Building the Connecticut Asset Building Collaborative
By Fran Rosebush and Roger Senserrich on 10/23/2014 @ 11:00 AM
Last year, the Connecticut Association for Human Services (CAHS) and a group of service providers, advocates and state agencies decided to launch the Connecticut Asset Building Collaborative (CABC) in order to collectively focus our energy and ideas to bring efforts in Connecticut to the next level. There were already several promising initiatives focused on financial education, budget coaching and asset building in the state, and we believed forming a collaborative would allow us to better align our efforts.
The group of organizations involved in the launch of the Connecticut Asset Building Collaborative chose to apply to the Assets & Opportunity Network Technical Assistance (TA) Fund for guidance on creating a vision and strategic plan for the collaborative. Thanks to the support through the TA Fund, the CABC was able to conduct a focused, inclusive strategic planning process, translating the energy and enthusiasm from groups at the table into a clear, well-defined theory of change with a vision statement, defined goals, and activities that we believe will allow us to achieve those goals. Our coalition-building efforts are much more intentional and focused than they would have been without the assistance. The CABC is stronger, and more effective, thanks to the work of our many partners over the course of these past few months.
Developing a Theory of Change for a Stronger Connecticut Asset Building Collaborative
After the initial group of service provider, advocates and state agencies decided to launch the CABC last year, we decided to take a first step and coordinate the first-ever Connecticut asset-building convening. The event was extraordinarily well attended, with more than 100 participants, and served as the true launch pad for our CABC efforts.
Of course, the road wasn’t always smooth when we first launched. The first bump we faced was the need to set a vision for the future of the Collaborative and identify the big picture goals of what we wanted to achieve together. What we knew was that we had a group of interested organizations, we had great energy, and there was a clear need from groups to both develop new programs and improve existing efforts. If we wanted to build on this energy, while successfully advocating for asset-building programs and policies, it was time to develop a plan. To do so, we applied to the Assets & Opportunity Network Technical Assistance Fund, supported by JPMorgan Chase, in order to tap CFED’s expertise in convening partnerships that drive asset-building initiatives forward.
CFED staff worked with CABC steering committee members to define a broad strategic plan. Using our current work as a starting point, it helped us map a path forward with collaboratively identified vision, goals and activities for CABC. CFED’s staff connected with all member organizations of the still-informal CABC steering committee individually, as well as the group as a whole, to discuss our objectives and expectations regarding the CABC. They worked closely with the CABC leaders to evaluate the needs and gaps and assess what competencies we should seek to build into the group as a whole.
After these extensive preliminary discussions and research, CFED’s staff came to Hartford, Connecticut, for a day-long workshop with the CABC steering committee. The main items on the agenda were drafting a theory of change and, from there, defining which activities and strategies CABC would need to advance the change we theorized. In addition, the group discussed how to organize the CABC, including forming a formal steering committee and workgroups, defining membership arrangements and drafting a membership plan. The session was conducted in a collaborative, organic way, with members proposing objectives, goals and tasks while CFED’s team facilitated the discussion and built a framework for the theory of change as they guided the group.
After the meeting, CFED’s staff produced a more fleshed-out theory of change, which contains a vision statement, goals/outcomes, and the activities the collaborative believes will help achieve those outcomes. They proactively gathered feedback on their proposals, keeping a fluid dialogue with all CABC partners in a dynamic, inclusive process.
Thanks to the support from the Technical Assistance Fund, the CABC was able to conduct a focused, inclusive strategic planning process, translating the energy and enthusiasm into a clear, well-defined theory of change. Our coalition-building efforts were much more intentional than they would have been without the CFED’s assistance. The CABC is stronger, and more effective, thanks to the work of our many partners over the course of these past few months.
Technical assistance from CFED to the Connecticut Asset Building Collaborative was made possible thanks to generous support from JPMorgan Chase for the Assets & Opportunity Network Technical Assistance Fund.
Also in this Series
An Asset Advocate’s Guide to the Exciting World of Tax Reform
By Ezra Levin on 10/22/2014 @ 02:00 PM
Last month, CFED released it’s report on wealth inequality and the upside-down tax code. In case 45 pages of tax policy analysis doesn’t excite you as much as it does me, I want to point you to our 3-page Federal Policy Brief, which summarizes the key points from that report. We want this guide to be useful to advocates on the ground, because reforming these asset-building tax programs is an enormous opportunity for the asset-building field.
If you’re an advocate who works on housing for low-income communities, how many times have you heard from policymakers that there’s just not enough money to expand this lending program or that down payment assistance program? Well, the federal government is spending nearly $100 billion on just two homeownership tax programs every year—and the low- and moderate-income clients and communities you serve are getting little or no support.
Or maybe you work on higher education? Or retirement security? Or savings and financial security more broadly? The story is the same for your issues too. All told, the federal government spent $542 billion last year on asset-building tax programs. The vast majority of this spending goes to those at the very top of the income spectrum.
It’s worth pausing on that number for a minute: $542 billion. When you think of the big “welfare” programs, what do you think of? Medicaid? About $265 billion last year. Food Stamps (SNAP)? That cost $76 billion. Section 8 vouchers? $18 billion. TANF? $17 billion. Bottom line: traditional social service spending pales in comparison to spending on asset-building tax programs.
If the thought of tax policy makes your eyes glaze over, don’t think of it as tax policy. Think of it as asset-building policy, because that’s what it is. The way the federal government boost assets is, as a rule, not through grant programs like Assets for Independence (AFI), which cost about $19 million last year. Laudable though these asset-building grant programs are, they are microscopic in comparison to asset-building tax programs. Multiply AFI by 28,000 and you approach what we spend on asset-building tax programs. In short, when the federal government wants to boost assets for Americans, it does so through the tax code; and it does so primarily for the wealthiest Americans. That’s Upside Down.
So if you’re looking for big federal policy reforms to get more low- and moderate-income folks into homes, look at making the tax programs more equitable. If you want to get more students into higher education, check the tax programs. If you want to expand retirement security, reform the tax programs. Or if you simply want to expand savings and wealth more broadly for low- and moderate-income Americans, take a look at the tax programs. That’s what this Federal Policy Brief and the full report do. The asset-building programs and funding are there, but they’re just not serving the families and communities who need it the most. Let’s change that.
Reflections on the Field and What We Should Do Together Part II: A Few Clear Mandates
By Jennifer Brooks on 10/21/2014 @ 12:00 PM
The first blog post in this series focused on results from a survey of Assets Learning Conference participants (and those who couldn’t make it) that asked about trends in communities across the country, as well as organizational needs and perspectives on what is most important for us to focus on together. The big takeaways were:
- The demand for services has increased across the country; financial capability, debt and credit issues are inextricably linked to high housing costs and low wages.
