Innovations in Savings: the $aveNYC Account New America Foundation April 21, 2009 Cathie Mahon Executive Director and

1. Innovations in Savings: the $aveNYC Account New America Foundation April 21, 2009 Cathie Mahon Executive Director and Assistant Commissioner

2. Office of Financial Empowerment (OFE) To educate, empower, and protect New Yorkers with low incomes. • Launched by Mayor Bloomberg in December 2006 as the first program under the Center for Economic Opportunity. • First local government initiative in the nation focused exclusively on anti-poverty and financial empowerment efforts for those with low incomes.

3. $aveNYC Account Pilot Program • Purpose: • ● Test a scalable, national model to increase • savings among low-income individuals • Program Structure: • Must direct deposit at least $100 from tax refund • Obtain a 50% match (up to $250) on restricted savings account if • participants save for at least for 1 year • Can make additional deposits throughout the year, but account will • close if participants deplete below initial contribution • New Approach to Savings: • Non-Prescriptive • Short-term • Designed to be administered at low cost and easy scale

4. Even individuals with very low incomes can and will commit to saving if presented with a convenient, simple tax time vehicle. • Participant average income: $15,530 • 63% were working full time • 73% have children

5.  Match money offered through the $aveNYC account is a powerful motivator to save.

6. The $aveNYC Account is already changing savings behavior. The $aveNYC Account motivated even those with no track record of saving. • 31% of participants were UNBANKED at program start • 72% had less than $500 in savings when the program began • 25% of respondents had no intention of saving a portion of their tax refund

7. The $aveNYC Account is already changing savings behavior. Most $aveNYC participants were able to save for the whole year. • Participants intended to save for the long term • 95% of respondents indicated they planned on keeping the account • open long enough to receive the match • Match money motivated majority to save for the full year • 74% of 2009 SaveNYC participants kept their account for 1 year. • 79% of those who received the match rolled over the account. Of those • who rolled over – 33% contributed again in 2009. • 57% of respondents who closed their account did so because of an • emergency, children’s expenses, or job loss

8.  $aveNYC Account participants are saving for a variety of non-frivolous short and long term goals.

9. Policy Implications • Tax time represents a unique opportunity to encourage low-income individuals to save. • Financial incentives, combined with trustworthy and effective implementers, can convince even the very low income and unbanked to save (even in difficult economic times). • Asset-building policy must incorporate the full gamut of savings needs, including for short-term emergency funds. Short term savings can help reorient people towards longer-term planning and financial management. • Cities and states can add to our knowledge base through experimentation with varied savings approaches.

10. 42 Broadway, 8th Floor New York, NY 10004 www.nyc.gov/ofe