed by saving for security, and lastly, saving for growth needs such as education and retirement), with findings supported by actual spending data. Further, this study design allows us to see that, consistent with financial needs theory (and contrary to conventional attitudes about irresponsible spending), after survival needs are met, participants receiving guaranteed income use a portion of the $500 payment to save for their security and growth needs. A policy implication of this study is that programs like the prototype Boost which combines present income and future asset strategies such as CSAs together might be able to provide low-income families with an environment rich for pursuing security and growth needs (i.e., the freedom to think what could be best for their futures).