Research shows even a small balance can have an outsize effect on a family’s attitude toward college education.
Excite Credit Union targets young children primarily from immigrant-heavy neighborhoods with its Step Up Savings program.
As part of its holistic approach to increasing financial inclusion, the credit union is working with community partners, including schools and nonprofit advocacy and self-help organizations.
CU QUICK FACTS
Excite Credit Union
HQ: San Jose, CA
Data as of 09.30.19
12-MO SHARE GROWTH: 4.7%
12-MO LOAN GROWTH: 0.1%
Excite Credit Union ($492.8M, San Jose, CA) wants to help make college an attainable goal for the children of its lower-income members, and it’s banking on a special new savings account to do that.
Called “Step Up Savings,” the credit union makes an initial deposit of $50 when the account is opened at a branch or remotely at a community event or school. It then matches up to $25 in deposits every year and contributes $25 to the account when the child turns 5, 10, 15, and 18. On balances up to $2,500, Excite offers an interest rate of 5%.
The credit union launched Step Up Savings in November 2019 as a follow-up to a similar account that debuted in early 2019. That account quickly attracted about 900 participants but wasn’t heavily reaching the market the credit union had primarily targeted: low-income families. The Step Up Account, which adds the annual match and birthday bonus, already has attracted a couple dozen takers in its first few weeks.
Mindset Over Matter
A college degree will cost much more than a savings account can generate during a youngster’s elementary and high school years, but it’s not the size of the account that matters. It’s the mindset, says John Hogan, the credit union’s vice president of community relations. Saving even a relatively small amount of money for college instills the expectation that college is in their future, and that alone makes that life-changing move more likely, Hogan says.
John Hogan, Vice President of Community Relations, Excite Credit Union
Excite is basing that assumption on research from Prosperity Now (the former Corporation for Enterprise Development), a nonprofit based in Washington, DC, dedicated to expanding economic opportunity for low-income families and communities.
“Data shows low-income kids with even $500 in college savings have three times the chance of enrolling in college and four times the chance of completing college than low-income kids who have no such account,” Hogan says.
He points to the growth of such Children’s Savings Accounts (CSAs) as a tool for improving the economic security of families and communities around the country.
“We’re leveraging that movement and bringing it right here to San Jose,” Hogan says.
But the credit union isn’t going it alone.
For an in-depth look at CSAs, Hogan recommends downloading Designing Children’s Savings Account Programs With An Equity Lens, a report from Prosperity Now.
The Power Of Partnerships
With Step Up Savings, Excite is addressing what Hogan calls the “opportunity gap” for low-income families. In its own product line, the credit union saw firsthand how higher-income families tended to be the ones that opened the original children’s savings account. So, to market the new, sweetened CSA, Excite is partnering with local schools and nonprofit organizations engaged in such issues as affordable housing and financial literacy to market.
A key partner is the East Side Alliance, part of the Silicon Valley Education Foundation. The alliance is a coalition of eight local school districts working with San Jose State University and Evergreen Community College on creating a pathway for education that begins with kindergarten, continues with guaranteed admission to college, and ends with a degree. Scholarship and other funding avenues are part of the strategy, and that’s where Excite comes in.
Earlier this month, the credit union met with the superintendent of one of the districts to sell her on the savings plan. This was a major step for Step Up Savings.
“She loved it and latched right onto it,” Hogan says.
It’s not the $500 that triggers these incredible outcomes. It’s the college-going mindset.
The school chief invited the credit union to participate in an upcoming district event that typically attracts approximately 900 families.
“We’re not going to sell bank products in schools, we’re not going to put flyers in children’s backpacks,” the Excite community relations executive says. “We’re going to work through school and parent organizations and community groups that provide such things as housing and food assistance.”
No Rabbit Hole
Some of Excite’s partner organizations offer financial literacy for low-income families. These groups heavily target the immigrant communities, primarily Latino and Vietnamese, that are so prevalent in the credit union’s field of membership, and Excite will send a financial educator to help in those efforts.
Meanwhile, Excite leaders don’t believe they’re going down a rabbit hole with such a holistic approach. In fact, a fictional rabbit plays a role in the credit union’s strategy. The credit union has donated a couple thousand books from the popular Sammy Rabbit series that uses songs, stories, and activities to teach young children positive money habits.
Taken together, the savings program, financial literacy, book donations, and other outreach combine to form a holistic effort to create financial inclusion in neighborhoods where many residents are “either unbanked or unfairly banked,” as Hogan puts it, but have aspirations for a more prosperous future.
“Kids learn from their parents, and we’re talking about parents that immigrated here to pursue the American dream. Their hope is that their children will do better financially than they did, and that success will be achieved through education," Hogan says.
Click the tabs below to see flyers in three languages provide details about Excite’s Step Up Savings program and speak to the three largest groups in the credit union’s field of membership.
Finally, Financial Inclusion
In that sense, then, the college savings program is more a way to prime the pump than pay the freight when it comes to paying for higher education.
“It’s not the $500 that triggers these incredible outcomes,” Hogan says. “It’s the college-going mindset. And, we know post-secondary education and training is critical to financial stability and mobility.”
Exposure to mainstream financial products generally is another benefit. The credit union opens accounts in the child’s name but requires an adult 18 or older to serve as the custodian. If the account is closed before the child’s 18th birthday, they don’t receive the incentives or extra contributions made by the credit union.
Custodians can open Step Up Savings accounts at community events or in Excite branches, and they can make deposits in one of the credit union’s six branches or in one of the thousands of locations that are part of the CO-OP shared branching network. Four of those branches are in the Silicon Valley region; the other two are are in Wilmington, NC, where the Step Up program also is being offered.
The credit union does not require a pre-existing relationship to open a Step Up Savings account, but the accounts could serve as a first step toward using more products at the credit union and perhaps toward using more sophisticated savings instruments like the tax-advantaged 529 savings plans that millions of American families use to put away money for college.
“The whole idea of financial inclusion is something we really want to instill in the community, beginning with children at a very early age,” Hogan says. “That’s the strategy and the plan.”
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