A Foot in the Door
By Sean Luechtefeld on 10/12/2012 @ 03:30 PM
At last month’s Assets Learning Conference (ALC), we debuted “A Foot in the Door,” a short film chronicling San Francisco’s Kindergarten to College Universal Children’s Savings Account (CSA) program. We’re happy to announce that the 17-minute video can now be obtained on DVD for free by visiting www.afootinthedoor.info.
“A Foot in the Door” – produced by CFED, Citi Community Development and the San Francisco Office of Financial Empowerment – features interviews from leaders in the CSA field, including our very own Andrea Levere. The film was developed especially for policy advocates, government agencies, nonprofit service providers and a host of others to help make the case for importance of universal CSA programs as a method for helping children build assets at a young age to ensure their full participation in higher education and the financial mainstream.
If you saw the video during the ALC, you already know how powerful “A Foot in the Door” is in promoting the important work being done in San Francisco and across the country in the CSA space. For these audiences, we hope you’ll order your free copy to share with your friends and colleagues. If you missed the film premiere during the Conference, you now have the opportunity to get your free copy. Simply visit www.afootinthedoor.info and click the “Order a Copy” link in the navigation menu.
CFED would like to extend its gratitude to its partner organizations who made “A Foot in the Door” possible, including Citi Community Development, the San Francisco Office of Financial Empowerment, GroundSpark and Citizen Film.
Live Blog: Vice Presidential Debate
By Sean Luechtefeld on 10/11/2012 @ 09:00 PM
Sean Luechtefeld (10:34 pm): Martha Raddatz sums it up best: no matter what, go vote. We'll see y'all back here next week on Tuesday night for the second presidential debate.
Kristin Lawton (10:30 pm): All the forgotten 40 percent (47 percent?) wants is a fair shake. Both candidates genuinely care. But we've got to identify the right way forward to ensure financial security for everyone. As President Bartlet would say, "What's next?"
Sean Luechtefeld (10:27 pm): Two million children could get kicked off early education programs? Sounds like a reason to support children's savings programs.
Sean Luechtefeld (10:22 pm): We're so quick to lament negativity during election cycles, but many would argue that negativity is actually good because it requires the attacker to marshal higher-quality evidence. That's the real takeaway here, folks: we need to make sure that the ways we justify policies - regardless of ideological bend - are thoughtful and thorough.
Sean Luechtefeld (10:18 pm): This question about the role of religion is an interesting one. Though often a target of criticism, faith-based organizations do some of the most innovative work to end poverty and bring all Americans into the financial mainstream. Take, for example, our colleagues at Catholic Charities USA. They're sounding the call for comprehensive anti-poverty programs. Did you join us for the Poverty Summit?
Jeremie Greer (10:11 pm): When the troops come home, they'll need support to build wealth and achieve financial secirity. Guest Contributor June Olsen's April blog post highlights the importance of supporting higher education oppotunities to veterans.
Sean Luechtefeld (10:06 pm): Look, I'm not saying Afghanistan isn't important, but assets matter, too. Here's why.
Lebaron Sims (10:03 pm via Twitter): The discussion on #jobs and #smallbiz was too brief. Where is the jobs plan, especially for the poor and long-term unemployed? #vpdebate
Lebaron Sims (10:00 pm via Twitter): We need to make healthcare #affordable. Let's hear how we're actually going to make that happen. #vpdebate
Jeremie Greer (9:56 pm): Details don't matter? The details matter when we are talking about tax credits and deductions. Let's not touch credits that affect low- and moderate-income familes like the Saver's Credit, Erned Income Tax Credit and the Child Tax Credit
Anne Kim (9:53 pm): A few tidbits from the Assets & Opportunity Scorecard as context:
- Median net wealth in Ohio, Rep. Ryan's home state: $60,963
- Median net wealth in Delaware, VP Biden's home state: $163,148
- Median net worth, US: $70,600
Jeremie Greer (9:51 pm): As one example of a way to support self-employed small business owners and low-income entrepreneurs, we can improve their access to money-saving tax credits like EITC and CTC. Read more in our VITA Value Proposition.
Sean Luechtefeld (9:48 pm): It only took 49 minutes for someone to talk about small business. Fact is, self-employment comprises the majority of small businesses, and small businesses are now responsible for all net jobs that are created in the US. Ways we can help these businesses prosper can be read in our Self-Employment Tax Initiative report.
Jeremie Greer (9:47 pm): Both candidates are quick to talk about what the middle class can look forward to in retirement. What scares me, though, is that so few people have the money (or the assets) they need to retire.
Kristin Lawton (9:45 pm): One place where Raddatz falls short is in asking the candidates for a simple answer. As Andrea Levere always says - and as all of us at CFED can attest - complicated problems require complicated solutions.
Jeremie Greer (9:42 pm): Speaking of weathering the storm, I hope another debate does not go by without a serious discussion about how we address the forclosure crisis. See one solution from CFED in our report, Weathering the Storm.
Kristin Lawton (9:40 pm): Finally, a nod to emergency savings. Folks across this country aren't able to weather a financial emergency because there's no nest egg or safety net in place. Let's focus on how to reverse that trend.
Sean Luechtefeld (9:38 pm): Food for thought: is health care an asset? What do you think? Discuss below.
Anne Kim (9:35 pm): Since "facts" are being called into question tonight, check out the truth about the real state of American households in CFED's Assets & Opportunity Scorecard.
Kristin Lawton (9:30 pm): According to recent research from Pew, voters' prioritiess are the economy first, jobs second and health care third. I'm relieved that we're starting to focus there. Learn more here.
Anne Kim (9:29 pm): The moment we've been waiting for - a debate on the "47 percent." Buckle up, everyone.
Kristin Lawton (9:25 pm): Biden hits the nail on the head when he argues that our tax policies make it easy for the rich and impossible for lower-income families. As Bob Friedman always says, our current tax policies reward the rich, miss the middle and penalize the poor. Read more in Upside Down.
