A degree of savings: savings accounts dedicated to paying for college can take the sting out of increasing tuitions and help develop the habit of saving.

• Author: Hathaway, Jessica
• Position: FINANCE

If current tuition rate increases continue, a child born this year will have to pay an estimated $215,064 for a four-year degree at a public college or university. Today, those costs average $110,408, according to SavingforCollege.com.

These increases are pushing higher education out of the reach of many Americans, especially since less than half of parents with children under age 18 have started saving for college, according to the private student-loan provider Sallie Mae.

To encourage parents--especially those with low incomes--to begin saving early, some states offer children's savings accounts. The rules and structure vary by state, but generally, they are long-term savings accounts that can be opened for a child when he or she is born. Most states also offer incentives for deposits and tax exemptions, deductions or deferrals on the earnings.

Increasing Assets

The concept of these accounts emerged in the 1990s with the asset-development movement, which held that increasing a low-income family's assets, not just its income, promotes better long-term financial stability.

At least four states offer statewide children's savings account initiatives. Some seed them with an initial deposit that varies in size from $500 in Maine to $50 in Nevada. Most also offer incentives for parents, relatives and, eventually, the children themselves to continue making deposits--such as matching contributions. Several programs include age-appropriate budgeting and personal financial education for both the parents and the children.

Seeding the accounts, matching deposits and managing the assets can be costly, however, and is not the role of state government, some say.

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Representative Richard Barry (R) of New Hampshire cosponsored legislation to create a pilot program in 2015. "I think of it very highly and will support it as long as it is not government-funded. I'd love to have private funding for it," he says. About 80 percent of state-level children's savings accounts are managed by the more traditional, tax-advantaged 529 savings plan administrators. Businesses, private foundations and philanthropic organizations also provide some financial support.

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Getting families to save for college can make a real difference. Low- and moderate-income children with college savings of as little as $500 are three times more likely to enroll in college and four times more likely to graduate, according to research by the Corporation for Enterprise Development.

Watching Oklahoma

The verdict on the long-term effects of children's savings accounts may...