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Margaret Wente

Free money you've never heard of Add to ...

Here’s a great idea. Let’s set up education savings accounts for poor kids. After all, middle-class kids have them. Research shows that all else being equal, kids with money earmarked for their higher education are far more likely to go on to college or university. Having even a modest amount of money set aside raises their expectations and gets them focused on the future.

In fact, we already have such a program. The trouble is that hardly anybody knows about it. The federal government will contribute $500 for a Canada Learning Bond for any child born since Jan. 1, 2004, who lives in a low-income family. It adds another $100 every year, to a maximum of $2,000, and matches any extra family contributions by as much as 40 per cent. It’s a great deal. The only catch is that you have to ask for it.

“I had no idea,” says Jennifer Graham, a 26-year-old single mother. She found out about the program, called Smart Saver, from a friend. Her bank had no idea either. She persevered, and three weeks later, the government deposited a cheque for $725 in a brand-new account opened on behalf of her daughter Makayla, age 2.

“When I went to college, I had nothing,” says Ms. Graham, who makes $35,000 a year working for a security firm. “It’s a real burden to think of all the student loans I owe.” She’s thrilled that her daughter will have a leg up.

About 880,000 kids in Canada are eligible for the Smart Saver program (www.smartsaver.org). But only 200,000 – under 20 per cent – are enrolled. May Wong, executive director of the Omega Foundation in Toronto, aims to change that. The foundation, whose aim is to strengthen financial self-sufficiency for low-income Canadians, is working on a pilot project to raise the take-up rate. One step was to create a very simple bright yellow information card that says: “Free money. For your kids. Yes, really.” The card comes in 14 languages. The foundation is working with community service agencies and the banks to spread awareness at the grassroots.

“The No. 1 question people ask is, ‘What’s the catch?’” Ms. Wong says. There isn’t any. The only condition is that the money must be spent on postsecondary education.

Education savings bonds can help level the playing field between poor kids and your kids. Two-thirds of children in affluent neighbourhoods go on to postsecondary school. Two-thirds of kids in poor neighbourhoods don’t even apply. But poor kids with even a modest amount of savings set aside apply at much higher rates.

“The earlier you introduce the savings into a child’s life, the more it can change their ideas and expectations,” Ms. Wong says. “It changes the child’s decision-making from ‘Should I go?’ to ‘What should I study?’ ” It also gives their parents reinforcement. “You’d better study,” they can say, “because that’s the only thing your money can be used for.”

Ms. Wong says most of the parents she meets don’t need tips on motivation or money management. What they need is money. As one mother told her, “Where we’re from, it’s just expected that you save for your children’s future – except you save for a dowry. Here, you save for education.”

Although families aren’t required to contribute a cent, 94 per cent of them do. Ms. Graham, Makayla’s mother, chips in with regular payroll deductions. “I want the best for my children,” she says. “And this is a great starting point.”

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