Financial Inclusion

This is America Saves Week, which is an annual campaign that encourages nationwide discussion on savings and promotes good savings behavior. For those of us in the asset-building field, this is an opportunity to elevate research on the relationship between savings and life outcomes. This research can help justify the importance of good savings behavior, especially when these habits and behaviors start early in life. So in honor of America Saves Week, here are some of the research highlights from the asset-building field. Specifically, these highlights come from our research at the Assets and Education Initiative (AEDI) at the University of Kansas School of Welfare, where we are studying the relationship between children's savings and their financial and educational outcomes later in life.

David Dayen has a nicely written piece up on Pacific Standard ("Signed, Sealed, Delivered") arguing that  a "two birds, one stone" solution exists within the current struggles of the United States Postal Service. He argues that we could improve the USPS' bottom line and strike at the heart of the challenges faced by unbanked and underbanked Americans by allowing the USPS to offer basic financial services.

Two events this week explored some important policy territory for government supported retirement savings accounts. First, at the Center for American Progress Action Fund, a panel of experts and policymakers met on Tuesday to discuss the future of retirement security in light of proposed cuts to Social Security, the marked shift from defined benefit to defined contribution plans, and the possibility of state-level action to ensure greater access to savings opportunities. Yesterday, an event at Brookings explored the implications of a recent study suggesting that tax incentives may be an ineffective tool for promoting retirement savings. While each discussion featured a range of perspectives, both highlighted the success of default features like automatic enrollment and explored the potential of retirement accounts tied to the worker rather than the workplace. Still, the question remains: how can retirement policy effectively help workers both contribute to their accounts and maintain their balances until retirement age?

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include housing and homeownership, savings and debt, consumer protection, and inequality.

By Katie Stalter, Center for Social Development

This was originally posted on The Center for Social Development's site.

Editor's Note: This blog post was authored by Bob Annibale, Global Director of Citi Community Development and Microfinance. 

Earlier this week, President Obama was sworn in for a second term, and his inaugural address drove home the notion that “prosperity must rest upon the broad shoulders of a rising middle class.” Yet the U.S. Census Bureau reports that in 2011, 46.2 million people — or nearly one in six Americans —lived below the official poverty line of $23,201 a year for a family of four. Millions more households live just above this level, and even more lack almost any savings. Prosperity, however, will only really be achieved when it is a shared and inclusive prosperity, recognizing the contributions made by all communities.

Income inequality has been widening over the last 40 years, but new analysis of the U.S. Census Supplemental Poverty Measure by the Brookings Institution provides some hope. It underscores the idea that two tax credits for working families — the Earned Income Tax Credit (EITC) and its companion Child Tax Credit (CTC) — have been crucial tools for many low- and moderate-income families to raise their standards of living, build assets and educate their children.

Originally posted on youthsave.org.

In a recent piece for Foreign Policy Magazine, Patrick Doherty, director of New America's Smart Strategy Initiative, outlines a "new U.S. grand strategy." The piece successfully links some of the key principles of the Asset Building Program (economic inclusion and equal opportunity) to global economic health and long-term national security. Doherty writes that by investing in innovation, economic security, and equitable industries both here in the U.S. and around the world we will be in a better position to meet the most pressing needs of the 21st century. In particular, he argues that ensuring economic opportunity for Americans through investment in health care, education, and retirement security provides the added benefits of supporting our national security goals and promotes global economic development. Access to financial markets and products, strong consumer protections, and strategic investment in future generations are exactly the types of innovations that the U.S. should seek to export.

I wrote earlier this week about Mayor Michael Bloomberg's philanthropic effort to spread NYC's promising model of personal, one-on-one financial advice for ordinary citizens. Mayors in five other cities (Lansing, MI; Denver, CO; Nashville, TN; Philadelphia, PA; and San Antonio, TX) will get a shot at using a total of $16 million in seed money to leverage some additional private investment and provide unbiased, reliable, one-on-one financial counseling to folks in need.

Last Friday, I mentioned Justin Bieber's new prepaid card in the weekly news round up. This week, reality TV star Honey Boo Boo (Alana Thompson) is making headlines with news that her family has set up trust funds for their show earnings. TIME posted a piece yesterday with the snarky headline: Honey Boo Boo's Mom is Actually Doing Something Smart with Her Reality Show Money. (I know that sometimes journalists don't write their own headlines, but someone wrote this one.) The headline supposes that we should be surprised that a historically low-income family from rural Georgia would ever do something "smart" with an influx of cash. In fact, the way the headline frames the article sets us up not to explore the savings strategies this family is using, but instead to have a little "fun" at the expense of poor people. Not only are the assumptions that went into that headline wildly classist in nature, they also happen to be flat out wrong.

There's a myth (apparently all too common) that poor people can't save. Actually, they can and do. Decades of research from the asset building field (check out this 2011 Urban Institute paper for a sampling) show that while certainly a lower income can make saving harder, many individuals and families overcome low levels of earnings to put money away for a rainy day.