- To meet demand, not only is more funding is needed, but the field also needs best practices research, connection to others doing similar work, case-making data, and online and peer learning opportunities.
- The most important issues to focus on together are increasing the resources in the field, lifting up the experiences and engaging those who are living in asset poverty, and coordinated federal policy advocacy.
Some of the responses show clear trends and provide a mandate for specific kinds of collective action; however, others raise important issues that we need to figure out how to address together. While CFED, as the backbone organization for the Assets & Opportunity Network, doesn’t have any silver bullets in our bandoleer, we do feel an obligation to respond in ways that will move our field and our movement forward.
This blog post focuses on where we see some clear mandates. Part III of this series will focus what we need to grapple with together.
A few clear mandates …
Connect Network members to others doing similar work
“We need to be connected with models that work and shown how to make it happen ourselves.”
One raison d’être of the Assets & Opportunity Network is to connect and organize the assets field. The newly launched Network Experts Directory, which lets you find Network leaders by their area of expertise or geography, is a new way to find others doing similar work. Other ways to connect are through learning groups, “virtual coffees,” affinity groups and more. Check out the Network Learning Community for more information. What more should we be doing? Your ideas are always welcome.
Provide case-making data
“We need solid data that is localized to demonstrate need to funders.”
The demand for local data is not new, but our ability to meet that demand is. To complement state-level data in the Assets & Opportunity Scorecard that CFED produces annually, we launched a new tool at the ALC called the Assets & Opportunity Local Data Center. It provides city- and county-level data on asset poverty, liquid asset poverty, unbanked and underbanked rates.
Offer online and peer learning opportunities
“I want to hear from other organizations that have tread this path before.”
In addition to the learning groups mentioned above, the Network will continue to develop virtual and peer learning opportunities on topics that are relevant to you, such as credit building and logic models. What are your ideas for online and peer learning opportunities?
Coordinate advocacy efforts
The survey results affirmed that we’re headed in the right direction with our advocacy coordination efforts. Now we need to do more. The Network’s Federal Policy Working Group is drafting a policy agenda for the 114th Congress that will guide the Network’s advocacy efforts for the next two years. Be on the lookout for your opportunity to weigh in. At the state level, a learning group on children’s savings policy advocacy kicks off this month. Is there a state or local policy issue that you think is ripe for a learning group? Share it here.
With clear mandates, the job is to just dive in and do the work. However, some of the issues raised in the survey of the field—funding for the field, affordable housing and engaging people living in poverty in our movement—are ones we need to address together. Part III in this series will focus on those gnarly questions.
Manufactured Housing as a Bridge Over the Affordability Gap
By Doug Ryan on 10/20/2014 @ 03:00 PM
Last week, the Consumer Financial Protection Bureau released an important study called “Manufactured-Housing Consumer Finance in the United States.” For 10 years, CFED, through its Innovations in Manufactured Homes (I’M HOME) initiative, has both promoted manufactured housing as affordable housing, while also supporting fundamental changes to the financing, consumer protections, and public policies that affect the nearly 18 million Americans who call them home.
The report relied on a number of sources, including proprietary industry data, to develop its findings. The bureau reported on numerous areas, including some we know all too well, but bear repeating. For example, manufactured homeowners have considerably lower incomes and less wealth than other homeowners. We also had confirmed that the chattel, or personal property, loans most often financing manufactured homes are much more likely to be expensive than mortgages on other houses. In 2012, 17 percent of chattel loans had interest rates that would have triggered the Home Ownership and Equity Protection Act, or HOEPA (as currently enforced), compared to 0.01 percent of site-built loans that actually triggered HOEPA that year (HOEPA did not apply to chattel loans until 2014). HOEPA loans provide borrowers with additional protections, as regulators recognize that the borrowers face higher costs and potential hazards.
The study also supports what CFED and many others have seen in manufactured housing over recent years. Although the percentage of new manufactured homes placed in manufactured home communities is still relatively low–about 30 percent in 2013—78 percent of the total new manufactured homes were titled as personal property. The disconnect between titling and finance should alarm any housing advocate, but also call us to action to do things differently.
What this suggests is what I’M HOME partners have long assumed: that many chattel borrowers—the CFPB says as many as two-thirds—may have qualified for mortgages had they been given the option. Industry disputes this, stating that many new units are on “family” land that the owner would not want to use as loan collateral. No doubt this is true in some cases, but with a finance market dominated by just a few players with a deep stake in the chattel model, it stands to reason that the CFPB is on to something. This business model can also turn into higher cost for families, which in turn means riskier loans, more likely to default.
Industry sources also help dispel one of the myths of this market, that manufactured homes are mobile homes. According to the community owners surveyed, the average length of time a home is located in a community is 40 years, while the average resident stays 13 years. Nevertheless, the manufactured housing industry chooses to fund the majority of home purchases as if the families and the homes would skip town in a heartbeat.
Industry, to its credit, has made great strides in improving the quality and look of manufactured homes. It’s time that the financing be modernized as well.
We know there are better ways to do business. Any regular reader of Rooflines no doubt has heard CFED tout the success of the New Hampshire Community Loan Funds’ manufactured home loan program. Private lenders have already moved into this space in the Granite State, and we believe that other lenders in other states would follow if manufactured homes were on equal policy footings as site-built homes. The loan fund is also the basis for CFED’s assertion that titling reform would, with other tools, lead to transformation of this market. But that is not enough to turn the homes into true assets for all owners.
That’s why we are advocating strong duty to serve rules for Fannie Mae and Freddie Mac to ensure they invest in manufactured housing mortgages. This would provide the liquidity that small depository lenders desperately need to lend in this space. It’s also why we advocate for stronger zoning and planning rules to prevent localities from excluding manufactured homes and to offer policymakers and advocates another weapon in their affordable housing arsenals.
In an era of declining subsidies and reduced homeownership rates, advocates and policymakers are looking for ways to bridge the affordability gap. Manufactured housing, done right, offers a framework unlike just about any other option.
We look forward to working with all parties to move this agenda forward. The next best chance for all of us to do so is at the 10th Annual I’M HOME Conference on November 13 in Seattle. I hope you can join us.
Asset Building News Round Up: October 17, 2014
By Paul Day on 10/17/2014 @ 01:30 PM
EconomicCheckUp: Helping Older Adults Find Programs to Boost Their Economic Security
October 28, 2014, National Community Reinvestment Coalition, Washington, DC
This webinar is designed for financial institution professionals, financial educators and counselors, community-based organizations, asset builders and the aging network.
2014 Rural Housing Summit: Staking Our Claim: Securing a Sustainable Future
October 23, 2014, Asilomar Conference Grounds, Pacific Grove, CA
The Rural Housing Summit brings together housing professionals and advocates to examine key policy and program issues and develop a strategic action plan to improve the living conditions of low-income and rural Californians during the upcoming year and beyond.
