The California Kids Investment and Development Savings Program (CalKIDS) is a state program offering families assistance in saving for career training or college. Launched in 2022, the program offers automatic college savings accounts for eligible newborns and school-age children and offers incentives for encouraging a college culture. Here is a closer look at what CalKIDS has to offer and who is eligible.
What is CalKIDS?
CalKIDS is a child savings account (CSA) program governed by the ScholarShare Investment Board, which is chaired by the California State Treasurer. It is intended to assist families and, more specifically, those low-income families, in saving for qualified college education expenses like:
- Tuition
- Books
- Supplies
- Computer equipment
- Certain room and board fees
The funds that are provided by CalKIDS are tax-free when utilized on these qualifying expenses and thus a critical source of funding for families planning ahead for their kids’ education.
How does CalKIDS work?
CalKIDS automatically registers eligible children into the program and establishes a college savings account in their name. The program makes an initial deposit and offers additional monetary rewards depending on some criteria of eligibility. Unlike 529 college savings plans, parents cannot contribute money to CalKIDS accounts. The program is being used as a launching pad to get families saving elsewhere.
Eligibility for CalKIDS is divided into two categories: newborns and school-age children. The following is a description of the eligibility requirements:
1. Newborns
Newborns born in California on or after July 1, 2022, are eligible for a CalKIDS account automatically. The advantages are:
- A $25 or $100 contribution, depending on the child’s birth date.
- Additional advantages of $25 for enrolling online and $50 for connecting a ScholarShare 529 account.
2. School-age children
The program is made available to eligible California public school students in grades 1–12 under their school district’s Local Control Funding Formula (LCFF). In order to be eligible, such students should:
- Be enrolled in a California public school on Census Day (first Wednesday in October).
- Be classified as low-income or English learners, as shown on data their school district submits to the California Department of Education.
Eligible students can receive up to $1,500 in total benefits:
- $500 automatic deposit per qualifying low-income student.
- An additional $500 to students identified as being foster youth.
- Another additional $500 for students identified as being homeless.
How are funds disbursed?
The CalKIDS funds are invested in mutual funds by utilizing ScholarShare, which is the official plan of the state of California on college savings. The family withdraws the CalKIDS money when their child is enrolled at career training or college. This withdrawal is free from taxes when used for higher education expenses approved but will incur taxes if for non-education purposes.
Making use of CalKIDS money
Although enrollment is automatic for eligible participants, parents or students must register online to access their funds. To register, you’ll need:
- Personal identification details.
- Information about your child’s eligibility (e.g., Social Security number or other identifying data).
Once registered, families can request withdrawals when needed to cover qualified educational expenses.
Benefits of CalKIDS
CalKIDS offers numerous advantages that make it an appealing resource for families:
- Financial assistance: Up to $1,500 per qualified child can go a long way in covering the cost of higher education.
- Automatic enrollment: No application is required; qualified children are enrolled automatically.
- Promotes college attendance: Studies have found that children with college savings plans are three times as likely to attend college and almost four times as likely to graduate.
- Tax-free growth: Spending on qualified education expenses grows tax-free.
Although it has its advantages, CalKIDS registration has fallen short of expectations. A mere 300,000 out of 3.6 million eligible students had used their accounts as of recent times. This shows the need for more awareness of the program among families and schools.
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