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Building Tomorrow’s Wealth Today: A Guide to the 401Kids Savings Act

Donna Kline, MBA, CDFA®, CDC®, ChSNC®


The importance of financial literacy and early savings cannot be overstated, especially for our children. Engaging in savings practices from a young age not only fosters a sense of financial responsibility but also sets the stage for a future of economic stability and opportunity. Children with their own savings accounts are more likely to develop a stronger understanding of financial concepts and are better positioned to make informed decisions about their money in the future.

In recent times, it has become increasingly challenging for young Americans to build wealth and realize their dreams. The Federal Reserve found that, in 2019, over 80 percent of households headed by individuals aged 18 to 24 had less than $20,000 in financial assets. There is also a concerning trend that many young Americans are on track to possess less wealth than their parents at a similar age, marking a historic first and a stark reversal of the American Dream. This problem is made worse by the fact that over the past two decades more and more young people are getting into debt from student loans and fewer of them can afford to buy their own homes (compared to older generations). This is why initiatives like the proposed 401Kids Savings Act are essential. Serving as a powerful tool that can help change current financial trends, this act gives our kids and grandkids a head start towards a more financially secure future.

What is the 401Kids Savings Act?

The 401Kids Savings Act is a groundbreaking piece of legislation aimed at helping American kids build wealth and become financially successful. Understanding what the impact of this law could mean is really important, especially if it becomes official.

The overall idea behind this legislation is to ensure every child in the United States has their own savings account. These accounts, known as Children’s Savings Accounts (CSAs), provide benefits to all children, with a particular focus on those from families with limited financial resources. The proposal is to seamlessly integrate these CSAs with state 529 college savings plans and have them overseen by state treasurers. This plan is a big step forward in helping kids feel more confident about money from a young age.

One interesting aspect of this law is that it’s for every single child, from the moment they’re born until they turn 18. Anyone can put money into these accounts, like family members, non-profits, employers, foundations, and others. Once the child turns 18, they can use the money for various purposes, like going to college, starting a business, buying a house, or even saving for retirement.

The federal government would contribute to these accounts, especially for children in lower and moderate-income families. For example, families where the individual’s adjusted gross income (AGI) is $75,000 or less, or $150,000 or less for married couples filing jointly, are eligible for automatic federal contributions each year. This system is designed to ensure that the families most in need of financial support can benefit from these contributions. As a family’s income rises above these thresholds, the amount of federal support they receive gradually decreases, eventually phasing out completely at higher income levels.

Potential Benefits

The 401Kids Savings Act is expected to make a big difference in many areas. Experts believe it will bring significant benefits in terms of higher earnings later in life, better health outcomes, additional tax revenues, and less crime. For every dollar put into 401Kids, society could gain about $2.61 in return. This initiative isn’t just about helping individual kids; it’s also about making our country’s economy and society stronger.

How to Take Advantage of the 401Kids Savings Act

If the 401Kids Savings Act passes, here are a few steps that you can take to leverage its benefits:

  • Understand Eligibility and Enrollment: Familiarize yourself with the criteria for eligibility and the process of enrollment. This will likely vary by state, but it’s important to know how and when you can start contributing to these accounts.
  • Plan Contributions Strategically: Assess your financial situation and plan how you can contribute to these accounts. Even though there’s a cap on annual contributions, strategic planning can maximize the growth of these accounts over time.
  • Seek Matching Contributions: If your income qualifies for federal support, ensure you are taking full advantage of the matching contributions. This could significantly enhance the value of the savings.
  • Educate and Involve Your Children: Use these accounts as a tool to educate your children about savings and financial planning. Involvement in managing their accounts can instill financial responsibility from a young age.
  • Monitor and Adjust Investments: Regularly review the performance of the investments within these accounts and make adjustments as necessary. The goal is to maximize growth while managing risk.
  • Explore Various Usage Options: Understand the different ways the funds can be used (education, business start-up, home purchase, retirement) and plan accordingly. This flexibility allows for tailored financial planning based on individual needs and goals.
  • Stay Informed about Legislative Changes: Keep up to date with any changes or amendments to the Act, as these could impact your savings strategy.

The 401Kids Savings Act is a major move toward reducing wealth gaps and creating more economic opportunities for the future. As it goes through the steps to become law, it’s important to stay informed and ready to take advantage of its benefits. Keeping up with what’s happening and being prepared will help you make the most of what this Act has to offer.

HBKS is here to guide and assist you with the 401Kids Savings Act or other financial planning needs. For personalized advice and detailed strategies tailored to your unique financial goals, contact us at (724) 934-8200. Let’s work together to secure a brighter, more prosperous future for your children and grandchildren.


The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.

Any investment involves some degree of risk, and different types of investments involve varying degrees of risk, including loss of principal. It should not be assumed that future performance of any specific investment, strategy or allocation (including those recommended by HBKS® Wealth Advisors) will be profitable or equal the corresponding indicated or intended results or performance level(s). Past performance of any security, indices, strategy or allocation may not be indicative of future results.

The historical and current information as to rules, laws, guidelines or benefits contained in this document is a summary of information obtained from or prepared by other sources. It has not been independently verified, but was obtained from sources believed to be reliable. HBKS® Wealth Advisors does not guarantee the accuracy of this information and does not assume liability for any errors in information obtained from or prepared by these other sources.

HBKS® Wealth Advisors is not a legal or accounting firm, and does not render legal, accounting or tax advice. You should contact an attorney or CPA if you wish to receive legal, accounting or tax advice.

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