Sean Luechtefeld (9:21 pm): To Andy's comment below, I would say that there are certainly problems in our political system. But, it's also dangerous to believe that we can't affect change in a broken system. Instead, we simply need to be more diligent. And, there are ways.
Sean Luechtefeld (9:18 pm): I'm ready to confirm my earlier suspicion: Raddatz is doing a great job moderating. Stark contrast to the last debate, indeed.
Sean Luechtefeld (9:11 pm): Vice President Biden says that when there are crises, the US comes together as a unified body. We believe this shouldn't just apply to international emergencies, though. Millions of Americans are living in or on the brink of crisis; when will we come together to stand together domestically?
Kristin Lawton (9:06 pm): Not to leave Ryan out, it looks like his biggest fan is giving him some motivation tonight. From Twitter: "Great pep talk from one of my most trusted advisors. pic.twitter.com/liskM5a5"
Sean Luechtefeld (9:03 pm): Fun fact: Centre College in Danville, Kentucky is the alma mater of CFED Receptionist Zach Ford!
Sean Luechtefeld (9:02 pm): I'm pretty sure Martha Raddatz will do a great job moderating tonight's debate.
Sean Luechtefeld (8:58 pm): Gearing up! The debate will start in two minutes. Make sure you use the Comments below to throw in your feedback, and let us know how you think Biden and Ryan are doing when it comes to promoting a comprehensive assets agenda.
Kristin Lawton (8:56 pm): Even Vice President Biden is Tweeting: "Barack and I are in this because we'll never stop fighting for you. You’ll see that tonight. -Joe"
Katherine Lucas McKay (8:38 pm via Twitter): I'm sad to be missing tonight's VP debate. Biden led the Middle Class Task Force which focused on savings and economic mobility for years
A Conversation with Savers: Rising Up to Give Back
By Veronica Weis on 10/11/2012 @ 05:00 PM
EDITOR'S NOTE: This is the second post in a three part series featuring profiles of the participants who spoke with Martha Kanter, Under Secretary of Education, in a Conversations with Savers at the 2012 Assets Learning Conference this September in Washington, D.C. The first profile of La Terra Cole can be read here.
Jennifer Jones, who attends a KIPP school in Washington, D.C., and plans to become a math teacher after college, is an inspiring example of how powerful savings and education can be in the development of a low-income child's life.
As a participant in the Partnership for College Completion, her matched savings for education have helped her make college a real possibility. She’s now on track to be her class valedictorian and hopes to grow up to be a Fifth grade math teacher. This is a valuable goal given that, as Under Secretary Martha Kanter points out, “we need 1.6 million teachers over the next decade.”
Martha Kanter: Tell us about when you started saving and why?
I started last year after I heard about the program. It wasn’t a formal introduction just a general explanation. As I told my Mom about it, she had no idea and neither did I, so we sat down with my counselor. After that, my Mom started saving in the 11th grade for me and also for brother.
I knew from about when I was nine that I wanted to go to college. My Mom is a single parent of two who started college but didn’t finish. She went back and is hopefully graduating this year.
As I was growing up, I watched her struggle with two children. I love her with all of my heart. She said that the best way to avoid struggling is a college education. The account helped to set aside money but I knew since I was young what I wanted.
Martha Kanter: What got in the way of saving for college?
I guess the biggest thing I struggled with growing up was my Mom having a steady job. She not knowing how to save herself meant she couldn’t teach me how. If we start at a younger age, hopefully the next generation will grow up to be better savers. We need to get kids on a path to college earlier on. Take it back to KIPP, to fifth grade, and teach kids, “you can get an education here and be better.”
Push education on kids.
Martha Kanter: Where do you see yourself in five years?
Well, I graduate this year. So, hopefully graduating from college and entering the work field. My heart is set on being a math teacher, 5th grade specifically. Hopefully, get a Masters and then a PhD then open up my own school and daycare. That’s where my heart is right now.
Martha Kanter: What advice would you have for parents? What do you need from parents to get to the success level that you’re at now and contribute?
Parents need the ability to save and know about having a college education so they can teach their children how to do those things. It has to start in the home with the parents. If they don’t know how, then the child will really struggle with learning how to do that.
Martha Kanter: What would you tell your students in the future?
I want them to know that I’m always there. I grew up with teachers at KIPP who always were there when we needed them. From 6am-7 or 8pm, they were there working with students. I appreciated that support at school and at home. I want them to know that if your parents are not always there for you, I will be.
Martha Kanter: How can we create a new social network to support you?
I think it’s a balance between the school, the home and the community. The school supporting the child with an education and letting them know they can be someone. At home having a steady source of support. Most kids are between those two places so both have to be balanced and supportive. I mention the community because you have to get involved to know who’s there. Help those who need help if you’re strong. Be able to step out and ask for help when you need somebody.
Martha Kanter: How are you covering the costs of education?
I had a scholarship from KIPP. In middle school, I was named KIPPster of the year. I’m currently working on a Quest Bridge application and Coca-Cola Foundation. Every scholarship I see, I’m applying for it.
And for all of the asset-building advocates out there, she wanted to share a message: “I do want to say that you’re all doing a good job. I appreciate the push. Knowing you’re there supporting and helping us.”
Friedman: "Our Asset Policies ‘Reward the Rich, Miss the Middle, Penalize the Poor'"
By Bob Friedman on 10/11/2012 @ 11:00 AM
EDITOR'S NOTE: This post originally appeared on the OK Policy Blog, a project of the Oklahoma Policy Institute. Special thanks to David Blatt and his team for joining us in DC for the 2012 Assets Learning Conference!
Last week, I attended CFED’s 2012 Assets Learning Conference, a biannual national gathering of practitioners, researchers, and advocates working to promote economic opportunity and fight poverty for low- and moderate-income Americans through savings, investment and ownership. Following the conference, I sat down with Bob Friedman, CFED’s founder, Board Chair and General Counsel, to discuss the state of the asset building field.
