Chicago ABCs will braid three proven strategies: child savings accounts, direct cash assistance and visiting nurses in a dual-generation approach propelling families to economic security
In the Chicago region and across the country, income and wealth disparities by race and ethnicity seem intractable. Sixty-seven percent of African American households and 71 percent of Latinx households in Chicago are considered liquid asset poor, meaning they are so financially fragile that they do not have enough savings to stay above the poverty line for three months if they lose their income, face a medical crisis, or encounter any number of other life challenges. Racial and ethnic wealth inequality is at the core of most of the Chicago region’s thorniest problems, from underinvestment in quality education and housing to health disparities and food insecurity, to gun violence and police brutality. This inequity is rooted in entrenched and inequitable systems caused by centuries of racism, discrimination and segregation. We will not be able to realize our vision of a thriving, equitable and connected region until we tackle this systemic issue. And now, the COVID-19 pandemic has demonstrated – tragically – the impacts of wealth inequity.
The Chicago Community Trust focuses its strategy to close the racial and ethnic wealth gap on increasing economic prosperity for current and future generations of Black and Latinx individuals and families. We will achieve this goal by creating opportunities for households to increase incomes, build assets and reduce debts while addressing the systemic structures that perpetuate economic inequality. Our strategy includes creating opportunities for Black and Latinx families to build wealth from an early age and intergenerationally.
One approach the Trust is taking to build intergenerational wealth is a collaborative planning effort – Chicago Asset-Building for Children (Chicago ABCs) – which would advance three proven strategies: child savings accounts, cash transfers and visiting nurses in a dual-generation approach to propelling families to economic security. Chicago ABCs is a partnership between the Trust, Chicago Department of Public Health, Community Organizing and Family Issues, Family Independence Initiative, Heartland Alliance, and the Illinois State Treasurer’s Office.
Chicago ABCs is a proposal submitted to the Lever for Change, an economic opportunity challenge affiliate of the John D. and Catherine T. MacArthur Foundation. In June, the submission was selected as a finalist for the $10 million prize, which will be announced in the fall of 2020.
It begins with a critical life moment
A child’s birth should be a joyous and hopeful time. For nearly half of Chicago’s population, however, the reality is that this is a moment that can trigger a cycle of persistent intergenerational poverty. The birth of a child is often accompanied by short or long-term income disruption (lower-wage workers are less likely to qualify for paid time off) and new financial stresses. These factors dramatically increase the likelihood that asset-poor families fall into debt traps, poverty, or worse – situations that have lifelong negative impacts on children and their parents. Studies show that children who grow up in poverty are more likely to struggle in school, have lower job earnings and experience family instability as adults.
Chicago ABCs will build on two recent public commitments, Illinois’ new universal child savings accounts (CSAs) and the City of Chicago’s Family Connects visiting nurse program. Participants will receive additional transformational CSA deposits of $500 to $750 and cash transfers of $50 each month over 18 months. The goal of the program is to drive economic opportunity for 4,600 financially vulnerable families.
- Child Savings Accounts: An early savings intervention, often managed via a 529 plan, designed for the sole purpose of future educational opportunities. Research has shown that low-income children with $500 or less in a college savings account are three times more likely to go to college and four times more likely to graduate than their peers without the same dedicated savings.
- Cash Transfers: Unconditional cash assistance intended to ease the financial shock of having a newborn, along with accompanying supports such as social capital connections and financial education. Cash transfers that provide immediate support for basic needs can alleviate financial burdens, promote short-term economic wellbeing, and prevent the cycle of debt. Cash transfers can be transformative when paired with other supports like home visits, services, social capital connections, and financial coaching.
- Home Visits: A program that offers all families with newborns home visits by nurses, who will evaluate needs and connect them to resources.
The power of these programs working together
Cash transfers and home visiting programs are proven strategies that provide families immediate and direct financial, emotional, and physical support when a child is born. Recognizing that every family faces a unique set of challenges, Chicago ABCs program staff will connect parents to supports based on participants’ specific needs and interests. CSAs are powerful tools that invest in a child’s future educational path. When combined, they provide investment and hope to families both now and in the future, creating a web of support from a child’s first days and propelling them through adulthood.
Evidence around cash transfers points to increased incomes and consumption for families after three years. We hypothesize that these more short and medium-term cash transfer outcomes for families will enable them to contribute to their children’s CSA accounts and participate more deeply in the wraparound supports that improve the economic mobility outcomes of their children.
The outcomes the Chicago ABC collaborative will measure include each family’s financial health and general wellbeing, such as income, asset accumulation and involvement in supportive services. We also anticipate seeing mid-term outcomes within the first four years, including parental expectations for their children, parental levels of stress, families’ financial security, and children’s socio-emotional development and readiness for pre-K.
Through the partnership, Chicago ABCs will engage families in numerous ways and at critical points to not just increase their cash flow but catalyze household wealth that will positively impact two generations (or more). With the Trust as the convener, we will leverage not only the infrastructure established by the State’s CSA program and the City’s Family Connects pilot, but also the social supports (both local and national) and the research portal built into Family Independence Initiative’s cash transfer program; supportive services from Heartland Human Care Services’ asset-building team; and community building and parental supports from Community Organizing and Family Issues (COFI).
As the Chicago region continues to grapple with its deep and growing economic inequity, the Chicago ABCs collaboration aims to pilot and prove an effective model to support families in becoming more economically secure while investing in the financial future of their children. Models like this give us the opportunity to collectively recommit to one of our country’s core values and that of just about every parent, that our children have the chance to be more financially secure than their parents.