A new (?) idea for welfare right from the cradle

[Aimless]

Hear me out.

Everyone hates welfare, but almost everyone loves some level of public support of education, child-care, that sorta thing.

The US public education seems to be almost as wasteful as its healthcare system and its social security system.

What would the pros and cons be of taking a small portion (say $2/day, perhaps inflation-adjusted) of the money spent on the education of every single child in the US every month and putting it in a personal inflation-beating investment portfolio--composed of eg. index funds--of some sort with a reasonable level of risk? The idea would be that money can go in but parents can't take it out and neither can the account-holder until he turns 18, and perhaps not even then.

Kids would be told about this account from an early age, preschool at the latest. Over the course of grade school and on through highschool this personal savings fund would form the core of a basic course aimed towards fostering financial literacy. Every year they'd get a little update on the estimated value of their portfolio. This way there would be a summat class-neutral way to keep children aware of these issues and possibly also even hopeful wrt future prospects. It would also help parents with the sometimes difficult task of saving for their children's futures.

When they turn 18 they may perhaps be able to use their portfolio as eg. security for a decent student loan.





Whatcha reckon? What are the potential benefits? What are the pitfalls?

[Veldan Rath]

Personalized accounts? You Kapitalist PIG!

[wiggin]

See this as largely a waste. You can teach the same fundamentals with virtual money without the dubious cost. Also, $730 a year will barely make a return worth mentioning, while costing a huge amount of money. (Back of the envelope calculation costs about $55 billion/year, which is most of the current Department of Education budget - $68 billion.)

[GGT]

1. There is no such thing as an inflation-beating investment portfolio. We used to call them Savings Accounts, because they paid interest above inflation....but that no longer holds true.

2. Taking $2/day from public education funds can mean losing art, music, athletics, library...and/or a school nurse, librarian, coach, gym or health teacher.

3. Our spending on Education is already debt-based. Our federal tax revenues barely pay for SS, Medicare and Medicaid. Everything else, including Military and Veteran Affairs, scientific R & D for medicine and space, satellites for communications and weather tracking, infrastructure maintenance and improvements ....are programs based on debt and borrowing.

4. Teaching financial literacy is different than teaching personal fiscal responsibility. Preschool is too early --- those kids are still trying to figure out the cost of a pack of gum vs a video game, and what their "allowance" or chores actually means in monetary terms.

[Lewkowski]

1. There is no such thing as an inflation-beating investment portfolio. We used to call them Savings Accounts, because they paid interest above inflation....but that no longer holds true.

2. Taking $2/day from public education funds can mean losing art, music, athletics, library...and/or a school nurse, librarian, coach, gym or health teacher.

3. Our spending on Education is already debt-based. Our federal tax revenues barely pay for SS, Medicare and Medicaid. Everything else, including Military and Veteran Affairs, scientific R & D for medicine and space, satellites for communications and weather tracking, infrastructure maintenance and improvements ....are programs based on debt and borrowing.

4. Teaching financial literacy is different than teaching personal fiscal responsibility. Preschool is too early --- those kids are still trying to figure out the cost of a pack of gum vs a video game, and what their "allowance" or chores actually means in monetary terms.

1. The stupidity of this remark hurts. I'm guessing you mean there is no "guaranteed inflation-beating investment portfolio" because there are literally thousands of examples of investment portfolios that beat inflation.

2 and 3. I'm not in favor of this idea but you do realize that most of a school's budget is done locally not at the federal level right?

4. Financial literacy is incredibly important - I don't think its ever too early to start. I'd rather it err on the side of too early then late. Or what we have now which is NOT AT ALL.

[Aimless]

See this as largely a waste. You can teach the same fundamentals with virtual money without the dubious cost. Also, $730 a year will barely make a return worth mentioning, while costing a huge amount of money. (Back of the envelope calculation costs about $55 billion/year, which is most of the current Department of Education budget - $68 billion.)

The problem with virtual money is that it isn't real and so the real payoff is lower and far less tangible which may be a problem to those who are otherwise difficult to motivate eg. the hopeless and poor with parents who can't/won't help put these principles into practice.

The goal wouldn't be simply to "teach" financial literacy in the same way we now attempt to teach maths and basic literacy. See Lewk's oft-repeated claims about no-one really caring about school. The primary goal would be to ensure that every kid, esp. those who're the most at risk of becoming poor troublemakers, start their adult lives with some solid assets to their name and a good attitude about their financial futures perhaps even with a plan for what to do with their assets. Everyone cares about money and confidence.

The US as a whole spends 11K/year per student on elementary and secondary education so around 1K/student every month unless you have school every month of the year. I propose that the rest of the system may save money on this venture if it helps even a small percentage of kids avoid a lifetime of being sucky.