David Blatt: You’ve been active in this field a long time. What do you see as the biggest changes in the area of asset-building today compared to 15 or 20 years ago.
Bob Friedman: First of all, it’s so much bigger. We did our first conference 16 years ago, which was an IDA (Individual Development Account) learning conference and there were 150 people. We just finished this conference, where we had 1,200-plus. Today we see so many more programs, people, policies across the field. Even the classes of assets we talk about has expanded. It was always homes, businesses and education. Now it’s citizenship, assistive technology for people with disabilities, emergency savings as well. Also, we now cover a larger spectrum of financial security – learn, earn, save, invest, protect. The innovation is burgeoning.
DB: Where have you seen the most exciting progress in the area of asset-building?
BF: It’s spread among all states. The Assets & Opportunity Scorecard that we issued this past January, there’s a long list of policies there and every year more states are filling those out. I think one of the limitations has been that with the 2008 recession and the decline in state finances, things that cost money have not grown and sometimes have been cut back. But in general, whether it’s policy, practice, research, we have data now about what works and what doesn’t that we could only dream about even a few years ago.
DB: Obviously the Great Recession took a huge toll on the wealth and savings of families, especially of low-income families. What do you see as the lasting impact of the recession on the movement to expand economic opportunity?
BF: It’s taken a huge hit. The current estimate is that people lost $7 trillion in asset value, mostly in housing but not exclusively. People of color were hit especially hard. That’s sobering to all of us. I think there are some very interesting ideas now that Ray Boshara and Jacob Hacker and others are talking about. Maybe there’s a new role for social insurance, new types of insurance for when the markets falls.
The other side of that is that at some point there’s got to be a buy-in opportunity as housing values fall. At some point they’re going to start going up again. I hope that on top of this huge and tragic loss in wealth that we at least take advantage of the possibility to regain some of this and get some new folks into housing and allow them to rise up the economic ladder.
DB: You’ve been especially vocal in focusing attention on the ‘upside-down asset budget’ at the national level. Can you describe what’s wrong with national asset-building policies, and how we reverse the situation?
BF: Sure. Generally we’ve dealt with poverty and unemployment though safety net programs, which not only don’t build wealth but actively penalize low-income and unemployed people from building wealth by imposing asset limits on eligibility. On the other hand, we use the tax system and tax preferences to build the economic ladder. And it’s just mind boggling in its regressivity. We spend half a trillion dollars a year or more through tax incentives – home mortgage deduction, preferential capital gains, and others. As our Upside Down report detailed, more than a third of those benefits, 37 percent, accrue to the richest 1 percent, 55 percent accrue to the top 5 percent, and just 5 percent are spread among the bottom 60 percent. People making over $1 million a year get over $96,000 in annual subsidy; people in the bottom quintile get five bucks. We are rewarding the rich, missing the middle, and penalizing the poor. And it’s cumulative. Over ten years, that’s five trillion dollars. That’s been redistribution towards the wealthiest from the poor.
But it is an opportunity looking ahead because you could reduce this overall budget, you could cut it in half or more and generate two, three trillion dollars in savings. That would go a long way towards closing the budget gap. Then if we could put in place a refundable saver’s tax credit of $500 available to everybody, but particularly targeted for the 60 percent who are currently left out, I really think that could change the face of economic opportunity and growth in this country. If we can renew savings, spread that ‘hope in concrete form,’ I think we’ll see a lot of new businesses, new jobs, lots more people going to college and gaining new chances for economic opportunity.
I think the tax reform we’re going to see as part of deficit reduction provides the chance to change the system. Even the Republicans are talking about curbing tax incentives because we’re spending more money on tax incentives now than we’re collecting in income taxes. That can’t continue, we’re gonna have to curb them, and this is the opportunity.
Call for Papers: Emergency Savings Project
By Sean Luechtefeld on 10/10/2012 @ 01:45 PM
The Center for Financial Security (CFS) at the University of Wisconsin - Madison is launching the Emergency Savings Project with the support of the Charles Stewart Mott Foundation. This effort will document innovative ways to address emergency or ‘contingency’ savings issues with financial strategies designed to help low-income households to meet immediate non-recurring expenses. The goal of the call for concept proposals is to generate a broad set of ideas for strategies that can serve to expand emergency savings mechanisms, vehicles, policy, public or nonprofit programs, or new financial products.
Given the bevy of cutting-edge savings research being conducted by our partner organizations, I figured that the CFS Call for Papers might be on interest to many of our readers. You can download the Call here, and leave questions and comments below if you're planning to submit!
Highlights from Understanding Prepaid Cards
By Lebaron Sims on 10/10/2012 @ 12:30 PM
The prepaid card industry is largely new, and has only recently begun to be seen as a viable instrument in the asset building field. As the field is still emerging, it has become popular among low-income consumers, prompting a need for additional research on its use and effectiveness as an alternative to traditional financial instruments. The popularity of the topic was evident upon walking into Washington 3 for the 2012 ALC’s Understanding Prepaid Cards and Improving their Role in Improving Consumer Outcomes session. Though the session got off to a bit of a late start, moderator Dan Quan (CFPB) kept things moving without missing a beat, and even allowed for a robust and thought-provoking audience discussion after the presentations. Though the discussion was indeed lively, the true focus of the session, and what made the session truly worth attending, was the research.
Stephanie Wilshusen (Federal Reserve Bank of Philadelphia) led off with an overview of her paper, Consumers’ Use of Prepaid Cards: A Transaction-Based Analysis (released just last month, by the Philadelphia Fed’s Payment Cards Center). Using the most recent data from the Federal Reserve Payments Study, Ms. Wilshusen and her co-authors’ findings on the dissemination and use of prepaid cards are truly remarkable. The analysis, which looked at 15 separate card programs grouped by type and enrollment method, shows that prepaid card use is most prevalent at fast food locations, grocery stores, and gas stations, with dollar value of purchases staying relatively consistent across the various prepaid card types. In addition, cards with direct deposit vary greatly in usage life and intensity from those without the feature. Retail cards with a direct deposit feature demonstrated an increase in usage life of over 300 days compared to those without – a remarkable amount of variation. Lastly, the research showed that cards with regularly scheduled value loads are active for longer periods, and have more transactions and value loads.