It remains cheaper to buy than rent in every one of the country’s 100 largest metro areas, according to new Trulia research. In fact, homeownership nationwide has actually become a sweeter deal, coming in on average 38% cheaper than renting today, compared with 35% one year ago, thanks to falling mortgage rates and rents rising faster than prices. Read more here.
When it comes to putting money away for retirement, women outmatch men: They are more diligent savers and more likely to put a bigger percentage of their paycheck into a savings plan. But when it comes to the final savings tally, women are falling far behind. Read more here.
The ELM² Fellowship—offered by FIELD in partnership with the Capital One Foundation—supports the development of emerging leaders in the microbusiness development field. Thanks to the continued support of Capital One, FIELD announces that the Request for Applications for its third class of fellows is now available online. Applications are due November 14, 2014. Read more here.
Five years into a national economic recovery that has further strained the poor working class, an entire industry has grown around handing them a lifeline to the material rewards of middle-class life. Retailers in the post-Great Recession years have become even more likely to work with customers who don’t have the money upfront, instead offering a widening spectrum of payment plans that ultimately cost far more and add to the burdens of life on the economy’s fringes. Read more here.
Manufactured homes — factory-built structures that are transported to a leased or buyer-owned lot — offer a realistic possibility of homeownership for many lower-income buyers. But financing options are limited and expensive, which has sparked calls for reform. Read more here.
From the Assets & Opportunity Network
From Louisville Metro Community Services and Revitalization: It has been a little while since we posted new information - but that doesn't mean we've been sitting on our laurels! In August, Bank On Louisville celebrated its 4th Anniversary with 100 of its closest friends who came to help celebrate our successes. Read more here.
New Northwest Area Foundation Initiative Promotes Financial Inclusion
By Arohi Pathak on 10/16/2014 @ 04:30 PM
Under the umbrella of the Assets & Opportunity Network, the Financial Inclusion Policy Action initiative, CFED’s newest initiative with the Northwest Area Foundation, is off to a promising start!
Over the next three years, seven grantees in five states (WA, OR, ID, MN and MT) will advocate for policies that rein-in predatory lending and abusive debt collection practices, increase access to safe and affordable financial services and products, expand financial education, and encourage savings, among other financial security policy ideas. The initiative is designed to advance state and tribal policies that increase financial inclusion and security among low-income communities, Native American communities and communities of color.
We’re excited to be partnering with a number of national experts, which will allow us to bring very specific expertise to the state and tribal grantees. The experts are:
- Center for Responsible Lending
- National Consumer Law Center
- Center on Evaluation Innovation
- Spark Policy Institute
- First Nations Development Institute
- Seven Sisters Community Development Group
The Financial Inclusion Policy Action Initiative will use three key approaches in building policy and advocacy success at the state and tribal level:
- Peer learning—regular opportunities for experiential and intentional learning with peers to foster new connections and identify solutions to policy challenges;
- Technical assistance—tailored supports to help advocates build relationships with critical allies, develop expertise on specific policy issues, and identify strategies for policy success or capacity building; and
- Honing adaptive capacity—using coaching, tools, data and other supports to help organizations adapt to complex policy environments, monitor progress, respond to new information, and evaluate policy change strategy on an ongoing basis.
In mid-September, CFED held a meeting in Washington, DC with the grantees and our TA experts and coaches to talk about how organizations can create meaningful state and tribal policy change, and build advocacy capacity for long-term success. The TA experts shared knowledge on strengthening financial security, effective strategies for state and tribal policy change, and lessons learned from similar efforts.
Over the next few months, grantees will participate in an intensive self-assessment to evaluate their policy landscape, understand their strengths and gaps as advocates, and plan strategic advocacy campaigns. The assessment will inform a tailored technical assistance plan co-created by the grantee, CFED and technical advisors to guide on-going learning, adaptation, and evaluation.
As we continue working on this initiative, we will share the best practices, learning and tools through the Assets & Opportunity Network. For more information, contact Arohi Pathak at CFED.
Prize-Linked Savings: An Innovative Strategy for Helping Low-Income Households Build Savings
By Alexander Scarlis on 10/15/2014 @ 05:00 PM
American households do not have enough savings. One in four lacks the financial cushion to support themselves for three months at the federal poverty level if their income is suddenly interrupted. That proportion jumps to almost half if the household’s illiquid assets, such as a home or car, are excluded from net worth.
Setting aside money for emergencies is especially difficult for those with modest incomes. Yet given the right supports and incentives, they too can accumulate savings that will help them weather financial hardships.
CFED’s new Fact File, “Prized-Linked Savings: An Innovative Strategy for Helping Low-income Households Build Savings,” highlights how an innovative and exciting asset-building policy is helping low-and moderate-income families build savings across the country.
Prize-linked Savings (PLS) is an innovation that is fun, works, and is popular among those who need it most.
- PLS offers participants the opportunity to win a cash prize every time they deposit money into a savings account.
- Participants keep the money they save and any interest accrued even if they don’t win a prize.
- Research shows that PLS accountholders increase their total savings, which likely includes new savings.
Experience on the ground demonstrates these positive results. Michigan’s prize-linked savings program, the longest-running in the U.S., saw account balances of financially vulnerable participants increase on average by more than 20% after one year. Notably, the asset poor saw their balances increase on average by more than double that of non-financially vulnerable participants.
Several states have already changed their laws to promote PLS with more working to do the same, and the federal government is showing signs of increased bipartisan support.
Check out our new Fact File to learn more about this exciting innovation!
Reflections on the Assets Field and What We Should Do Together: Part I
By Jennifer Brooks on 10/14/2014 @ 06:30 PM
Now that the dust has settled from the Assets Learning Conference, we’ve hopefully all had time to reflect on our own personal “takeaways.” I know that some took away gold nuggets of information, others built new strategic relationships, some felt the thrill of participating in the policymaking process, and still others refilled their metaphorical coffee cups and found inspiration to redouble their efforts. My own reflection has focused on what we are called to do together in the next couple of years.
From the pre-Conference survey of participants (and those who couldn’t make it), we learned about trends in communities across the country, organizational needs and perspectives on what is most important for us to do together. While some of the findings show clear trends and point to mandates for specific kinds of collective action, others raise important issues that we need to figure out how to address together.
This blog post will focus on survey results. Parts II & III of this series will focus on what the survey findings tell us about what we should do next.
Trends and Needs in the Field
Four hundred thirty-eight individuals in the assets field responded to the survey. Of them, 362 (83%) said that the need for financial capability and asset-building services has increased in the past year.