[Aimless]

Personalized accounts? You Kapitalist PIG!

Fair start

[Aimless]

1. There is no such thing as an inflation-beating investment portfolio.

In the long term, yes there is.

2. Taking $2/day from public education funds can mean losing art, music, athletics, library...and/or a school nurse, librarian, coach, gym or health teacher.

I don't know if I believe it considering how school costs have risen and considering how much you guys pay per student but I think I might be okay with losing at least a portion of what you listed. Or, you know, something you didn't list.

3. Our spending on Education is already debt-based. Our federal tax revenues barely pay for SS, Medicare and Medicaid. Everything else, including Military and Veteran Affairs, scientific R & D for medicine and space, satellites for communications and weather tracking, infrastructure maintenance and improvements ....are programs based on debt and borrowing.

It's interesting how almost all those things focus on adults/the elderly and mostly when it's too late. I'd rather your govt. put itself into debt for a worthwhile long-term investment, wouldn't you? Maybe it'd even lead to lower SS and Medicare/Medicaid costs. It's possible that a large amount of the socioeconomic aspects of poor health and various adverse life events are caused by 1. relative financial illiteracy and 2. early disadvantages.

4. Teaching financial literacy is different than teaching personal fiscal responsibility. Preschool is too early --- those kids are still trying to figure out the cost of a pack of gum vs a video game, and what their "allowance" or chores actually means in monetary terms.

Preschool is the perfect time to begin teaching kids that a penny in the bank is worth more pennies in 10 years and that it may worthwhile to wait for those pennies. If they can think about the costs of gum and about video-games then they can probably start thinking about their hoard.

I dunno if all kids get an allowance, esp. at that age. I don't really care about the whole being-paid-for-chores business either. The key lesson, the first lesson they need to learn is that saving money is worthwhile. Many people can't or don't learn that lesson on their own, esp. not from an early age. The most at-risk groups learn the exact opposite of that lesson, ie. that saving money isn't worthwhile. It's never too early to start making sure they learn the right lesson.

[Aimless]

My major concern is perhaps how this may lead to teen pregnancies and kids being used rather than eg. kids esp. girls becoming more empowered.

[Wraith]

I actually kinda like the idea, but I don't think it'd be financially worthwhile. I could also see most kids blowing all their money the moment it becomes accessible to them. It'll probably seem more like a windfall they're entitled to than a financial bedrock. This would probably be better if it were their parents providing the money for it; at least then it comes from a real source, and they're much more likely to have to deal with their parents if they waste it all.

[Aimless]

I agree about the possibility of kids viewing it as a windfall that they can waste, and am not sure how to prevent that other than to give them 12 years' worth of guidance along the lines of "don't waste it, use it to fund a good life plan, it's worth delaying some gratification". Some options may be to raise the age at which they can access it freely (rather than using it as an asset to eg. secure a good student loan or the like), to make it a little more difficult to convert into $$$, to restrict the program to those kids that are really at risk of suffering from not having anything to their name when they become adults (eg. poor/lower middle class families), to make parents and children more invested in the scheme by letting (and helping) them match the govt by just eliminating the practical and cognitive barriers to investing in something more complicated than a piggybank (see studies examining association of number of options to rate of participation in retirement plans for a possible analogy).

The main reason I don't want to have to rely too strongly on the parents is my suspicion that the parents are often the problem (intentionally or unintentionally) when it comes to the most at-risk kids, either because they have limited means, bad luck, or bad attitudes.

[Aimless]

Tbh I may be willing to accept a number of middle-class kids going to the trouble to convert their portfolio to iPads, vacations and cars if it would keep a sufficiently large number of lower class kids out of poverty and crime.

[Wraith]

Maybe give it a vesting schedule? 10% every year, so it takes a decade to be able to draw on all of it? At least then if they want to blow it all at once as soon as possible, they have to go through a loan company using the remainder of their funds as collateral. I still don't think it'd work out well enough to be worth the expense.

I do agree that parents are often the problem, but I think it's doomed to fail without parental guidance and reinforcement. If we can't count on parents to instill good financial discipline in the first place, we can't count on them to help the kids make good decisions here either.

edit: Did the math, and assuming an 8% interest rate and annual deposits, this plan would result in an expected ~27k at maturity. Maybe 10% a year is too harsh; 25%, then?

[Dreadnaught]

Why create entitlements when we can't afford the ones we have already? Inevitably people will think of the money as "guaranteed" and demand more when its not enough to pay for something significant.

I would rather we spend the money on pushing real business and financial education to lower grades, which is often absent from our education.

[Aimless]

This would come out of the money already allotted.

[Dreadnaught]

The premise of that taking is that the money is being spent unwisely. And I would argue we're probably allotting too much skrilla in the first place. I would rather focus on spending the money wisely.