Next up was Sarika Abbi (D2D Fund), whose paper, “Expanding Financial Access: Emergency Savings on a Prepaid Card” features findings from the “Rainy Day Reserve” intervention. The Rainy Day Reserve is an emergency savings pocket designed to help low-income prepaid card consumers create and maintain a fund for use after experiencing an unexpected economic shock. Partnering with Plastyc Inc., a prepaid card company, D2D was able to implement the system, which was designed to meet three primary goals: to find and drive takeup, ensure the use of the service, and help consumers both maintain their savings for emergency purchases and rebuild their savings after use. Ease of use was also paramount, so the program was designed with limited barriers to entry (no minimum balance or deposit requirement) and features like pop-up reminders designed to influence user behavior. The results of the study show that these low barriers to access were the primary reason for using the service for 49% of users. The Rainy Day Reserve saw over $5.4 million in deposits through over 59,000 transactions, indicating both a demand for the service and a high volume of activity among users. The pop-up reminders also served as effective deterrents to anti-saving behaviors, with a third of respondents indicating that the message requiring a “yes/no” response before withdrawing money from their Reserve successfully deterred them from going through with the transaction. Though the intervention is ongoing, these preliminary results are inspiring. With over 4.4 million unbanked and underbanked households using general prepaid cards, introducing a savings component could be an effective means of both incenting responsible financial behavior and introducing underserved populations to more sophisticated financial instruments.
Romy Parzick (CFSI) closed out the presentations with a discussion on fee disclosures. With median number of fees charged on prepaid cards at 15.5, and with a surprisingly minimal level of overlap among these different types of fees, disclosure and transparency is a pressing issue for users, and must be rectified with prepaid cards are to become further incorporated into the financial mainstream. Ms. Parzick’s presentation and paper, “Thinking Inside The Box”, outlined a number of practical and demonstrable changes to current industry practices. All prepaid cardd companies have a list or box in which they disclose fees, but the format and locations of the box vary. Generally speaking, companies only disclose about 85% of all fees in this box, and only half disclose third-party fees (i.e., reload network) at all. The report offered five required policy recommendations to increase transparency:
- Simpler language (8th grade language or lower)
- Thoughtful design and formatting (larger type, no jargon or legalese)
- Balancing simplicity and comprehensiveness (the most commonly incurred fees should be included in box, but a full list should be readily available)
- Balancing pure disclosure and financial capability (encouraging positive use)
- Clear and consistent placement, with standard categories
With the CFPB now open for business, and with prepaid cards moving both into the mainstream and onto their radar, we may very well see these regulations put into place soon, particularly if the asset building industry embraces the model and helps to take it to scale. Of the many sessions I was fortunate enough to attend over the three days of the ALC, this was by far my favorite. The audience interaction was fantastic, the research was engaging, and the policy implications were exciting. I can’t think of a better way to close out my 2012 Assets Learning Conference!
A Conversation with Savers: From Foster Youth to Future Lawyer
By Veronica Weis on 10/09/2012 @ 11:00 AM
EDITOR'S NOTE: This is the first post in a three part series featuring profiles of the participants who spoke with Martha Kanter, Under Secretary of Education, in a Conversations with Savers at the 2012 Assets Learning Conference this September in Washington, D.C.
“I had no idea there were so many people who cared about my future.” - La Terra, former foster youth and future lawyer
La Terra Cole joined us from Mile High United Way in Denver, Colorado where she manages Bridging the Gap, a program that provides financial education and individual development account assistance for low-income youth. She grew up as a foster youth who after being emancipated at 17 went on to college and is now in her third year at Catholic University Law School.
La Terra first learned about money management while living in foster care. She could only go out and spend money if she put a dollar away here and there. She didn’t realize the power of savings until she was introduced to the SEED initiative in high school. With an individual development account, she was able to see college as a possibility and invest in her future.
“At that time I had a fast food job. CFED took on the role that a parent would have and thought about my future. It made all of the difference,” La Terra noted to Under Secretary Kanter.
Here are some highlights from the Q&A session:
Martha Kanter: “What can we do to encourage more young people to get serious about college and plan for it?”
The SEED initiative gave me money to manage. Don’t just teach money management, give them an account so young people can learn to invest in themselves. The account gave me a new way to think about the future. I wouldn’t have to be defined by poverty.
Martha Kanter: “Where do you see yourself in five years?”
Well, I’m going into my third year of law school so an employed attorney.
Martha Kanter: “What advice would you have for parents for their kids to get to a high success level?”
I grew up in foster care so the state was my parent. We need to build in a culture of college expectation and then enroll kids in programs like the one I participated in. Less than 3% of kids in foster care go on to complete a college degree so we need programs on a larger scale.
I was introduced to the SEED initiative as part of my independent living transition. We need to have someone for every foster child who is thinking about their future with a focus on education or some type of college.
Martha Kanter: “How do we create a new social network or what would support you as a network?”
Outside of additional collaboration with other participants in the program, a lot of young people don’t know there are rooms of people out there working hard to build a future for them. Expose young people to adults who are interested in these issues. Most adults around them aren’t expressing this type of concern.
Resources from the BETA Project Q&A Webinar
By Ethan Geiling on 10/08/2012 @ 03:36 PM
On Thursday, October 4, CFED and ideas42 hosted a Q&A webinar to explain the structure of the BETA Project, describe the ideal pilot program, provide tips for a successful application, and give participants the opportunity to ask questions. The powerpoint from the webinar, a recording of the webinar, and the Request for Proposals are all available online.
