Since the early 1990s, the typical U.S. savings rate has gone from $7.70 per $100 earned to $1.80.
WASHINGTON -- Three weeks shy of his first day of kindergarten, Austin Sambrano is the only person in his family who has a savings account.
Living with his parents and older brother in a trailer park near Pontiac, Mich., he is part of an experiment called the SEED Initiative that is opening investment accounts for children, in an effort to ensure them a college education -- and teach their families the habit of putting aside money for the future.
The $800 deposited in his name places the rambunctious, blond 5-year-old at the leading edge of a new wave of thought about how to create wealth, curb poverty and improve the abysmal savings rate among Americans, particularly those who are poor.
The idea is to give newborns or young children a miniature version of what affluent families have long provided their offspring: a trust fund. To induce parents to save, families get their deposits matched if they add to the fund.
In today's economy, a savings account "is as fundamental as land was back in the 18th and 19th century," said Ray Boshara, of the New America Foundation, a centrist think tank that is a main advocate of children's accounts.
Involving several hundred children in a dozen communities around the country, SEED (Saving for Education, Entrepreneurship, and Downpayment) -- a four-year experiment being conducted by local social service agencies, studied by researchers and paid for by several nonprofit foundations -- is a modest version of the ultimate goal.
Legislation has been introduced in Congress that calls for the government to open a KIDS Account of at least $500 for every baby born in the United States.
And President Bush's first Treasury secretary, Paul O'Neill, has been giving speeches around the country, promoting an even bolder plan he has devised for children's accounts that he says would guarantee every American at least $1 million by age 65, eventually eliminating the need for Social Security.
Fostering savings from childhood is, in a sense, a spillover from the debate over whether to establish private investment accounts in Social Security, the nation's fragile retirement system.
But unlike the partisan rancor that runs through the Social Security debate, children's accounts are gaining proponents across the ideological spectrum. Conservative Republicans construe them as a form of the market-oriented "ownership society" that Bush touts.
Liberal Democrats view them as an extension of the Great Society of the 1960s that created government programs to lift people from poverty.
"It's a simple kind of merging of the stereotypes of the parties," said Rep. Harold E. Ford Jr., D-Tenn., sponsor of a bill that would create KIDS Accounts. "You give to people; you put some responsibility on people to save, as well."
Despite bipartisan cheerleading, such accounts have skeptics on the right, who are disdainful of a new government handout, and on the left, who fear the expense would drain money from other social needs.
White House stance
So far, White House officials are unenthusiastic, saying that any available money should be used to prop up Social Security and that it would be wasteful to give an account to every baby, including ones born into families that are rich.
Still, proponents say that investing in children is a breakthrough in thinking about how to reverse a worrisome deterioration of savings habits. Since the early 1990s, the typical American's savings rate has plunged from $7.70 per $100 earned to $1.80, according to federal figures.
Between 9 percent and 20 percent of U.S. households have no bank account, studies show, and the proportion is higher among blacks, Hispanics and the poor.
"I don't find the current political process doing justice to the fundamental question: What meaning should be given to creating financial independence? The president puts his head down and keeps saying the same thing over and over again," said O'Neill, who was dismissed by Bush in 2002.
O'Neill said his plan, which he estimates would cost $144 billion, would create "a fundamentally different society than any one on Earth."
The idea for children's accounts has been germinating for some time. In Britain, for example, the government in April began mailing vouchers worth 250 pounds -- almost $450 -- to the parents of all 700,000 children born in that country each year, under the Child Trust Fund announced two years ago by Prime Minister Tony Blair.