When asked what services people were seeking, some of the answers were not surprising. For example, financial education/counseling/coaching, debt management assistance and credit building assistance ranked #2, 3 and 4, respectively. However, the #1 service that respondents reported people in their communities seeking was affordable housing. Many respondents commented on the interrelationship between high housing costs, low wages, credit and debt.
Although more than half (53%) of respondents said their organization’s ability to meet community needs had increased, nearly two-thirds (61%) said they had a significant need for funding. Many respondents noted the growing disparity between community needs and available funding.
Respondents indicated that they have a multitude of needs that national intermediaries (both the Assets & Opportunity Network and “CFED proper”) might address. Best practices research, connection to others doing similar work, case-making data, and online and peer learning opportunities topped the list. However, more than half of respondents indicated a need for nearly all of the options.
What We Should Do Together
In addition to trends, the survey also asked about what we should collectively focus on as a field/movement to increase financial security and economic opportunity nationally. Ninety percent of respondents indicated that increasing resources available to provide services and engaging and lifting up the experiences of those living in asset poverty were important activities for us to do together. More than 80% said it is important that we focus on learning from each other about effective practices and raising awareness about our issues with the media and other stakeholders. More than two-thirds of respondents said that it was also important for us to focus on coordinated advocacy at all levels of government.
When asked what was most important to focus on together, increasing resources and lifting up experiences of those living in asset poverty remained at the top of the list. However, coordinated federal policy advocacy moved into second place as critical for us to increase financial security and economic opportunity.
So Now What?
The data give us a lot to chew on. Part II of this blog series will focus on our initial ideas for how we respond. What ideas do you have? Leave a comment on how you would address the gnarly questions of funding for the field, affordable housing and engaging people living in poverty in our movement.
Marvin Talley: Proof that Asset Building Can Change Lives
By Paul Day on 10/13/2014 @ 12:30 PM
After going through a rough divorce, Marvin Talley lost everything—his stable, salaried job with the federal government; his passion for tennis playing and his overall stability. Marvin struggled with drug addiction, joblessness and debt for over a decade. Through a transitional shelter, he was able to rebuild his life and find a job working for a nonprofit. Eventually, Marvin would get engaged to his friend, Deborah, who encouraged him to think about their future.
Deborah introduced Marvin to the homeownership classes at Manna, where he learned about Capital Area Asset Builders’ (CAAB) IDA Program. Through CAAB’s IDA program, Marvin could save for a downpayment on a mortgage. “It was a win-win situation,” Marvin says.
At the same time, Marvin and Deborah were undergoing significant medical issues: he had prostate cancer and she had triple bypass surgery that left her unable to work. Because he was the sole income earner, Marvin decided to take on the mortgage entirely himself.
It was “touch and go” for a while before Deborah was able to go back to work. Marvin struggled with paying down his credit cards while contributing to the IDA. With help from CAAB, Marvin was able to access his credit report so he could start addressing some of these issues. Along the way, he also learned how to stick to a budget.
All of Marvin’s contributions to his IDA were matched threefold, and he eventually saved enough to make a downpayment on a home in the Trinidad neighborhood of Washington, DC. In August 2006, Marvin and his wife were able to move into their new home.
This September, Marvin has been in his home for eight years. Unfortunately, Deborah has since passed away, but he credits her to introducing him to CAAB, which totally changed his life.
Marvin looks forward to further building his financial future. CAAB is now offering investment and estate planning classes, which he plans to take advantage of. His story is an incredible testament to the power of asset building in changing lives and providing those lifelong pathways to prosperity for all Americans.
Asset Building News Round Up: October 10, 2014
By Paul Day on 10/10/2014 @ 12:30 PM
Design for Action Conference
October 14, 2014, Artisphere, Rosslyn, VA
Want to learn how to design products that help people change their daily behavior and routines? At Design for Action, you'll learn from a dozen of the most prominent experts in the country.
A new TransUnion study found that the consumer loan wallet – the composition of loans that people typically carry – has materially changed for both the youngest and oldest segments of the population during the last decade. Read more here.
The 30-year mortgage is the foundation of the real estate market largely because it makes housing more affordable. But there's something new that's getting a lot of attention. It's called the Wealth Building Home Loan because it helps people own more of their house more quickly. Read more here.
The U.S. Treasury Department has awarded a $1.08 million research contract to the Center for Social Development (CSD) at Washington University in St. Louis’ Brown School. One of 11 contracts awarded nationally under the Financial Empowerment Innovation Fund, this award will fund research on myRA accounts (“My Retirement Accounts”). Read more here.
This AARP survey looked at the extent to which 50+ workers are planning for their future retirement and where potential health care costs fit into this planning. It also looked at whether individuals are concerned about these costs and what sources of income they plan to use to cover potential costs.
Freddie Mac is building a business to originate small apartment loans, between $1 million and $5 million, as part of its mandate to support affordable housing. The average loan will be about $2.5 million, the McLean, Virginia-based company said in a statement. The mortgage giant plans to originate as much as $1 billion of such debt in 2015, according to David Brickman, the head of multifamily operations at Freddie Mac. Read more here.
From the Assets & Opportunity Network
From Cataylst Miami: US businesses are in. The American public is in. So what’s next on the minimum wage, Congress? It has long been the argument from some voices in business—or at least their Washington lobbyists and the Members of Congress who listen to them—that raising the minimum wage would hurt business—and workers—by eliminating jobs. Read more here.
From Wayne Metropolitan Community Action Agency Asset Building: On September 15, the American Savings Promotion Act (H.R. 3774) passed the United States House of Representatives! This legislation would clear the way for all interested financial institutions to offer prize-linked savings (PLS) products by removing federal barriers that currently prohibit banks and thrifts from offering them. Read more here.
Three Reasons You Should Be Concerned about the Racial Wealth Gap
By Dominique Derbigny on 10/09/2014 @ 11:00 AM
During the Assets Learning Conference special event, “Unfinished Business: Winning the Battle for Economic Opportunity,” Cy Richardson of the National Urban League declared that in the battle for economic opportunity, “We’re not winning. We’re losing.” As part of the event, ABPN hosted a discussion about closing the racial wealth gap and expanding economic opportunity.
The racial wealth gap has tripled in size since 1984. According to the U.S. Census Bureau, African American households earn just 67% of the national average, and CFED recently found that households of color have approximately one-tenth the median net worth of white households. While we know wealth has declined for many families since the Great Recession, parallels between race, ethnicity and inequality remain staggering, and households of color are struggling to regain an economic foothold. Evidence illustrates that the black-white economic gap hasn’t budged, and ABPN urged us to address an important question: why should people care?
Here are three reasons we should all be concerned about the racial wealth gap:
- Minorities are needed to grow and sustain the economy.
