As the saying goes, “A penny saved is a penny earned,” but does that penny saved
translate into greater economic mobility? Movement up the income ladder is fairly
limited for children of low-income parents—42 percent of children born to parents
on the bottom rung of the income ladder remain on the bottom rung a generation later.i
To date, however, there has been less analysis that shows clearly how income mobility
differs based on one’s own or one’s parents’ level of savings. This paper clearly
demonstrates the… more
529s
are tax-advantaged accounts designed to help families save for post-secondary
education. In recent years, state
policymakers and 529 administrators have worked to expand access to 529 plans
and increase the participation of lower-income families through outreach,
advertising, and targeted incentives such as matching deposits and reducing or
eliminating fees.[1] Yet, as plan administrators and state and
federal policymakers design new strategies for expanding the use of 529 plans
At a time when low-income
students are underrepresented in higher education and the cost of attendance is
becoming increasingly unaffordable, 529 college savings plans have the
potential to address issues of college readiness, access and completion. Savings can help reduce higher education debt,
making college more affordable, and has the potential to change aspirations and
behaviors of both students and their parents. Research from the asset building
field shows that even a relatively small amount of savings may have positive
impacts on behavior and educational achievement.
AutoSave is a unique savings plan that automatically diverts through payroll deduction a small amount of post-tax wages into an individual savings account. This new infrastructure nearly seamlessly enables individuals to contribute small amounts of their wages into an accessible, non tax-advantaged savings account. It will be especially valuable for individuals who have limited liquid assets, and who may otherwise be forced to meet emergency needs with high-cost emergency loans.
Earlier this year, the Obama Administration released a
bold new plan for improving the state of higher education in the United States.
Its fiscal year 2010 budget proposal included several items aimed at increasing
postsecondary education enrollment and completion rates, and decreasing the
financial burden that college represents to many lower and middle class
families.
[1]
These proposals include reforming the federal student loan program, expanding
Pell Grants for low-income students, and creating a new College Access and
Scholars, policymakers, and practitioners of microfinance
are increasingly turning their focus toward devising and offering effective and
accessible savings services for the poor. Not only have experts argued that demand for savings services
greatly exceeds that of microcredit, but many also contend that savings-led
programs and products, with a focus on building assets, may be more effective
than credit in providing a pathway out of poverty.
In undertaking the task of rebuilding a viable financial system in the aftermath of the 2008-09 Wall Street meltdown, the principle that should guide all discussions should be straightforward: how to design measures that are capable of promoting both financial stability and broadly-shared social welfare.
There are 40 million persons
living in the U.S.
who lack a bank account. Many of these "unbanked" individuals lack sufficient
identification necessary to meet banks' customer identification verification procedures,
which are required by the Bank Secrecy (BSA) and USA PATRIOT Acts. Research shows
that insufficient identification is one of the top three reasons for account
denial and that customers who are denied a bank account once often do not
return to a bank again.
Asset ownership is seen as having an increasingly influential link to a variety of social outcomes. While the UK has experienced increases in economic wealth and improvements in overall living standards over the past 40 years, trends in asset ownership have reversed. More recently, 15 years of economic stability led to a feeling of increased financial security and individual savings were eroded in a boom of consumerism. The distribution of this increase in wealth has been unequal… more
Asset ownership plays a central role in the economic security of
American families and the broader economy. Assets can be deployed
productively, such as to pay for a college education, or tapped to help
individuals and families weather unexpected events. Additionally,
assets have behavioral effects that can change the manner in which
people think about and plan for the future.
What
does the bill do?
Why
is a bill to promote asset building for children necessary?
Who
is eligible? Will illegal immigrants or children who become citizens get
accounts?
Will
children born before the bill takes effect get accounts?
Why
do wealthy people get these accounts?
Why
do poor people who don't pay taxes get accounts?
Is it
unrealistic to expect those with low incomes to save when they already
struggle to get by?
How
To promote local economic development, California policymakers should
create Banking Development Districts, a proven way to connect
lower-income unbanked Californians with the financial products and
services they need to enter the financial mainstream and begin to build
savings and assets. It is modeled after New York State's successful
Banking Development District program.
For the full text of the issue brief, please see the PDF attached below.
The Saver’s Bonus is a policy proposal that would reward low- and moderate-income individuals and families who save at tax time. Every dollar deposited in a designated savings product would be matched with an additional dollar from the federal government, up to a $500 annual maximum. Participants would make or report contributions to an eligible account on their federal income tax return, and the bonus would then be transferred directly to the designated account. The… more
The California Employee Savings Program creates a voluntary, universal,
portable retirement account for California workers who do not have
access to a workplace retirement savings plan. It would give six
million California workers and their families an opportunity to have
their own workplace retirement savings plans to supplement their basic
Social Security benefits. The California Employee Savings Program would
also give hundreds of thousands of California small businesses an easy,
low-cost, voluntary way to offer a retirement savings plan to their
The CA Workforce Mobility and Savings Initiative, reforms the asset
limit in the California Work Opportunity and Responsibility to Kids
(CalWORKs) program, to encourage low-income families to build the
savings they need to permanently exit welfare. The measure repeals the
$2,000 asset limit in CalWORKs for current recipients and raises it for
new applicants from $2,000 to $7,000 while also eliminating the $4,650
vehicle limit. By reforming the asset limit, this measure restores the
stated goal of the CalWORKs program by assisting families in achieving
The current economic downturn, triggered in part by excessive household debt and
deflating housing prices, underscores the central role asset ownership plays in
the economic security of California
families and the broader economy. Yet,
half of all Americans currently have few or no assets, in part due to policies
that encourage savings and wealth accumulation that benefit the upper half of
earners. The purpose of New America's
Asset Building Program, is to significantly broaden savings and assets
ownership in America,
The America Saving for Personal Investment, Retirement, and Education Act of 2009 ("The ASPIRE Act of 2009")
Purpose of
the Bill
To encourage savings, promote
financial literacy, and expand opportunities for young adults by establishing a
Lifetime Savings Account for every newborn child.
Over the past two decades, policymakers, academics, and others have pursued an array of policies and strategies to help lower and middle income households build savings and assets and access reasonably-priced financial products at mainstream institutions. While some progress has been made, there have been few advances in delivering a high-value, affordable financial product at scale.
ABSTRACT: This policy brief makes the case for linking conditional cash transfers to savings as a two-pronged poverty reduction strategy of supplementing income and building productive assets, while increasing effective financial inclusion of a given population. While conditional cash transfer (CCT) programs and policies have proven effective in achieving certain poverty alleviation goals, such as better health and education, only recently have we begun to explore the potential of CCTs to enhance economic inclusion and poverty reduction through wealth accumulation.
Over the past two decades, policymakers, academics, and others have pursued an array of policies and strategies to help lower and middle income households[i] to build savings and assets and access reasonably-priced financial products at mainstream institutions. While some progress has been made, there have been few advances to delivering a high-value, affordable financial product at scale.
