What A New Study Tells Us About Adding Grocery Store Rewards Cards to Children’s Savings Accounts Programs

As college costs continue to rise, financial aid and student loans are not enough to address the college affordability crisis. Parents may need to start saving at the birth of their child, if not earlier. Yet for low-income families who often struggle meeting day-to-day expenses, saving for college can be extremely difficult.  

Children’s Savings Account (CSA) programs help to lessen this financial burden by building assets for children’s educational future through initial deposits, incentives or savings matches that boost these nest eggs. As the number of CSA programs continues to increase at both the state and local levels, many programs, if not all, confront the problem of low saving rates by families. The CSA field has used initial deposits and saving matches as ways to encourage families to save, but an important question remains: How do you encourage parents to save more, and contribute more often, when there might not be money left to save?  

To make it easier and more feasible for low-income families to save, some CSA programs have begun using rewards cards. Here’s how they work. A family participating in the CSA program signs up for the rewards card program. Each time the family shops at a participating grocery store—including purchases made with a SNAP (food stamps) EBT card—the store provides a rebate or reward equaling a certain percentage of the purchase total, which goes into the family’s CSA. The rewards card program is driven by the principle of facilitation: the program facilitates saving efforts by embedding savings in people’s daily activities such as grocery shopping so that saving requires little additional effort on the part of individuals. The automatic saving feature in the rewards card program is crucial to ensuring regular account contributions.

While 529 college savings plans work for higher-income families, rewards cards aim to level the college-savings playing field by building a savings channel by which everyone, regardless of income, can benefit.  

In 2018, a rewards card program was implemented at two existing CSA programs in Wabash County, Indiana and St. Louis, Missouri. Both CSA programs contracted with local grocery stores and established rewards percentages that would go towards participants’ CSA accounts. The Center on Assets, Education, and Inclusion at University of Michigan conducted two pilot studies using a cluster randomized trial (CRT) designed to test the effects of the rewards cards on participants’ saving engagement. Families were randomly assigned to receive a rewards card (treatment) or wait for twelve months before receiving a rewards card (delayed-treatment control). Both studies examined the effect of rewards cards within a 10-month time frame (a detailed description of research design can be found here).

The key findings from the pilot studies are:

  • Both programs had substantial increases in saving activities among treatment groups.
  • When compared to the control group, saving activity via rewards cards among the treatment group at both programs was significant.
  • In Wabash County, the use of rewards cards increased the total dollar saved among the treatment group. No such evidence was found in the St. Louis program.
  • In Wabash County, the projected savings at the end of the first year of using rewards cards with a four percent rebate rate would be $51.58. In St. Louis, the projected savings from the rewards cards is estimated to be $14.44 after one year.

What do these pilot programs tell us about the potential for integrating rewards cards into CSA programs?

Automatic savings that do not come from families’ income makes rewards cards a better savings tool for low-to-moderate income families. Most 529 plans allow for automatic deposits. However, they favor high-income families who have financial resources to invest in the plans. By giving families the ability to automatically add savings into their CSAs, without dipping into their household budget, rewards cards may be a better option for low-to-moderate income families to save for college education. 

Rewards cards programs have the potential to activate saving engagement. Both pilot studies showed a causal link between participating in a rewards card program and increased savings activity. Savings matches and incentives currently embedded in most CSA programs benefit higher-income families with greater financial resources to engage in saving but don’t do enough for lower-income families. The rewards card program’s potential to facilitate saving by all families, regardless of available financial resources, is particularly crucial to achieving equity.

Lastly, the rewards card program can be integrated into a larger asset-building agenda at the state and federal level. The promising evidence collected about rewards cards suggests that CSAs and rewards cards could be part of a larger asset-building agenda. The rewards cards may be particularly crucial to increasing saving engagement in CSA programs and creating an asset-building policy agenda for improving equality in educational opportunities. If the rewards card program is enacted at the federal level, children in the United States with a CSA would see money deposited whenever grocery shopping occurs, thus building lifelong assets and providing them with a more secure future.  


Zibei Chen is a Postdoctoral Fellow at the Center on Assets, Education, and Inclusion (AEDI) and Adjunct Assistant Professor at the University of Michigan School of Social Work.

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