Opinion: Want a Nation of Savers? Start at Birth

(July 23) -- Without much fanfare, savings disappeared from the national economy, replaced by rising levels of debt used to finance ever-expanding consumption.

It's an unsustainable path, and one that contributed to the Great Recession we are still struggling to overcome. And while turning us into a nation of savers isn't going to happen overnight, we have to start somewhere.

And a good place to start is where savings habits are formed -- with our children.

Of course, in the short run, policymakers need to focus on increasing spending to boost consumer demand, spark investment and job creation, and provide relief to families dealing with sudden wealth loss and income declines.

But beyond this stimulus, securing our economic future will depend on returning savings to the national economy.

For many families, it is savings that provides the security blanket and seeds investments that can pay off down the line. At the macro level, savings becomes a source of investment that will ultimately power the economy.

Right now, we are importing large amounts of capital from abroad, but in the long run we'd be better off generating these resources internally.

That's why it makes sense to rebuild the foundation of our economy to one based on savings and investing rather than borrowing and spending.

Not only will this require the creation of new policy mechanisms, such as more effective savings incentives, but it will also depend on changing social expectations related to consumption and money management. Precisely because this transition won't happen overnight, it is especially important that we engage with children and youth on the basics of financial education.

And one powerful way to do this is to make sure that every child grows up as the owner of his or her own savings account.

This way children can experience firsthand the savings process, have access to a valuable teaching tool and potentially build up meaningful levels of resources that would help them plan for their futures.

What's more, research has shown that savings can have a profound effect on the expectations and behaviors of children and their parents. Even relatively small amounts of savings can trigger positive outcomes, such as improved academic performance and an orientation toward pursuing post-secondary education, which could have a significant impact on the future economic prospects of an entire generation of children who could grow up with these accounts.

Last week Sens. Chuck Schumer, D-N.Y., and Chris Dodd, D-Conn., introduced the America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act to provide a "Lifetime Savings Account" for every newborn child.

Under their plan, every child born would get an initial deposit of $500, and children in families with lower incomes and fewer resources would have their contributions automatically matched. In addition, the plan would set up a financial education curriculum for schools.

The plan has attracted bipartisan support in the House, and has a diverse roster of supporters, including conservatives Newt Gingrich and Rick Santorum. Previously, Vice President Joe Biden and White House Chief of Staff Rahm Emanuel endorsed the policy.

What has united these strange bedfellows is the potential to promote financial education for both children and parents alike and to create opportunities for every individual to experience what it takes to save.

With these goals in mind, it makes sense to start the process as early as possible and make sure it continues throughout the life course. By jump-starting the savings process, we can help more families build a secure and vibrant economic future.

Eventually the recession will recede and economic growth will resume. However, steps must be taken now to create a sustainable foundation for future growth. Increased savings is a key ingredient in this plan, and the ASPIRE Act is a bold first step for empowering all Americans to save so they can invest in their own futures and that of their country's.

Reid Cramer is director of the Asset Building Program at the New America Foundation, a nonpartisan think tank based in Washington, D.C.