Top Questions from the Webinar
Question: My organization serves fewer than 500 individuals. Should I still apply?
- Answer: We are not ruling out any projects on this basis. However, we will look favorably on large programs because higher numbers allow us to evaluate the interventions more accurately.
Question: My organization has a few different programs that might benefit from the BETA Project. Should I submit separate applications for each one?
- Answer: No, each organization should only submit one application. If you would like us to consider multiple programs, please try to explain all of the potential programs within the specified word limits. However, if you feel you need more room to fully explain the different programs, you can go over the word limits for questions 2, 3 and 4. You should also prioritize which program you believe is the best fit.
Question: I have a very complex program and we are trying to redesign an entire program. Is this ideal?
- Answer: The BETA Project is not meant to redesign an entire program. It is only meant to make small behavioral "tweaks" within existing programs or services. Keeping it simple allows us to isolate and understand the effects of the behavioral tweaks.
Question: I don't have any ideas for a good intervention and I don't really understand behavioral economics. Should I still apply?
- Answer: Yes! We are not expecting you to submit a fully thought-out intervention idea; we are more concerned with finding programs with great potential. The "BE 101" document may help give you a better sense of how Behavioral Economics relates to your program.
Background on the BETA Project
In early September, CFED, ideas42 and the Citi Foundation announced the launch of the Behavioral Economics Technical Assistance (BETA) Project. The goal of the BETA Project is to tackle tough social problems by designing and testing behavioral interventions on real world products, processes and/or services.
Three to five pilot organizations will be selected for the BETA Project through a competitive application process. Click here to read more about the project, selection criteria and timeline.
Click here to download the Request for Proposals. Proposals are due October 19.
The BETA Project is part of the Assets & Opportunity Network’s Intensive Learning Clusters - which are time-limited, thematically-based, small groups that learn from each other and outside experts to advance a learning agenda on specific topics or approaches.
Opportunities to participate in these Intensive Learning Clusters are limited exclusively to members of the Assets & Opportunity Network. Click here to join the Network!
Promising Pathways to Wealth-Building Financial Services
By Sean Luechtefeld on 10/08/2012 @ 10:30 AM
EDITOR'S NOTE: CFED's Chief Program Officer, Ida Rademacher, will be speaking at the Federal Reserve Bank of St. Louis' event, October 25-26. Details of the event are provided below.
Thursday & Friday, October 25 & 26, 2012 | St. Louis, MO
The growing and dizzying array of financial-services providers, products and distribution channels often leave underbanked consumers and their advocates perplexed: Should they use traditional banks and credit unions? "Bank On" campaigns? Prepaid cards? Retailers (e.g., Walmart and Target)? Direct deposit? The internet? Cell phones and other mobile devices? Some combination thereof? How should they handle government benefits payments, which are increasingly electronic? And what about during tax time, when receiving a refund?
This financial access forum is designed to help communities and practitioners make informed choices about promising pathways for underbanked households to connect to wealth-building financial services. The ultimate goal is to help underbanked consumers build a healthy balance sheet.
Key questions to be explored:
- What do we know about underbanked consumers?
- What financial products exist to meet their needs?
- Through what channels are these products distributed?
Participants will hear from some of the nation’s leading experts, industry representatives and on-the-ground providers of financial services focused on unbanked, underbanked and unhappily banked consumers. To facilitate discussion and share practical advice, a series of roundtables with local and national experts will also be offered on key forum topics. Finally, while not a policy forum, policy barriers and opportunities will also be captured and discussed.
A nominal cost of $100 per participant is required for attendance. Early registration is encouraged, and advance registration is required by Monday, Oct. 22, 2012.
Sponsored by the Federal Reserve Bank of St. Louis, Federal Reserve Bank of Kansas City, the U.S. Department of the Treasury, and Center for Financial Services Innovation.
Leveraging a Full Range of Philanthropic Resources
By Lauren Williams on 10/05/2012 @ 04:00 PM
What is impact investing? It’s an investment that generates both a financial and social return. The Calvert Foundation makes it possible for anyone to be an impact investor by selling a Community Investor Note, which can be held in investors’ accounts like any other security. Calvert takes the capital from those notes and invests in communities.
Does it have to be market rate? Many people talk about impact investing as the opposite of Socially Responsible Investing (SRI)—which used to primarily involve “negative” screening, but also now aims to affirmatively invest in companies that represent socially responsible behaviors. Calvert sees SRI as a type of impact investing. SRI investing is typically market rate, but other types of impact investing is done at a below market rate. Given today’s interest rates, the Calvert Foundation’s below market rate options are still relatively competitive. As long as a social return is being generated, they still see it as an impact investment.
How does impact investing work at Bank of America? Dan Letendre began by quoting the Bible (Matthew 6:24): “No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other.” How is this scripture relevant, you ask?
On an institutional basis, Dan suggests that we need to identify creative ways to combine “right brain” and “left brain” investors—assuming that each serves a different “master”—in order to create impactful investments. Essentially, he argues that in some cases, the best way to deliver impactful investment is to bifurcate investments based on investors’ goals. For instance, Bank of America is an investor in Resident Owned Communities USA (ROC USA®)—a social venture that enables and finances the conversion of manufactured home parks into resident owned cooperatives. As an investor, Bank of America’s focus is on minimizing financial risk. At the same time, other joint investors provided the base equity investment for ROC USA®. These investors—CFED, the New Hampshire Community Loan Fund and NCB Capital Impact—have a primary interest in ROC USA’s outcome: preservation of affordable housing through cooperative community ownership.
Dan Letendre directs Bank of America’s Community Investments; in 21 years of lending to CDFIs, they have not lost one dollar. Dan’s operation is not generating a ton of money for Bank of America, but as he said, Bank of America has other endeavors whose primary focus is profit-generation. Still, he can sit across from any nonprofit or any impact-minded investor and tell them that they can invest and get their money back. In the long run, his primary aim is to operate a break-even operation while providing capital to CDFIs so that they’ll invest in low-income communities where no other banks will offer financing. In effect, Dan’s team only provides capital where no other bank will and in such a way that the operation breaks even.
