Early Childhood Investment Has Huge Financial Returns

July 26, 2016       Andy Segedin      

Large amounts of philanthropic capital directed at early-childhood investments have the potential to produce returns of $5 to $11 for every $1 invested. An investment of $1 billion focused on children ages five and under could result in the upward trajectory of hundreds of thousands of low-income Americans.

The projections come from a new report by the Bridgespan Group of Boston, Mass., Billion Dollar Bets to Increase Early Childhood Development. About 1 million low-income five year olds enter kindergarten not fully prepared, the study states, with 5.8 million children ages five and younger not currently on a track for preparedness. Children who enter kindergarten developmentally ready are far more likely to master basic skills by third grade, 82 percent to 45 percent.

The study supports philanthropic intervention in improving early-childhood development focused on six investments:

  • Fund research to develop a tool to map health and developmental assessment results to programs and service;
  • Fund research to evaluate kindergarten-readiness assessments;
  • Fund research to evaluate tech-enabled tools for early-childhood;
  • Scale existing, evidence-based organizations that offer low-cost, tech-enabled tools for early adult-child interactions;
  • Support venture capital investments to develop tools for low-income and diverse families; and,
  • Support evaluation and refinement for tech-enabled tools.

The first two investments would be temporary, according to the study, no longer needing support after findings are adopted. The latter four should, in time, become sustainable.

“The growing body of research on the barriers impeding the healthy development of children from birth through kindergarten has created a unique opportunity for philanthropists to fund initiatives that can support parents, caregivers, daycare providers and pre-K instructors,” said Devin Murphy, a manager at Bridgespan and co-author of the study, via a release.

Basing costs on applicable benchmark programs, the authors estimate that $200 million would be needed to support investments in tailored tools for low-income and diverse families and that it would take $773 million to scale existing evidence-based organizations and to pilot tools in communities. An additional $27 million is projected to evaluate and refine tools as well as fund evaluations – bringing necessary investment to $1 billion.

The report’s authors use the Social Genome Model to estimate that every child whose cognitive skills is improved by .21 standard deviation, the amount possible using proposed tools, will see an average lifetime family income increase of $15,800. The report assumes that of the 10 million children whose guardians would be provided the investment resources, 3.5 to 7 percent of them will be able to reach the described level of improvement.

Multiplying the $15,800 in income increase by the forecasted 350,000 to 700,000 children benefitting brings the total anticipated impact to $5.5 billion to $11 billion. To read the full study, click here.

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