Saving for post-secondary education in individual development accounts

Journal of Sociology and Social Welfare, Sept, 2005 by Min Zhan, Mark Schreiner

The independent variables include important program-related factors (also known as "institutional" factors) and participant characteristics. Program factors include the match rate, the monthly savings target, hours of required financial education, and whether participants used direct deposit into their IDAs. The monthly savings target is the total match cap (i.e., the limit on the amount of deposits that can be matched) divided by the time cap (i.e., the number of months after opening an account in which a participant may make matchable deposits). IDAs in ADD have both a match cap and a time cap because funds are limited in time and amount. If deposited each month and not removed as an unmatched withdrawal, this level of savings would lead to net deposits equal to the lifetime match cap by the end of participation. Participant characteristics include demographic information (gender, age, marital status, race/ethnicity, number of children, and number of adults), education and employment status, household income, bank account ownership, home ownership, and receipt of AFDC/TANE Detailed information on these variables is presented in Table 1.

The regression also includes a yes/no variable that indicates whether a given participant was an "education saver" who made a matched withdrawal for post-secondary education or who declared at enrollment that he or she intended to make such a matched withdrawal. There are two major reasons that we include participants who have not made matched withdrawals as "education savers". First, for most participants, savings ended and matches were allowed only for deposits made through December 31, 2001, at which point the most recent data are available. However, matched withdrawals were possible at most ADD programs through June 30, 2002. Therefore, the "time window" for the current data does not catch participants who made a matched withdrawal after the end of the "savings period" (i.e., December 31, 2001). This group includes a large share of intended "education savers". Second, further analyses indicate that there are no significant differences between "intended education savers" and "actual education savers" in terms of their demographic and socioeconomic characteristics.

Similar yes/no indicator variables are also included to mark participants who declared an intention to save for home purchase, home repair, microenterprise, retirement saving, or job training. Finally, in order to examine how being an education saver moderates the associations between program and participant factors and savings outcomes, the regression model includes interaction terms between the indicator for "education savers" and all the other independent variables.

Analysis

Following descriptive and bivariate analyses, multiple regression was used to examine how Average Monthly Net Deposits in IDAs might differ between "education savers" and others in ADD. AMND was regressed on program factors, participant characteristics, and interactions between the indicator for "education savers" and each of the other independent variables. After list-wise deletion of cases with missing values, the regression sample encompassed 1,979 cases. This model simultaneously estimates how the savings outcome is associated with program and participant factors, with being an "education saver", and how being an "education saver" moderates the associations between AMND and other program and participant characteristics. Specifically, the coefficient on the (non-interacted) indicator for "education savers" is an estimate of the link between characteristics that are omitted from the regression that are associated with both "education savers" and AMND. The interaction effects provide estimates of how being an "education saver" moderates the associations between AMND and program and participant characteristics. Overall, the model intends to examine both whether "education savers" are different from other savers and, if they are different, why.