The ability to accumulate and access savings is a fundamental determinant of economic security for many families, especially those with low incomes and limited resources. Since every family’s circumstance is different, so too are their savings needs, which can range both in time horizon and flexibility of use. Current federal policy favors longer-term, targeted purposes, such as savings for retirement, leaving a void in policy supports for households whose savings needs are more immediate. This impedes a household’s ability to build up a stock of unrestricted savings that are accessible to buffer against financial shocks or unexpected events or to invest in ways that may improve their future, roles that serve as the underpinning for economic mobility.
Policy solutions to fill this gap need to address both the lack of resources that lower-income households can dedicate to saving and the lack of products that facilitate saving for multiple purposes. In response, the New America Foundation has developed a proposal, The Saver’s Bonus, which offers lower- and middle-income households the option to open an account and an incentive to save in that account at a moment when they are receiving an influx of resources—tax time.
Through a simple and easy procedure integrated into the process of filing taxes, families can be linked to a range of savings products that are specific to their savings needs. Over the past three years, a version of The Saver’s Bonus has been tested at the local level in New York City; it is now being replicated in several cities across the country. The pilot is producing results and insights that can inform a larger discussion of designing effective savings incentives for a targeted, lower-income population. This paper will present the policy rationale, review the pilot experience and its key findings to date, and explore the federal policy ramifications.
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