Illinois Government Would Mandate Children's Savings Accounts

On Friday, Illinois governor Rod Blagojevich signed into law legislation that mandates the development of a plan by the end of 2008 for instituting savings accounts to be opened at birth for every baby born as a citizen of that state and continued until the child reaches 18 years of age.

The Illinois Senate and the Illinois House unanimously passed the legislation, which they say reflects growing awareness among lawmakers of the role that savings plays in the future financial success of families, individuals, cities, and states. The U.S. Congress and in a number of cities and states across the nation have also introduced bi-partisan legislation to establish children's savings accounts.

Mandatory children's savings account advocates in Illinois would want to restrict the funds' use until after the child reaches 18 years of age to specific, designated purposes related to education and training, homeownership, or small business development.

People appointed by Governor Blagojevich and the state Congress to investigate the Children's Savings Accounts program will include State Treasurer Alexi Giannoulias, community groups, financial education providers, financial services industry professionals, business and banking associations, children's advocates, and state policymakers.

Critics of the measure say this is just one more step on the slippery slope to Big Brotheresque control by states and ultimately the federal government. While few people would argue that the opening of savings accounts for children from the earliest possible age, including the day they're born if possible, would be anything other than a great idea, it is a decision that should be left up to individuals, not government mandates.

Financial advisors and planners have been advocating this kind of plan for their clients for years. What's more, they usually advocate putting money aside for children into mutual funds or some other financial instrument capable of getting and compounding returns on the deposited money at substantially greater rates than what a savings account can offer.