The minority population in the US is growing and, as Wade Henderson expressed during the event, we increasingly rely on these workers to support productivity and maintain our quality of living. We need to invest in communities of color through asset development (Bob Annibale mentioned various forms such as tax credits, tax reforms, credit building, citizenship and others) and sustainable employment in order to grow and support the economy.
- The student loan borrowing gap delays economic advancement and contribution to the economy.
Student loan debt has surpassed the trillion dollar mark nationally, but minorities are disproportionately impacted as there is a major gap in borrowing. According to a National Journal article, “half of all black graduates reported taking on at least $25,000 or more to complete their undergraduate degrees between 2000 and 2014, compared to 34% of white graduates.” Gaps in income and wealth mean black families have fewer resources to cover rising college costs. The debt burden not only disrupts college completion, but delays economic advancement. Students with large debt loads are more likely to forego large purchases, such as vehicles and homes, lessening their potential contributions to the economy.
- Mass incarceration, the school-to-prison pipeline and the racial wealth gap are self-reinforcing.
Evidence from Pew reveals that the incarceration rate of black men is more than six times higher than that of white men, and New America explains that time spent behind bars can reduce annual earnings by 40% and has permanent negative consequences for economic mobility that affects younger generations. Many minority children are not only impacted by parental incarceration rates, but are subject to the school-to-prison pipeline. The U.S. Department of Education Office for Civil Rights reports that black students represent merely 18% of preschool students, but make up over 40% of preschool student suspensions. Southern Poverty Law Center reports that black students are almost three times more likely than white students to be suspended in middle school. Too often, students who endure multiple suspensions are driven out of the classroom and into the juvenile or criminal justice systems. Additionally, higher suspension rates may prevent high school completion resulting in reduced earning potential and decreased economic opportunity.
Although the racial wealth gap is ever present, speakers during the ABPN event posed innovative ideas for how to level the economic playing field. For example, we could provide a savings account for every child born in the US or a generational “baby bond” whereby the amount of the bond is based on household wealth (i.e., less wealth = larger bond) and is able to grow from birth through adulthood. Another suggestion is to replace the home mortgage interest tax deduction with a simple, flat, refundable homeowners’ tax credit, so that the U.S. tax code can truly support more people achieving the dream of homeownership. While no single solution will close the racial wealth gap, perhaps we have to start by acknowledging that we are not yet a post-racial society and then determine strategies that improve economic opportunity for all.
We Need to Focus on Strategies for Building Generational Wealth
By Solana Rice on 10/08/2014 @ 12:00 PM
During a recent Monopoly night with my husband, I was ahead, with lots of cash and some properties. But a few bad rolls of the die later, I found myself mortgaging my properties. I lost more equity at every turn despite the $200 in play money I had amassed. And then, to make matters worse, I made a bad deal with my husband that put me in a cycle of debt. I’m lucky; for me, it was just a game.
But the Monopoly spiral mimics a devastating reality for far too many Americans—particularly black Americans. African Americans, and most people of color, have only a fraction of the wealth of their white counterparts. According to a new analysis just out of theFederal Reserve Consumer Finances Survey (pdf), the median white family in 2013 had a net worth of $134,000. The median net worth of Latino families was $14,000, and that of African-American families was just $11,000. For every $1 of wealth for white families, black families had just 12 cents.
It brings to mind a classic 2008 Chris Rock comedy bit, in which he spells out the difference between “rich and wealthy.” Rich is temporary; wealth is enduring and is passed on to generations.
And comedian Louis C.K., who’s white, does a pretty good job of expanding on Rock’s riff in one of his own stand-ups. It’s a funny line that’s sort of depressing at the same time: “When white people are just rich, they’re just rich forever and ever. Even their kids are rich. But when a black guy gets rich, it’s countdown to when he’s poor again.”
Clearly it’s an oversimplification, but you get the picture.
In a study (pdf) of why this racial wealth gap has widened, the Institute on Assets and Social Policy found that length of homeownership accounted for the majority of the gap. Household income, unemployment and college education were also strong factors, which give black folks a clear blueprint for steps we need to take.
Homeownership remains an important part of building assets and wealth, despite the recent foreclosure crisis. As foreclosures reportedly slow (pdf) in some parts of the country, we should champion efforts to make homeownership more affordable and sustainable while also creating opportunities for renters to have some of the same advantages for building wealth as homeowners.
Only 44 percent of black families (pdf) own a home—down from 46 percent in 2010. So how do we extend the savings and credit-building mechanisms that are inherent in homeownership to black families who are currently renting?
And, of course, the jobs picture is a key factor, to provide families not only with sustaining wages but also benefits and a mechanism for saving. I grew up in a solidly middle-class family in the suburbs of Cleveland. My father had a job working for Ford Motor Co. for 30 years that provided benefits and allowed us to live comfortably and save for my education and my parents’ retirement, and also enabled my parents to own a home.
So with the important gains recently in various states on minimum wage increases—which allow individuals and families to earn more—it is essential to build on that by fostering mechanisms to encourage workers to save more of their pay.
Right now, though, 2 in 3 families of color don’t have the three months’ worth of savings needed to live above the poverty line should they have a disruption in income. This—in addition to the pain and hurt of generations of American families, particularly black families, who work, earn and even own and then lose it all—is real.
Hearing “countdown till you’re poor” in the back of your mind can cloud your every life decision. It can make you averse to or ill-prepared for the financial risks that are necessary for growing ownership, building wealth and really participating in the economy. But we have a fighting chance at ending the countdown and that cycle—leveling opportunity for economic mobility—and, I suspect, even improving our economy, if we focus on strategies to end the racial wealth gap.
Levere’s New York Times Op-Ed Calls for Universal Children’s Savings, Fixes to Higher Education Tax Benefits
By Kristin Lawton on 10/07/2014 @ 02:00 PM
Recently, many of us have speculated that the issue of children’s savings has been gaining momentum, and that attention to children’s savings as a solution for financially vulnerable families has been heightened. This morning, an op-ed published in the New York Times by CFED President Andrea Levere confirmed exactly that. The article shows that now, more than ever before, children’s savings are attracting a national spotlight.
In the op-ed, CFED President Andrea Levere discusses growing support for CSA programs across the country with the potential to serve more than 200,000 low- and moderate-income families. Yet, that number could soar into the millions with the help of federal policies that make it easier, not harder, for financially vulnerable families to save for higher education. The problem with many of our existing higher education policies, Levere argues, is that they act as “Pell Grants for the rich,” making it even easier for wealthier families to afford college while missing the middle class and leaving the poor behind. By turning this upside-down system right-side up, postsecondary education can be a reality for all young people, regardless of the ZIP code into which they are born.
I hope you’ll take some time today to read “This Little Piggy Went to College.” As you read the piece and its accompanying comments, I hope you’ll also take a look at the comments, recommend the thoughtful ones and adding your own ideas. Together, we can use this remarkable opportunity to advance a meaningful conversation about the challenges facing financially vulnerable families.
