110th CONGRESS, LEGISLATIVE ISSUES A - Z
KIDS ACCOUNTS
ISSUE: The America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act is legislation introduced in the 109th Congress to promote savings, asset building, and financial literacy among young Americans. “KIDS”, an acronym for “Kids Investment and Development Account” is the name of the accounts that would be established in every child’s name born in 2007 and after. Each KIDS account would be seeded with $500 from the federal government. If a child is born into a household that falls below the national median income, the federal government would supplement the account with an additional $500. As the child gets older, contributions may be made by the child, the family, or practically any other source and directly deposited into the KIDS account.
The account would grow tax-free and children living in low and moderate-income households would have their savings matched. When the child reaches age 18, he or she will be able to make withdrawals for certain qualified expenses like college tuition or a home. The accountholder would also have the option of keeping the balance intact and saving it for retirement.
When the accountholder reaches age 30, they must begin the process of repaying the seed money to the federal government. However, the capital gains in the account would be theirs to keep.
CUNA POSITION: CUNA supports KIDS accounts and is part of a broad coalition supporting its enactment by the Congress. CUNA supports asset-building, particularly by those who are younger and least able to afford it. KIDS accounts are an innovative approach to contributing to the national savings rate and educating people at a young age about financial literacy.
IMPACT ON CREDIT UNIONS: KIDS accounts would provide credit unions with the opportunity to offer these accounts to their members and build relationships with younger people who may be less likely or able to save for college or a first home.
STATUS/OUTLOOK: The ASPIRE Act of 2005 (KIDS Accounts) has been introduced in the Senate by Senator Rick Santorum (R-PA) as S.868 and in the House of Representatives by Representative Harold Ford (D-TN) as H.R.1767. No action on was taken on these bills before the close of the 109th Congress. No similar legislation has been introduced this year in the 110th Congress.
CONTACTS: John Hildreth, (202) 508-6724, jhildreth@cuna.coop
