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The United States of the 21st Century

Floor Speech

By:
Date:
Location: Washington, DC

THE UNITED STATES OF THE 21ST CENTURY

BREAK IN TRANSCRIPT

Mrs. BIGGERT. Thank you so much, Mr. Kirk, for organizing this opportunity to discuss the Suburban Agenda. As a Member who represents part of Cook County, the most populous county in Illinois, DuPage County, the second most populous county in Illinois, and Will County, the fastest growing county in Illinois, I certainly share your strong interest in suburban issues.

So I am delighted to be able to talk a little about the 401(k) kids. I want to just take a few minutes to explain what I think is one of the most important issues facing my constituents and constituents all over, particularly in the suburbs, the rising cost of college education.

Other than buying a home, the cost of a college education is probably one of the first major expenses that families need to start saving for. The average cost of tuition at an in-state public school is now at least $13,000; for an out-of-state public school, it is $19,000; and an average tuition at a private school is $28,000 and rising. These numbers have risen and continue to rise far faster than the rate of inflation.

Adding to this problem, let me put on my financial literacy hat just a little bit, is that personal savings rates in this country have dropped to a negative 1 percent, one of the lowest savings rates since the Great Depression. So what I fear here is we have a financial storm waiting to strike families across the country.

With students already carrying 45 percent more debt than they did 10 years ago, I simply don't think increasing loan amounts and reducing loan rates is enough. We have to provide more tools for parents and students to save for college. That is why we have introduced H.R. 87, the 401 Kids Family Savings Act of 2007.

This legislation would put American children on the path to an affordable education and a firm financial future. It allows an individual, including a parent, a grandparent, an aunt or an uncle, to set aside a total of $2,000 annually in 401 Kids Savings Accounts for each child.

Like that Roth IRA, the money is contributed to the account after taxes, but interest accumulates tax free, and the balance can be used tax free for the approved purposes in the bill. In the case of 401 Kids Savings Accounts, the money could be withdrawn tax free, first of all, for the college education.

The legislation would extend through 2015, the Coverdell Education Savings Account tax benefits, and rename these accounts 401 Kids Savings Accounts.

Second, for housing. 401 Kids Savings Accounts also can be used when the child grows up and they haven't used the amount, all of the amount, for the purchase of a first home.

And third, retirement. When the child grows up, he can roll over his 401 Kids Savings Account into a Roth IRA for use much later during retirement.

By enacting these reforms, we really can supply families with a single vehicle to set aside money for their children's futures. Money contributed at birth could grow tax free for 18 years until needed for college.

Parents and relatives also would have the peace of mind of knowing that if the child chooses not to go to college, even though they put away the money, or chooses a more affordable school, any money left over in the accounts can be used for the child's first home or retirement.

I would be remiss, as we talk about financial literacy and talk about savings, if I didn't mention that even Chairman Bernanke of the Federal Reserve has said that creating savings accounts for children at the time they are born is a great idea. So I am really pleased to be with you.

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Mrs. BIGGERT. Thank you. Yes, there are several States that have started this process, too. The more that we can entice people to start that saving, to know what is available, the more that it is publicized, whether it is a State account or a Federal account, it is very important that this starts.

I know that in all the work that we do in the financial literacy and financial education that still we have kids that don't understand the difference between checks, cash or credit cards. Nor do people understand compound interest. Adults don't understand that.

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Mrs. BIGGERT. Not even a teenager, but let's say a pre-teen, when the statement comes in and they look at it every month, they see how much interest, what interest means and what compound interest means, that they are getting more money every month, every year on this account. It isn't just sitting there static.

We have so many people in this country that are what we call ``unbanked,'' that don't even have a bank account or anything. They don't get these statements. So this is a tool, you are right, that kids learn about how to manage money. And part of that is having the opportunity that will be gained, being able to go to college because they had their parents and their family that put money aside for them. And you could put aside $2,000 a year, but you can start with $50, $100. Maybe families can't afford to put that much money in, but every dollar saved is a dollar towards education with the interest that is gained and reaped over the years in this account.

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