Asset-Building: A Framework & Survey of Issues Prepared by Denise DeVaan, DeVaan & Associates, LLC

“Lack of Income means you don’t get by. Lack of assets means you don’t get ahead.” “Lack of Income means you don’t get by. Lack of assets means you don’t get ahead.” Ray Boshara, New American Foundation New American Foundation

Key Players in Asset-Building Field Dr. Michael Sherraden, Director, Center for Social Policy, Washington University, St. Louis Dr. Michael Sherraden, Director, Center for Social Policy, Washington University, St. Louis Bob Freidman, Corporation for Enterprise Development (CFED) Bob Freidman, Corporation for Enterprise Development (CFED) Ray Boshara, VP & Director, Asset-Building, New America Foundation Ray Boshara, VP & Director, Asset-Building, New America Foundation Assets for Independence (AFI) Jim Gatz, HHS/OCS Assets for Independence (AFI) Jim Gatz, HHS/OCS The Assets Alliance (Trainers, Technical Assistance) The Assets Alliance (Trainers, Technical Assistance)

Additional Key Players United Way of America; Local United Way Agencies United Way of America; Local United Way Agencies Federal Reserve Banks Federal Reserve Banks Community Action Agencies Community Action Agencies Community Development Corporations Community Development Corporations Credit Unions Credit Unions National, Regional, Independent Banks National, Regional, Independent Banks Community Development Financial Institutions Community Development Financial Institutions

Tools to Help Save #1 Mainstream banking products (savings/checking accounts) prevent the use of costly check-cashing and payday anticipation loan services and facilitate savings and asset accumulation. The Earned Income Tax Credit (EITC) reduces low-income working families’ tax burden, supplements their wages, and assists in the welfare-to-work transition. The advanced provision of the EITC allows individuals with at least one child to apply to receive a 40% advance on their refund in regular installments through their paycheck. Individual Development Accounts (IDA) are dedicated matched savings accounts that are used for asset purchases such as a home, education or job training expenses, or starting or expanding a small business.

Tools to Help Save #2 Financial Education Classes IRS allowed split refunds Automatic enrollment into 401K’s and similar products (new Department of Labor Rules) Saver’s Credit (permanent, expanded and refundable)

Asset-Building – Asset building refers to engaging in long- term saving and investment behavior as a means to building household wealth and increasing economic independence. – Asset building strategies empower individuals to make economic choices that provide long-term benefits for themselves, their families and their communities.

Asset-Building The disparity in the distribution of assets is even greater than the disparity of income. There are tremendous economic, psychological, and social benefits to asset ownership, which ascribe not only to the individual asset owner, but also to the household and community in which the asset owner resides. There is historical precedence for government supported asset ownership (eg.GI Bill; 401K’s); these incentives in recent years have not reached people with low incomes (40% of the population).

Asset-Building Strategies Home Ownership Home Ownership Small Business Development Small Business Development Education and Career Counselling Education and Career Counselling Tax Preparation; EITC; federal and state tax credits for individuals/families Tax Preparation; EITC; federal and state tax credits for individuals/families Individual Development Accounts Individual Development Accounts

FAIM Example IDA Match $3match for $1saved Year One Year Two Total Saver Deposits $480$480$960 Match ½ AFI ½ State $1440$1440$2880 Total$1920$1920$3840

National & Minnesota Results ADDDemonstration Results ADDDemonstration Results Match rate: 2:1 Match rate: 2:1 Average monthly net deposits: $19.07 Average monthly net deposits: $19.07 Savings 6 out of every 12 months Savings 6 out of every 12 months Uses: home, home repair, microenterprise, post-secondary education. Uses: home, home repair, microenterprise, post-secondary education. 64% people of color 64% people of color Income not related to savings… Income not related to savings… Minnesota Results Match rate: 3:1 Average monthly net deposits: $28 Savings 9 out of every 12 months Uses: home, microenterprise, post secondary education 36% people of color 13% unbanked (first year) 718 savers; 616 financial education averaging 20 hours (86% of total); $566,869 deposited; 335 assets purchased (35% homes;33% businesses; 31% educations.) Unbanked became banked Income not related to savings…

Policies and Practices #1 Individual Development Accounts (IDA’s) Individual Development Accounts (IDA’s) ADD Demonstration Project; Congressional Approval of Assets for Independence (AFI) Policy and Funding ADD Demonstration Project; Congressional Approval of Assets for Independence (AFI) Policy and Funding Funded through federal AFI and a variety of mostly state and local funds. Some state tax credits. CDBG and TANF allow support. AFI (44,500 IDA’s; 400 AFI Projects; 1200 Organizations) Funded through federal AFI and a variety of mostly state and local funds. Some state tax credits. CDBG and TANF allow support. AFI (44,500 IDA’s; 400 AFI Projects; 1200 Organizations) Require financial education and asset purchase classes Require financial education and asset purchase classes Debt reduction, credit repair, savings and income plans Debt reduction, credit repair, savings and income plans

Policies and Practices #2 IDA’s for Farmers and Ranchers (pilot project) IDA’s for Farmers and Ranchers (pilot project) IDA’s for Refugees (renewed) Office of Refugee & IDA’s for Refugees (renewed) Office of Refugee & Resettlement Resettlement IDA’s for Disabled (HHS One-Stop Family360 Initiative) IDA’s for Disabled (HHS One-Stop Family360 Initiative) 401 Kids (proposed initiative). Allows parents to establish Roth IRA’s for children at birth to finance college, buy a home, save for retirement. $2000 per child per year. No match for low-income. 401 Kids (proposed initiative). Allows parents to establish Roth IRA’s for children at birth to finance college, buy a home, save for retirement. $2000 per child per year. No match for low-income.

Policies and Practices #3 Savings for Education, Entrepreneurship, Downpayment (SEED) Demonstration Project Savings for Education, Entrepreneurship, Downpayment (SEED) Demonstration Project ASPIRE Act (federal bill to fund kids accounts) ASPIRE Act (federal bill to fund kids accounts) Savings for Working Families Tax Credit of 2007 (currently 160 co-sponsors; Minnesota- Oberstar/McCollum) Savings for Working Families Tax Credit of 2007 (currently 160 co-sponsors; Minnesota- Oberstar/McCollum) 529 College Savings Plans 529 College Savings Plans

Resources Office of Community Services: Office of Community Services: Center for Social Development, Washington University: Center for Social Development, Washington University: Corporation for Enterprise Development: Corporation for Enterprise Development: New American Foundation New American Foundation IDA Network: IDA Network: Institute for Social and Economic Development: Institute for Social and Economic Development: The Asset Alliance The Asset Alliance