Why did the W.K. Kellogg Foundation begin exploring impact investing? They did so in an effort to confirm that they were doing everything in their power to serve children’s needs. They began by taking $100 million from their endowment for what they call “Mission Driven Investment.” Today, they have deployed about 80 – 90% of that investment and created a direct investing portfolio with about five investments to date. So far, they’ve found that direct investments have given them the best return and the greatest impact.
All three presenters agreed, we’re dealing with a spectrum when it comes to the structures we need to finance social change. The best way to address some social needs is through philanthropy; for others, impact investing works best.
Our America is Healthy When All Residents Have Opportunity
By Sean Luechtefeld on 10/04/2012 @ 12:30 PM
EDITOR'S NOTE: This post originally appeared on the Better Life blog, a product of the Louisville Courier-Journal. You can read the original article here.
Last week I was in DC attending a conference which focused solely on helping the underserved and underprivileged gain the knowledge and develop tools to build assets. The Assets Learning Conference is hosted annually by the Corporation for Enterprise Development (CFED) an organization with a vision of a “more inclusive” economy. The whole focus of those who work in the field is this – assets are the difference between the haves and the have nots – not just income.
Unlike one of our presidential candidates who recently dismissed 47% of the American population, there is an entire movement to help all who desire work towards economic success. This candidate would say that 47% of our population does not desire economic success. This candidate would have you to think that everyone in the 47% desire to constantly struggle to feed their families, worry about paying the next bill, or even wonder how to get the medical treatment needed to save the life of a sick child.
On the other hand, thousands across the nation have dedicated their careers to this population. As a matter of fact, 12 cities were recognized at the conference for integrating financial empowerment into their social services delivery system. Cities for Financial Empowerment (CFE) is the nation’s first coalition of local governments dedicated to advancing financial empowerment across their communities. In some communities, the conversation begins with simple banking and savings accounts, grows to owning a home and moves to investing in the future. I am proud to say that our own city, Louisville, KY is one of the 12 cities of CFE!
Some policy makers and government servants recognize that it takes more than income to make ends meet. The economic and financial industries of our great America are complicated systems. Collateral is needed to securing funding for business loans. If you do not have assets, you do not have collateral. Many of the wealthiest people gained their wealth from past generations, passing down assets through inheritances and family gifts. If your family has not amassed wealth, then there will not be a “pass down” to future generations.
In my opinion the resounding, rhetorical phrase, “let’s take our country back” is a slap in the face. Take it back from whom? When did it leave? You ask the question.
Our Constitution’s Preamble reads “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.” The Declaration of Independence states “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their creator with certain inalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
Although these words were crafted during a time when slavery and injustices were the laws of the land, I have to believe that God himself inspired these words for future generations, that God himself knew what was to come and the battles we would fight.
Yes, economic opportunity is for all. Not just 53% of the population, but for all.
Curbing Predatory Small Dollar Loans
By Jimmy Crowell on 10/04/2012 @ 11:00 AM
Payday loans don't solve a financial crisis, they create a new crisis every two weeks. That is the main message that Uriah King, with the Center for Responsible Lending, is trying to convey through his work with payday loan policy reform. The fact is that payday loans are not short-term loans, they end up sinking people further and further into debt. In the U.S., a payday loan will leave a person indebted for an average of 212 days over the course of a year. Payday loan advocates insist that these loans are a needed service for people experiencing an unexpected financial setback. The harsh reality is that most people turn to payday loans to pay for regular expenses like mortgage payments, utility bills and food. This only creates a a cycle of incurring more and more debt to pay for exorbitant interest rates. Unfortunately, due to this cycle, a payday loan borrower is more likely to pay overdraft fees, lose their bank account, default on their credit card and file for bankruptcy.
These stark realities have inspired community advocates across the country to lobby their legislatures to become part of a cohort of 17 states (and Washington D.C.) that have abolished 400% payday loans and capped interest rates at around 36%. The Montana Community Foundation successfully campaigned for payday loan policy reform with a meager budget of $500,000. Through their strong partnerships with organizations like AARP and Rural Dynamics, Montana Community Foundation were able to inform and mobilize Montanans to vote for payday loan reform. With an impressive 72% of voters supporting the policy reform, Montana Community Foundations estimate that Montanans are saving $32 million in payday loan interest fees every year. That is an amazing return on a $500,000 investment!
The Center for Economic Integrity also launched successful campaigns for payday loan policy reform in Ohio and Arizona. They too were able to mobilize strong coalitions with a modest budget to defeat highly paid lobbyists for payday lenders. The Center for Economic Integrity attributes a lot of their success to their concerted effort to raise awareness of the predatory nature of payday loans through local media outlets. Hopefully, more state leaders will step forward to champion payday loan reform. There is still a lot of work to do to protect Americans from predatory lenders but replicable campaigns can be launched to hold predatory lenders accountable and protect Americans from losing their hard earned income to draconian interest rates.
Live Blog: First Presidential Debate
By Sean Luechtefeld on 10/03/2012 @ 09:00 PM
Sean Luechtefeld (10:33 pm): You know, this was a lot of fun! So much fun, in fact, that we should do it again. We'll see you back here next Thursday, October 11 at 9 pm EDT for the first and only Vice Presidential Debate. Meanwhile, continue the conversation on our Facebook page and via Twitter, and remember that you don't get to complain about the outcome of the November 6 election if you don't get out and vote!
Kim Pate (10:32 pm): One role of government is to provide ladders of opportunity, create jobs by supporting the self-employed, small businesses and community revitalization.
Sean Luechtefeld (10:31 pm): Governor Romney: "What kind of America do you want to have for yourself and your children?" That really is the question, isn't it?
