Stanford Graduate School of BusinessIFDM TPF Session 4: Wealth Building in Early Years
Stanford Graduate School of Business
Introducing the Panel 0:09
The session opens with Olivia Mitchell, a professor at the Wharton School, introducing three speakers who will discuss wealth building in early life. Guglielmo Briscese works on AI, insights, and behavioral science at Vanguard. Michael Deadman leads research innovation at NEFE, the National Endowment for Financial Education. Libby Schaaf is president and CEO of the Bay Area Council and former mayor of Oakland.
Studying 529 College Savings Plans 3:01
Guglielmo explains that 529 plans are state-administered, tax-advantaged accounts letting parents save for education costs tax-free, with over 600 billion dollars invested nationwide. Working with Illinois Treasury data on nearly a million accounts over 23 years, his team found that uptake concentrates in higher-income, more educated areas, though more than 25 percent of Illinois-born children between 2003 and 2023 have had an account.
Testing Financial Incentives 6:00
A randomized trial offering 150,000 families 0, 10, 50, or 100 dollars to open an account found almost no effect, with only 11 people out of 37,500 in the top incentive group opening accounts despite reading the email. Follow-up surveys showed account owners have higher financial literacy, and low-literacy parents misjudge how much contributions help cover college costs, with most contributing only a few thousand dollars over a decade.
Linking Savings to College Outcomes 9:00
By matching Treasury records to National Student Clearinghouse data for over 200,000 children, the team found higher 529 balances correlate with attending more selective colleges and better transfer rates from community colleges. This work led to a new multi-state research consortium involving Illinois, Maine, Pennsylvania, Virginia, and Utah, alongside Vanguard and academic partners, to study these plans at scale.
Oakland's Early Wealth Experiment 11:00
Libby Schaaf recalls being inspired by a study showing low-income kids with even 500 dollars saved were three times more likely to attend college. As mayor, she launched Oakland Promise, giving newborns of eligible parents a 500 dollar 529 account paired with a financial coach, plus incentives for elementary school families to open and contribute to their own accounts.
Stories From the Ground 13:00
Schaaf shares that a low-income parent once angrily rejected a financial literacy session, saying she had no finances to apply it to, suggesting literacy lessons work better paired with an actual asset. She then describes visiting an Oakland elementary school where nearly all students qualified for free lunch, and finding a bulletin board of college pennants representing former students, which moved her staffer Carelli to tears recalling her own father's fear that he could never afford to send her to college.
Stories of Savings Changing Lives 17:01
You hear two stories from Oakland's Brilliant Baby program. Tiffany, a low-income single mother of three on Medi-Cal, set a goal with her financial coach to buy a home in expensive Oakland. Through the discipline of saving and a first-time home buyers program her coach told her about, she became a homeowner, gaining both the ability to send her children to college and the stability of owned housing. These accounts, though restricted to educational uses like 529 plans, also teach broader lessons about compound interest and legitimate government programs meant to help families build self-sufficiency.
Cal Kids and Automatic Enrollment 19:30
Cal Kids, California's 529 program, shows that automatic enrollment matters most. Every baby born in a California hospital gets an account automatically, earning interest from birth even if parents don't notice right away. Low-income first graders get five hundred dollars, foster care children get one thousand, and unhoused children under McKinney-Vento definitions get another five hundred. The newly discussed Trump accounts could follow this same automatic model. A second lesson is pairing government backing with trusted messengers like teachers, principals, and pediatricians. Bipartisan support from figures like Gavin Newsom, Ted Cruz, and Cory Booker gives hope that early wealth building for children is a shared priority.
Connecting Financial Literacy to Wealth Building 23:01
Michael Deadman, representing the National Endowment for Financial Education, explains that increased financial literacy strongly predicts better savings behavior and account ownership, linking classroom education to economic mobility through college attendance. He raises concern about whether existing personal finance curricula actually teach students about wealth-building tools like 529 or 529-type accounts and Trump accounts, urging educators and coaches to help close that gap for both students and adults.
A Challenge About Tax Shelters 29:01
An audience member, a personal finance professor, argues that 529 accounts mainly benefit wealthier families since they function as tax shelters, and that real change requires shifting behavior first, teaching people to save regardless of tax breaks, rather than relying on such incentives to change culture. In response, the presenter explains that 529 accounts work partly as a commitment device, like a mental budgeting envelope, and that research shows paying people directly doesn't always change saving behavior. The real barrier is belief: parents badly underestimate future college costs, overestimate financial aid, and underestimate how small savings compound and reduce student loan debt.
Education as the Missing Ingredient 33:02
Nudges and financial incentives alone have limited effect compared to actually teaching people basic financial concepts, even though things like compound interest remain genuinely hard to explain. The real value of 529 college savings plans may be as a vehicle for building a college bound identity, since many families are held back not by culture but by a sense of hopelessness about ever saving enough. Trusted educators, interventions aimed at both parents and students, and inclusion in school curricula can help people overcome resistance to saving, even when money is tight.
Automatic Enrollment and Targeted Universalism 36:01
A concern with programs like Trump accounts is that they rely on parents to enroll, which favors those with the time and tax benefits to do so, while most low-income Oakland parents pay little tax and gain nothing from that incentive. Oakland instead uses automatic enrollment and a model called targeted universalism, giving every kindergartener a hundred dollar account while directing more money toward low-income families, partly to let them share in investment gains that are outpacing wage growth.
A Guaranteed Income Recipient's Choices 37:32
A personal finance instructor at UNLV sums up his course as never accumulating wealth by spending more than you earn, while stressing that family stability often determines whether someone can even think about saving. An Oakland guaranteed income recipient named Alicia Rowe, after basic needs like a microwave, used her extra cash to open a college account for her grandson and to repair her credit, eventually landing her first job in years.
Questioning the Payoff of College 42:00
A World Economic Forum attendee presses on whether rising education costs and a shrinking wage premium still make college a sound financial investment compared to trade paths. The panel notes that 529 flexibility now allows unused funds to roll into a Roth IRA, and describes ongoing research with the state of Maine studying how AI driven changes in the labor market might affect parents' view of college's return on investment.
Education's Broader Value 45:30
One panelist argues that financial education should still be valued for producing confident citizens able to advocate for the world they want, not just for its dollar return. The session closes with a question to Dr. Mitchell about teaching children financial literacy, and she describes creating a home system called the Bank of Mom, an Excel spreadsheet where her daughters earned money through chores to spend on things they wanted.
Teaching Kids the Value of Money 49:02
Letting children earn money for chores stopped them from begging for things, because they came to understand how expensive items really were and learned to save and budget.
Personal Accounting Before Personal Finance 49:31
An accounting professional in the audience asked whether financial literacy should start with personal accounting basics, like net earnings becoming retained earnings, before teaching things like financing a car or house, since you cannot advise someone without first seeing their balance sheet.
Fitting Finance Alongside Other Subjects 51:00
The panelist responded that NIH is agnostic about whether personal finance is taught standalone or folded into subjects like math, as long as the content meets strong standards, and pointed to NIH's online personal finance ecosystem model, which shows how family background and comfort discussing money shape how someone approaches topics like accounting.
Helping Families With No Money to Start 54:02
A former teacher asked for real examples of helping students whose families have no money to invest, prompting a response about California's children's savings accounts given to every low income student since 2022, state auto-enrollment efforts in places like Maine and Pennsylvania, and a call to search for local matching savings programs.
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