SAN DIEGO (KGTV) - A new bill signed into law in July will expand the California Kids Investment and Development Savings Account (CalKIDS) program beginning next year.
Initially, CalKIDS would provide a ScholarShare 529 account with $25 of "seed" money for every child born in the state. AB 132 expands the program, adding $500 to the account when a child begins first grade in a California public school. The program also offers an additional $500 for children in foster care and $500 more for any children experiencing homelessness.
"We think this will establish a college-going culture in California," says Julio Martinez, the executive director of the ScholarShare Investment Board.
"We don't want to let financial concerns be the biggest deterrent for students," Martinez says. "We want to make sure that they know the state does believe in them and that everybody should be able to have access to higher education."
Lawmakers set aside $1.9 billion in state and federal funding for the first year. It will establish accounts for approximately 3.7 million California students. After that, the program will cost an estimated $170 million each year for all newborns and new first graders.
Martinez says it's an investment in the kids and the state's future.
"I think we can do a lot to push students to continue their pursuits and their ambitions to become the professionals they want to become," he says.
The money will go to any child born in California, regardless of their parents' status. They must live in the state for at least one year.
Students can use it for any kind of higher education, including four-year colleges and universities, community colleges, and technical schools.
Financial advisor Dennis Brewster, from Sagepoint Financial in San Diego, says the state opening accounts for people makes it more likely that parents will continue to save for their child's education.
"A lot of times, the toughest step is that first one, and then it never gets done. That's the reality of it," says Brewster. "So I think by the state doing that automatically it'll make a big difference... It's encouraging savings, and it's encouraging higher education. Both of them are great ideas."
Brewster says even a small amount of savings can grow over time, thanks to compounding interest. He tells people that $500 invested in the S&P 500 20 years ago would be worth $2,500 today. That's why parents need to start saving as early as possible.
"Sometimes small amounts starting out can grow to bigger numbers when you've got that long time horizon in front of you," says Brewster.
Martinez says the program will begin in the summer of 2022, and anyone who wants updates or wants to open an account right away should visit CalKIDS.org.