Education Saving Incentives and Household Saving: Evidence from the 2000 TIAA-CREF Survey of Participant Finances

This paper examines the effects of education saving incentives on the level of private saving by households. Little is known about this subject. One explanation for this gap in the literature is that because education saving incentives are relatively new, data on education saving are not readily available. Using wealth data from a survey of TIAA-CREF participants, this paper attempts to estimate whether saving in education saving programs offsets other household saving. As in the extant literature of the impact of retirement saving programs on household saving, an empirical challenge is how to deal with the issue of saver heterogeneity. In this paper, two strategies are used to address this issue. The first strategy distinguishes savers from non-savers by whether households have an IRA or a supplemental pension plan. The second strategy uses the propensity score approach to control for unobserved heterogeneity in taste for saving. Results from both strategies suggest that education saving incentives in general do not offset other household saving and stimulate saving for households with high propensities to use education savings accounts.