California has launched the California Kids Investment and Development Savings Program, or CalKIDS, making all newborns and low-income public school students eligible for a state-funded college savings account, according to a Wednesday press release.
CalKIDS is administered by the ScholarShare Investment Board, a state agency responsible for California’s official college savings plan known as ScholarShare 529, according to the press release. Julio Martinez, executive director of the ScholarShare Investment Board, said in an email that all newborns born on or after July 1, 2022 will be eligible for up to $100 in seed money in a 529 college savings account, and low-income public school students may qualify for as much as $1,500.
While the program automatically offers eligibility for Californian newborns, Martinez noted that awards are also distributed to all low-income public school students, regardless of immigration status.
“California is telling all of our low-income students that we believe they’re college material — not only do we believe it, we’ll invest in them directly,” said Gov. Gavin Newsom in the press release. “With up to $1,500 going to eligible students, we’re transforming lives, developing college-bound mindsets, and setting up generational wealth for millions of Californians.”
While Newsom emphasizes that this program will foster “college-bound mindsets,” the CalKIDS savings account is not exclusive to four-year university post-secondary paths. Rather, the press release noted, the CalKIDS account may be used for eligible institutions abroad, community colleges and vocational and professional schools.
In addition, Martinez noted that funds in a student’s CalKIDS account are available for use until the individual is 26 years old, allowing students a large window of time to pursue education. After they reach the age of 26, the funds will be pulled and offered to another child enrolled in the program.
However, Martinez did note that if a student or family has their own ScholarShare 529 account, there is no age or time restriction for funds available in that account.
“CalKIDS participants and their families are encouraged to register online to access their CalKIDS accounts, take advantage of additional financial incentives, if applicable, and link a newly established or existing ScholarShare 529 account,” the press release reads. “By doing so, families can make contributions thereby maximizing growth potential and view all of their total college savings in one place.”
While families cannot deposit funds into their CalKIDS account, Martinez encouraged families to add money to existing ScholarShare 529 accounts that they may have. He noted that both accounts have the potential to grow “tax-deferred” until the child is able to make “qualified distributions.”
Martinez emphasized that the ScholarShare Investment Board is encouraging families to create or link existing ScholarShare 529 accounts so families can contribute to their accounts and in the future, use the tax-free funds for qualified higher education expenses.
According to the press release, CalKIDS is the largest children’s savings account program in the United States, with an estimated 450,000 newborns annually in California and 3.4 million low-income public school students.
“It is widely understood that education serves as the great equalizer, especially among underserved students,” said State Treasurer Fiona Ma in the press release. “An investment of this magnitude in our children will undoubtedly help make the dream of a college education come true for a large number of families statewide.”