Click here to read Andrea Levere’s op-ed in the New York Times.
Reflections on the ALC Platforms for Prosperity Awards: A World Within Our Grasp
By Kim Pate on 10/07/2014 @ 01:00 PM
It’s been almost three weeks since the ALC Platforms for Prosperity Awards and our celebration of CFED’s 35th anniversary. That night we set out to envision together an America of truly equal opportunity—an America where, as I said at the ceremony Thursday night, success is not predicated on being born into wealth or privilege, and there are real pathways out of poverty. An America within our grasp.
That evening we honored five organizations on the frontlines for their commitment to transforming lives one at a time through innovation, dedication and delivering essential services. Five leaders in the field committed to creating financial security in their communities across meaningful and tangible platforms.
But it goes so far beyond that.
As I have reflected on the ALC and CFED’s 35 years, I am continually reminded just how many individuals and organizations, in all sectors, are doing this work every day, every year and most without awards or recognition.
People committed to a simple but powerful idea that by creating economic opportunity, we can alleviate poverty. People who have bought into the game-changing idea that given a reasonable opportunity, every family can save, build assets and create a more prosperous future for themselves and their children.
These people—YOU—are the ones working to transform how and where we bank, to shape and improve where we work, to change the way we get comprehensive services, to allow more of us to start businesses, and to build better homes and neighborhoods where we live.
Together, we mark this milestone in our campaign and together, we continue our work and redouble our commitments. We pledge to make the next 35 years even better than the 35 before.
Will you join us? Send us your stories about what you are doing to help families turn opportunity into enduring economic and social benefits, and take another look at the organizations and videos below.
ALC 2014 Platforms for Prosperity Awards Winners
Where We Bank: HOPE Enterprise Corporation
HOPE ensures that everyone, especially those in some of the country’s most underserved communities, has access to affordable, responsible financial services, so that all of us can pursue economic opportunity.
View the HOPE Enterprise Corporation video here.
Where We Get Comprehensive Services: Alameda County Community Asset Network and Alameda County Social Services Agency
Alameda County Community Asset Network works with the Alameda County Social Services Agency to go beyond dealing with only the downstream effects of poverty and families in crisis, but instead, investing in families and neighborhoods proactively to lift up communities in need.
View the AC CAN video here.
Where We Live: Hawaiian Community Assets
Hawaiian Community Assets works with Native Hawaiians to provide bridges out of homelessness and create stability and opportunity for families.
View the Hawaiian Community Assets video here.
Where We Start Businesses: Opportunity Fund
Opportunity Fund is pioneering new ways, including innovative loans, to help families realize their dreams and prepare for the future.
View the Opportunity Fund video here.
Where We Work: Step Up Savannah
Step Up Savannah is helping families move out of poverty through innovative workplace-based supports that lead to greater economic security of workers, more stable employment, and higher earnings.
View the Step Up Savannah video here.
Helping Employed Youth Get Banked, Save and Manage Money
By Kori Hattemer on 10/06/2014 @ 04:30 PM
Nearly 20 million young people were employed in July 2013. Summer youth employment programs are a great opportunity for young people to develop job skills and experience. As youth receive a paycheck—possibly for the first time—and prepare for adulthood, they should also be developing the knowledge, skills and access to financial management resources that will help them manage their finances effectively now and in the future.
Research says that financial education should involve hands-on application and be relevant at the time people receive the information. What better time to help youth become banked, start saving and learn financial management skills than when they receive their first paycheck? Across the country, organizations that manage youth employment programs have begun to integrate financial education into their programs, establish partnerships with employers to build financial capability and identify effective strategies to collaborate with financial institutions.
In November 2013, the Consumer Financial Protection Bureau (CFPB) collaborated with other agencies on the Financial Literacy and Education Commission (FLEC) to bring together national and local leaders from promising programs across the country. Four lessons emerged from this roundtable and are outlined in Building Financial Capability in Youth Employment Programs, a report we prepared for the CFPB and Administration for Children and Families (ACF):
- Lesson 1: Partnerships with the private sector, nonprofit organizations, government agencies, financial institutions and youth are necessary for successful program implementation.
- Lesson 2: Financial education should be tailored to the needs of youth, employers and financial education providers.
- Lesson 3: Financial products offered to youth should be carefully selected by weighing the costs and risks of various options.
- Lesson 4: Organizations should develop explicit strategies for engaging youth in the short and long term. Efforts to engage youth are important both during and after the employment program.
Check out the report for insights from national and local leaders, and for specific examples for how you can help youth that you serve build financial capability.
Asset Building News Roundup: October 2, 2014
By Paul Day on 10/03/2014 @ 10:00 AM
CAAB Celebration + Film Premiere Event
October 7, 2014, True Reformer Building, Washington, DC
Please join us as we celebrate the successes of CAAB's participants, from graduating from Money Management 101 to successfully saving for a first home. We will hear the inspiring stories captured by Stone Soup Films and meet several successful savers.
FDIC’s 4th Annual Consumer Research Symposium
October 16-17, 2014, FDIC L. William Seidman Center, Arlington, VA
The symposium will facilitate discussion of recent research on consumers’ capabilities, knowledge, preferences, and experiences in the market for financial products and services, as well as the effects of public policy interventions and new regulations on consumers, households, communities and financial institutions.
Five years after the Great Recession, foreclosures in the U.S. are still three times the normal level. While the number of homes in trouble is high by historical standards, they are on the decline. Around 629,000 homes nationally were in some stage of foreclosure last month — also known as the foreclosure inventory — compared with 936,000 in August 2013, a year-over-year decrease of 33%. Read more here.
Financially stressed-out workers aren't good for businesses. Yes, employees who bring their money worries tend to be less productive and less engaged, and even raise employer health care costs. And so, it is with good reason that employers are now adding "financial wellness" program to their menu of employee benefits. For one, companies that offer this sort of benefit could save $3 for each dollar they spend, according to a recent Consumer Financial Protection Bureau (CFPB) report. Read more here.
Speaking Monday at a regional housing summit in New Windsor, New York State Attorney General Eric T. Schneiderman announced he will allocate an additional $40 million from New York’s share of a national mortgage settlement to extend for two years his office’s Homeownership Protection Program for distressed borrowers facing the loss of their homes. Read more here.
Tennesee State Treasurer David H. Lillard Jr. announced a new program to provide state funding to assist low-income families in building college savings accounts. Through the new Tennessee Investments Preparing Scholars Program, the state will provide enhanced matches for money invested by families that have accounts in the Treasury Department’s TNStars College Savings 529 Program and meet the income requirements. Read more here.