Anne Kim (10:30 pm): With only a few minutes left to go, the ultimate "winners" of this debate (and the election) are supposed to be the American people. This debate notwithstanding, let's hope that's the case come November 7.
Sean Luechtefeld (10:28 pm): President Obama: We need to let go of some of what the most extreme parts of our parties want us to do and do what we know is right. Yes! Whether Democrat or Republican, there's real work to be done - to expand economic opportunity and more. But, we need to work together. In today's political climate, we can't put party over people.
Sean Luechtefeld (10:25 pm): C-SPAN (where I'm watching the debate) will be taking calls from the public at 10:30. I'm tempted to call in...what should I ask?
Jeremie Greer (10:22 pm): Glad we are talking about student loans; they could be the next major debt crisis (after foreclosure crisis, which we still haven't talked about...).
Lauren Williams (10:18 pm): Both candidates indicate that too many college grads are in too much debt. Here's the reality: college isn't accessible. But, it doesn't have to be that way. Children's Savings Accounts help close the aspiration gap, and can put higher ed within reach.
Sean Luechtefeld (10:17 pm): So many commenters! Thanks for sticking with us, folks.
Kasey Wiedrich (10:10 pm): Consequesnces of medical debt: 39% of people did not go see a doctor when they had a medical condition (New Demos research presented at the Assets Learning Conference in the Applied Research Forum. View the full presentation here).
Sean Luechtefeld (10:07 pm): Governor Romney: "we need private markets to solve the problem." Yup, but we also need public policy. And, while we're at it, community practice, too!
Sean Luechtefeld (10:04 pm): Finally, someone is talking about the struggles for the self-employed. Entrepreneurship isn't just good for the economy; for a lot of folks, it's the surest way out of asset poverty and into the mainstream.
Kristin Lawton (10:01 pm): Sean, the health care issue is an assets issue. People without health care are financially vulnerable - they could be one medical emergency away from losing it all.
Anne Kim (9:58 pm): If there is any silver lining to the financial crisis, it is the creation of the Consumer Financial Protection Bureau. No other agency is better poised to protect Americans' wealth. (EDITOR'S NOTE: Check out CFPB Director Richard Cordray at the ALC!)
Sean Luechtefeld (9:57 pm): Now we're moving onto health care. I think it's an important topic, but it makes me worry that we won't circle back to those who are financially vulnerable.
Sean Luechtefeld (9:52 pm): Is this debate changing anyone's mind?
Anne Kim (9:51 pm): Why do all debates around health care devolve into a contest over "Medi-scare"? No question health care is fundamental to economic security (check out CFED's Scorecard on this topic), but policy makers need to realize that Americans know there's no free lunch. We can handle an honest debate over the trade-offs we're all facing.
Lauren Williams (9:46 pm): Don't forget candidates for the ponies! Ponies need help building assets, too. Just ask @assetpony.
Sean Luechtefeld (9:45 pm): We keep hearing about the $716 billion. What would happen if we put that money into something other than Medicare? Like, something that created longer-term financial stability for the "forgotten 40 percent?"
Katherine Lucas McKay (9:42 pm): Social Security and Medicare, great. But what about investing in opportunity for today's children and their future, not just today's retirees? (by the way...CSAs work!)
Kim Pate (9:41 pm via Twitter): Taxes are important to both #candidates in this #debate, follow @cfednews for ways tax reform can support lower and middle income Americans.
Jeremie Greer (9:39 pm): Forty minutes into the debate and no talk about the foreclosure crisis? Huh?!?
Sean Luechtefeld (9:37 pm): Obama says governors are creative, but not so creative to overhaul public programs in a productive way. We'd disagree, and in fact, some of the most innovative work to create financial security are happening at the state and local levels. Anyone see Cory Booker at the ALC?
Anne Kim (9:33 pm): The red versus blue ties are a nice touch. Although we're not yet hearing much new, the contrast between the candidates' visions couldn't be more clear than the contrast between their neckwear!
Jeremie Greer (9:32 pm): There are a ton of ways to cut the deficit. Cutting programs that support the most vulnernable populations is not the way to do it.
Katherine Lucas McKay (9:30 pm): When talking about deficit reduction, the crucial question we need to ask is whether the program is so critical that we can't live without it? You can't answer that question without thinking about the people the programs are intended to serve. Neither candidate has addressed economic vulnerability yet tonight.
Sean Luechtefeld (9:27 pm): Psst...Jim! No need to move on. The economy is a topic we care about, and I'm pretty sure we aren't alone.
Ida Rademacher (9:25 pm): Neither candidate is using this opportuinty to appeal to the American people; they are in policy wonk-ville. Tons of data, but no effort to be accessible to the public.
Sean Luechtefeld (9:24 pm): "Math, common sense and our history all prove..." ZING! from President Obama.
Jeremie Greer (9:23 pm): It's refreshing to hear a balanced approach to deficit reduction that inlcudes revenue and spending.
Anne Kim (9:21 pm): Both candidates are focusing their appeals on what they would do for America's middle class, and each has named his litany of the principal hurdles to future middle class success.
But conspicuously missing so far is any mention of the 40 percent loss in wealth by all Americans as a result of the recession. Regardless of who wins in November, our work is cut out for us: we need to elevate household financial security to the top of the next Administration's agenda.
Sean Luechtefeld (9:19 pm): We absolutely agree that there needs to be deficit reduction. But, to be clear, there are a ton of things we can do to create a more inclusive economy that don't cost much and are both moveable (politically) and manageable (administratively). Read our recommendations in our Federal Stroke-of-a-Pen guide.
Sean Luechtefeld (9:17 pm): Neither candidate seems to be answering questions directly. Or, in the case of Romney, the opportunity to ask a question goes missed. Let's step it up, gents.
Kristin Lawton (9:15 pm): Romney wants to lower tax burdens for the middle class. Us too! So, how?
Jeremie Greer (9:13 pm): Both candidates are highlighting education as the linchpin for economic recovery.
