Scaling Up Savings and Savings Policy

1. Scaling Up Savings and Savings Policy The Saver’s Bonus and Lessons from $aveNYC

2. Presentation • Define savings needs of low-income families • Identify how these needs are(n’t) being met by current policy • Review The Saver’s Bonus as policy solution

3. The Need • Savings are critical for low-families. • Financial Stability • Among families that experience a job loss or health condition that limits the ability to work, 40% of liquid-asset poor families report hardship compared to 20% of families with liquid assets. • Economic Mobility • 71% of children born to low-income, high saving parents moved into a higher income quartile over a generation compared to only 50% of children with low-saving parents.

4. The Need • Precautionary, flexible use savings particularly important both functionally • “supplementary income” • And structurally • presents a first rung on the savings ladder

5. The Need • Good News: It doesn’t take much to make a difference. • Even amounts below $2,000 have been shown to reduce the likelihood of missing meals or rent payments when income is interrupted. • Children with a savings account in their name, regardless of the amount, are 7 times more likely to enroll in college than children who have no account.

6. The Need • Bad News: Most families don’t have enough. • 68% of families in the bottom income quintile are classified as “liquid-asset poor.” • Low-income households face barriers when trying to save. • Lack of resources to devote to saving • Lack of institutional support

7. Current Policy • Current policy provides a patchwork of supports. • Policies targeting low-income households small in scale • The tax code is the primary vehicle. • Benefits accrue primarily to upper-income households • Focused on long-term, restricted uses

8. The Saver’s Bonus

9. The Saver’s Bonus • $aveNYC- The Saver’s Bonus in Practice • Incentive: 50% match on initial deposit • Account Opening: On Site • Product: 1 year CD • Savings Purpose: Precautionary, flexible use

10. The Saver’s Bonus

11. The Saver’s Bonus • Implication of $aveNYC: • Tax time is the right time. • Resources • Access • Access to an account is foundational. • Savings products should support savings needs. • Incentives make saving valuable.

12. The Saver’s Bonus • The Take-Aways: • Savings allow families to plan for the future and keep moving forward when the unexpected occurs. • Low-income families often lack the basic building blocks of saving, resources to save and a place to save. • The Saver’s Bonus would help families start saving and keep saving- and $aveNYC shows that it can work!

13. Additional Resources • Black, Rachel and Reid Cramer (2011). “Incentivizing Savings at Tax Time: $aveNYC and The Saver’s Bonus.” Washington, DC: New America Foundation. • Cramer, Reid (2010). “The Saver’s Bonus: A Proposal to Support Savings by Working Families at Tax Time.” Washington, DC: New America Foundation.

14. Contact Information • Rachel Black • Policy Analyst, Asset Building Program • New America Foundation • black@newamerica.net • 202-596-3357 • www.newamerica.net