From the Assets & Opportunity Network
From the Illinois Asset Building Group:
On September 10, Chicago City Treasurer Stephanie Neely, launched the new Office of Financial Inclusion (OFI). The launch event took place at Instituto del Progreso Latino and included community partners, financial institutions and other community stakeholders. Read more here.
TA Fund: Sharing Lessons & Insights on Data Collection and Evaluation
By Fran Rosebush on 10/02/2014 @ 10:30 AM
Program evaluation can seem daunting, but is essential. It’s crucial for demonstrating value, making the case to funders and other stakeholders, monitoring efforts, and determining promising practices for ourselves and for the field. At the Assets & Opportunity Network Leadership Convening last December, a number of Network Lead Organizations shared that data collection and evaluation was a top challenge they faced, and one they’d like to face with others, rather than alone. In particular, Lead Organizations shared that some of their hurdles were (1) identifying what to measure, (2) selecting the right database, (3) ensuring consistent data collection and (4) building a theory of change.
To help these organizations overcome these challenges, the Assets & Opportunity Network created a three-part peer learning series on data collection and evaluation through the Technical Assistance Fund, supported by JPMorgan Chase. Assets & Opportunity Network Lead Organizations were invited to participate in a peer learning series to explore challenges and solutions together on data collection and evaluation. Eleven groups participated in the three-part virtual series in July and August, and ultimately shared their experiences, challenges and successes with representatives from CFED’s Applied Research team.
The number-one topic identified by participants in the series as helpful and meaningful for their work was building logic models. Logic models can provide a strong foundation on which to develop new or strengthen existing programs. Logic models help us to:
- Describe the sequence of events thought to bring about change over time.
- Portray the chain of reasoning used to make decisions about inspiring change.
- Provide a simplified picture of a program in response to a given situation.
- Portray the underlying rationale of the program.
- Illustrate the core of program planning, monitoring and evaluation.
Since this information was so helpful for the participants, the Assets & Opportunity Network will offer a webinar on Thursday, October 30 from 2-3:30pm EDT to provide an overview of logic models, share tips on building one of your own, share insights on common mistakes with logic models and how to overcome them, and provide an example of how one program is currently building a logic model to strengthen their design and evaluation process.
Register for “Logic Models: Laying the Foundation for Strong Programs” webinar on Thursday, October 30 from 2-3:30 pm EDT/ 11 am-12:30 pm PDT here.
Other key areas of focus for the Evaluation Peer Learning Series had to do with identifying what to measure, such as the outcomes that will help you demonstrate that your program made a difference. CFED’s Applied Research team indicated that identifying specific, measurable outcomes requires time, thought and a clear understanding of desired results. They shared the following tips with the group:
- What is/will be different as a result of the initiative and for whom?
- What will be changed/improved?
- What do/will beneficiaries say is the value of the program?
- What do/will they say about why they participate in the program?
- Think about what you want to be able to say to your funder or the taxpayers who finance your program. For example, what would you want to say to your state legislator?
The answers to those questions can you help you identify the outcomes that you want to track. Another challenge facing groups was scarcity of time and resources needed for effective evaluation. The groups shared tips on how to streamline efforts and reduce some resources needed. Some of the ideas shared were to:
- Combine intake information for multiple programs on one intake form.
- Embed monitoring activities in the daily operations of the institution as much as possible, including timing programmatic reports to coincide with other monthly, quarterly or annual activity reports.
- Combine pre-test information on client intake forms.
- Leverage community resources by linking with local colleges and universities for assistance with surveys, focus group discussions and/or more sophisticated sampling and analysis activities.
The group also explored shared challenges they encountered when working with multiple databases. To tackle this problem, CFED’s Applied Research team shared the following tips:
- Download data from most of your databases into Excel, so that data may be combined into a single spreadsheet.
- Work to ensure each database collects data in a similar way (e.g., participants’ age data is reported using the same age brackets).
- Collect the same unique client identifier in each of your databases so that you can merge them. This will put you in a position to be able to see the full range of services you’ve provided to an individual, as well as the number of unique individuals your organization has served.
- Find an affordable data geek—this could even be an IT or statistics undergraduate intern.
- Try to work with your funders—they may be more flexible than you think when identifying outcomes and reporting forms for projects. Let them know what systems you’re currently working with.
Sharing lessons and insights from groups was a great way to spread knowledge and speed up the adoption of effective practices. If you’re interested in learning more on these topics, we invite you to join us on Thursday, October 30 from 2-3:30 pm EDT for the webinar “Logic Models: Laying the Foundation for Strong Programs” to continue this conversation.
Also in This Series
Reflections on the ALC Plenary: Public Sector Leaders in Asset Building
By Diana Greenwald on 10/01/2014 @ 10:30 AM
The 2014 Assets Learning Conference plenary— “Public Sector Leaders in Asset Building”—featured speeches by several men and women working on asset building initiatives at the Federal level. The session was, in some ways, structured like a classic jeremiad—doom and gloom followed by optimism and a roadmap to a better future.
The session began with a video message from Janet Yellen, the Chair of the Board of Governors of the Federal Reserve System. She discussed a series of unfortunate statistics that will be familiar to people working in the field. For example, according to a recent report based on the Survey of Household Economics and Decisionmaking, an unexpected expense of just $400 would prompt the majority of [U.S.] households to borrow money, sell something, or simply not pay at all.” This reality seems somehow even more urgent and dire when pronounced by the head of the Fed, the country’s most senior economist.
Yellen’s tough truths were followed by similarly dark pronouncements from Ray Boshara, a senior adviser and assistant vice president at the Federal Reserve Bank of St. Louis. He spoke frankly about the fact that the Great Recession wiped out all of the assets that the bottom 40% of American households (by net worth) had built in the previous twenty-five years. Houses, college and retirement savings evaporated in the crisis. As Boshara said—and has discussed in detail elsewhere—it was more than two decades of asset building advocacy and work swiftly and unceremoniously undone. From this point of Boshara’s speech forward, the tone of the event became decidedly more upbeat.
The next speaker, Deputy Assistant Attorney General for the Civil Rights Division Roy Austin described how asset building is a priority of the Obama administration. He discussed a series of programs meant to improve the average American’s financial security. The most exciting of these was the MyRA program. This innovative program will be government-guaranteed no-fees retirement savings program for Americans earning less than $129,000 a year. It promises to be a safe, easy and accessible way for people to save for their futures. Austin’s announcement and description of the program was met with applause from the crowd.
The session concluded with a panel of several former and current Federal appointees in three separate government departments. Panelists were Elsie Meeks, State Director from South Dakota for the United States Department of Agriculture’s Rural Development program, Martha J. Kanter, Under Secretary of the Department of Education from 2009 to 20013 and Michelle Greene, the former Deputy Assistant Secretary for Financial Education and Financial Access at the Treasury Department. Lisa Mensah, who was recently appointed to be the Under Secretary for Rural Development at the Department of Agriculture, moderated the discussions.
