|
Issue 2, 2008
Federal Reserve Bank of Dallas
A National Perspective on Asset Building
Leigh Tivol |
Leigh Tivol, senior program manager with the Corporation for Enterprise Development (CFED) in Washington, D.C., presented the national perspective on the asset-building movement at the RAISE Texas Action Summit in April. CFED is a national nonprofit organization—as Tivol says, a “think and do tank”—with a mission to provide access to economic opportunity for people and families across the income spectrum. Ten years ago, CFED’s American Dream Demonstration was the first large-scale national test of Individual Development Accounts (IDAs). Today, there are about 80,000 IDA accounts nationally.
IDA programs are no longer the newest fad, Tivol said. “Now it’s a given that matched savings programs are key to giving low-income people a way out of poverty.” Tivol cited a few of the central findings from the American Dream Demonstration and other research, including:
- Low-income families can and do save.
- Savings and investment income—above earned income—reduces intergenerational poverty transmission.
- Savings have psychosocial benefits for adults, and these also likely enhance the well-being of children.
To the audience of IDA program administrators and representatives of the financial institutions that support these programs in Texas, Tivol emphasized that simplicity is the key to policy acceptability, scalability and program accessibility. Ease of use includes reducing barriers and promoting automation. For example, direct or automatic deposits to savings make the logistics of saving comparatively effortless. Tivol asked, “Would any of us do a good job of saving to our retirement accounts if we had to walk to the bank every two weeks to make our deposits?”
Tivol described the roles for community-based organizations, financial institutions and government in efficient and successful IDA programs:
- Community-based organizations (CBOs) often represent the trusted advisers for families and the frontline face of matched savings accounts. CBOs can play a critical role in outreach, enrollment and support of accountholders, as well as delivery of financial education.
- Financial institutions are needed to house accounts, create and refine appropriate savings products, and in some cases, deliver financial education themselves. In addition, financial institutions play an essential role in providing the back-office systems to manage accounts. While CBOs often try to tackle account management themselves, this is not usually the primary area of expertise for local nonprofits. Tivol recommends that this account management be handled to the extent possible by financial institutions that have the infrastructure and expertise to do so.
- IDAs, children’s savings accounts and other matched savings accounts require funding, not just for matching savings and other savings incentives, but also for financial education and operations. All sectors have a role in funding matched savings programs: public—including local, state and federal support—as well as corporate and philanthropic.
- Government funding is the only way to bring matched savings to scale, whether that funding comes from a direct appropriation or from a restructuring of the tax code to incentivize savings.
- Government also can help encourage savings by reducing barriers, such as eliminating asset limits that restrict the amount of money a low-income family can save and still qualify for public benefits such as food stamps.
«Previous article
| About Banking and Community
Perspectives
Federal Reserve
Bank of Dallas
Community Affairs Office
P.O. Box 655906
Dallas, Texas 75265-5906
Editor: Jennifer Afflerbach
Designer: Gene Autry
Researcher and Writer: Julie Gunter
The views expressed
are those of the authors and should not
be attributed to the Federal Reserve Bank
of Dallas or the Federal Reserve System.
Articles may be reprinted on the condition
that the source is credited and a copy
is provided to the Community Affairs Office. |
|
|