The clear message was that the executive branch of Federal government supports asset building efforts. There is money and a willingness to help. What is needed to tap these resources is local enthusiasm and constituents’ insistence that programs be started and funded. This community-based drive can break the red tape and remind government that, as Greene said, “In a resource scarce environment, asset building has a return on investment.” This positive concluding message was clearly meant to electrify and encourage conference attendees—and it did.
It is not only necessary to recap and respond to what was said in the Thursday morning plenary session, but to also draw attention to who said it. The majority of the leaders in asset building who spoke are women. After opening comments from the director of the conference and president of CFED (both women), there was video message from Yellen, the first female Chair of the Board of Governors of the Federal Reserve System. The closing session featured four women who have held or will soon hold powerful leadership positions in federal government.
It is appropriate to invoke one of keynote speaker Gloria Steinem’s many famous quips: “Some of us [women] have become the men we wanted to marry.” This session—like the conference in general—is I think not just a strong testament to the growth of the recognition of the importance of asset building, but evidence of the growth of female leadership. In this way, Steinem—someone dedicated to equality between the genders, but also economic equality generally—was the perfect choice of keynote speaker for the following day’s closing plenary.
CFED Supports Expanding FSS Program at No Cost in 2015 Budget
By Alicia Atkinson on 09/30/2014 @ 06:00 PM
Last week, CFED joined with 11 other national asset building and affordable housing organizations in asking Shaun Donovan, Director of the Office of Management and Budget (OMB), to support the expansion of the Family Self-Sufficiency (FSS) program to more families at no cost to the federal government.
CFED is longtime supporter of the FSS program, which provides families that receive federal rental assistance a powerful opportunity to achieve their financial goals and reduce their reliance on public assistance. It combines three services:
- Stable affordable housing;
- Case management to help families access services needed to pursue employment and achieve other financial goals; and
- A savings account that grows as a families’ earnings increase over a five year period.
Over 69,000 households currently participate in FSS. In the Housing Choice Voucher FSS program, 56% of continuing participants have positive escrow balances due to increased earnings. The average escrow at graduation for those with a positive balance is $6,000. Many participants use this money as a downpayment on a house or to help pay for continuing education for themselves or their children.
Despite the FSS program’s well-conceived design and documented success in moving families off public benefits, it currently does not allow families who are in Section 8 Project-Based Rental Assistance (PBRA) to participate. PBRA provides housing to more than 2 million people, a significant proportion of the approximately 10 million people receiving federal rental assistance.
The Senate’s FY 2015 Appropriations bill for Transportation and Housing and Urban Development (S. 2438) would enable PBRA assisted housing residents to participate in FSS, and a similar provision was included in the President’s fiscal year 2015 budget. CFED, as well as other low-income housing organizations and advocates, have asked Director Donovan to support the expansion of FSS eligibility to PBRA as he and Congressional leaders negotiate an agreement to fund the federal government in the next fiscal year.
Thrift in Early 20th-Century America and Today
By Andrew Yarrow on 09/29/2014 @ 10:30 AM
The United States is not a thrifty nation and “thrift” is often seen as an antiquated value in a society in which consumption is encouraged and most Americans either don’t or can’t save money. But that was not always the case. In early 20th-century America, thrift was the rallying cry for many civic, professional, business, and other organizations and was enthusiastically embraced by millions.
The YMCA, teachers, the banking industry, government, temperance advocates, anti-poverty activists, every President from Teddy Roosevelt to Herbert Hoover, and many other strange bedfellows played central roles in defining and promoting thrift. The movement’s many components and its philosophy were presented in books, pamphlets, juvenile and adult short fiction, posters, cartoons, and even silent films. Thrift was taught in schools and factories. This virtue was described and promoted during the annual National Thrift Week that was kicked off each January 17 on Benjamin Franklin’s birthday, from Gotham to small-town America.
Thrift represented a quest for control over an array of roiling social problems. Profligacy and waste threatened lives, businesses, the environment, and the country’s strength; poverty was a daily threat to the well-being of millions; and consumer society threatened values of restraint and modesty. These threats galvanized different people and groups with different concerns and agendas. For a time, they united under the banner of thrift, using a common language to respond to disparate problems.
Fast-forward from the 1920s to 2014: Although the United States is by many measures the world’s wealthiest country, the median assets of an American adult, about $53,000, are below those of 15 other countries. Our national savings rate, which stayed above 10 percent into the early 1980s, plummeted to zero in 2005, only to regain a little ground since the Great Recession. Still, the 2013 savings rate of less than 4 percent is a far cry from what individuals or the nation needs for economic health and is only a tiny fraction of what early 20th-century thrift advocates proposed. But even these alarming aggregate statistics dramatically understate the problem. Well-to-do Americans are doing just fine when it comes to saving, building up substantial fortunes in securities, real estate, and other investments. Since the savings rate is an average, the healthy savings of the affluent are counterbalanced by a vast swath of the population with minimal savings and a similarly vast swath who have no savings and are, in fact, mired in debt.
We live in a society in which too many who can save don’t, and too many simply don’t earn sufficient income to be able to save. Without savings, we are less able to take care of future needs, less able to provide the next generation with a down payment on a good life, and less able to help others in need. While the United States remains an attractive destination for foreign investment, our own people’s lack of savings diminishes the pool of funds available for investment in current needs or new ideas, products, or businesses. Without private savings, there is less money available for the private and public investments necessary for a flourishing economy. Private saving is the major source of funding for investments that enhance productivity and, in turn, raise real wages and living standards.
The numbers are grim. Many upper-middle-class Americans have frighteningly little in the way of savings, but much of America’s savings crisis stems not from either rampant consumerism or individual character flaws but from the extraordinary degree of socioeconomic inequality that has developed in the United States since the 1970s. The average net worth of the top 1 percent of households is about $16.4 million, whereas the poorest 20 percent of the population had negative net worth averaging -$27,000 and the second poorest quintile had average net worth of just $5,500 in 2010. Approximately one-fourth of Americans are in debt and have no savings.
Although the early 20th-century thrift movement waned in the 1930s, do many of its ideas have relevance in the 21st century? Does an idea predicated on wise resource use have new meaning today, at a time of high public and private debt, when the economy is floundering, the middle class is strapped, the Earth faces environmental threats, and profligacy and waste seem more widespread than ever? Can a new iteration of thrift, recalibrated to contemporary social realities, illuminate a path to a better future?
Andrew L. Yarrow, a historian, public-policy professional, and former New York Times reporter, is the author of the forthcoming book, “Thrift: The History of an American Cultural Movement.” For more information on the book, to be published this winter, visit Amazon.
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