Katherine Lucas McKay (9:12 pm): Governor Romney is right that new businesses are starting at rates that are a generational low. Big question: How can policies do more to support people who take the plunge and start business?
Sean Luechtefeld (9:07 pm): Both candidates talk about how the "top down" approach doesn't work. More importantly, we believe the "upside down" approach doesn't work. As is, of America's $400 billion in asset-building programs (most of which are delivered through the tax code), the majority of benefits go to those in the highest socioeconomic brackets. In fact, for those in the lowest 60% when it comes to income, the average federal benefit is only $5 per year. For more about how we fix these policies to make them "rightside-up," download Upside Down.
Sean Luechtefeld (9:05 pm): The candidates, along with moderator Jim Lehrer, have taken the stage. Remember, no noisy distractions allowed!
From Saver to Homeowner: IDA Success Stories Part 6
By Bank of the West on 10/03/2012 @ 02:45 PM
To help families achieve the goal of homeowner¬ship, Bank of the West has partnered with CFED to match the money that low-income individuals saving for a down payment and to support the nonprofits that provide financial education to these savers. This is the six story in a six-part series featuring Individual Development Account (IDA) program graduates from across the country. This story comes from the IDA program at Interfaith Housing Services in Hutchinson, KS.
Bill and Julie’s Story
Julie and Bill took life day-by-day and often lived paycheck-to-paycheck – Julie by working at a local gas station and Bill at a manufacturing company.
Supporting a family of eight and renting a substandard house with energy bills that were difficult to afford, Julie and Bill were trying to find a way to get ahead. They enrolled immediately after hearing about the Individual Development Account (IDA) program at Interfaith Housing Services (IHS). In financial education classes, they learned valuable lessons on the difference between needs and wants (for both them and their children). “Help with setting our budget and automatically depositing money into our savings each month made a huge difference for us,” says Julie. They saved every month for their own home, attended a first-time homebuyer course and participated in homebuyer counseling with IHS IDA program staff to learn all they could about credit, mortgages, and maintaining a home.
Excited about building a better future for their family, Julie and Bill reached their savings goal in just one year. After repairing their credit, saving enough money and finding the right home, they were finally ready to close on a house.
Having realized their goal of home-ownership, Bill and Julie continue to live on a clearly defined monthly and are saving for home renovations to create additional space for their family.
Join Us Tonight as We Blog the First Presidential Debate
By Sean Luechtefeld on 10/03/2012 @ 11:00 AM
Planning to watch the first presidential debate this evening between President Obama and Governor Romney? Us too! Join my colleagues and me as we live blog the event and provide commentary on what each candidate’s stance on the economy means for the assets field.
Tonight at 9 pm EDT, visit our blog homepage as experts from across CFED initiatives weigh in on what the debates – and the election generally – mean for our field in the coming years. In addition to our observations, we hope you’ll participate, too. You can click on the Comments link below to leave your observations or ask us questions.
We hope you’ll join us and add your voice to the conversation this evening from 9 – 10:30 pm EDT. For more information, check your local listings.
Affordable Housing as an Asset-Building Platform
By Lauren Williams on 10/03/2012 @ 10:00 AM
At the 2012 ALC, I had the pleasure of attending a session called “Affordable Housing as an Asset-Building Platform.”
During this unique session, Kris Krehmeyer, Margery Spinney and Michael Mirra encouraged the audience to think more broadly about asset building as it relates to affordable housing. Each of these speakers firmly believes that asset building can and should be embedded across affordable housing’s entire spectrum, not just as an outcome of homeownership.
Michael Mirra from Takoma Housing Authority (THA) highlighted several reasons for which public housing authorities (and ostensibly, affordable housing developers) can and should be allies – if not leaders – in the endeavor to help low- and moderate-income families reach financial security and build wealth. For instance, housing authorities already have relationships with the families that we want to reach with asset-building programs; most authorities develop, own and manage large properties that house hundreds of families. The value of this principle was exemplified by all of the presenters on this panel, whose projects demonstrate the value of housing developments as systems within which asset-building programs can be embedded.
For instance, Kris Krehmeyer’s Beyond Housing in St. Louis works across several different systems serving the needs of low- and moderate-income families that intersect in critical ways with affordable housing. Beyond Housing learned that the Normandy school district in St. Louis was under threat of becoming unaccredited, more than half of the children entering kindergarten were unprepared on their first day of school and the annual mobility rate in the school system was 57%, which represents the number of children who move in or out of the district during the school year.
Having recognized the interconnectedness of these outcomes, Beyond Housing encouraged the school system to talk to other stakeholders in the community to figure out how to enhance students’ sense of stability in order to help students succeed in school. They facilitated conversations between pre-kindergarten care programs and the school system, so that care providers could acquire an understanding of the basic minimum preparedness standards for students entering kindergarten – a conversation that, surprisingly, had never happened before.
During Michael Mirra’s remarks, he reminded us that these kinds of initiatives are most successful and effective if they focus on communities that identify themselves in a positive way and if those communities are part of the visual landscape. Beyond Housing’s work in Normandy has embraced both of these concepts: they are building the first bank ever to enter the community on the bottom floor of a forty-two unit senior community located directly across the street from a grocery store –the first to enter the neighborhood in over 47 years. What’s next? Beyond Housing is now exploring transit-oriented development solutions to bring light-rail to the community, offering two-for-one matched savings accounts for children in the Normandy school district and ultimately making universal savings accounts accessible as well.
Margery Spinney from Cornerstone offered a different way to think about housing as an asset-building platform, reminding us that many low- and moderate-income renters have the same aspirations as homeowners: they want to build wealth, feel secure in their homes and make a contribution that enables them to feel like part of the community. For these families, renter equity is one alternative to homeownership. Rents are approximately half of what they would be at market rate. Residents – most of whom are too low-income to leverage Habitat for Humanity, individual development accounts and similar strategies – accumulate credits that translate into equity by participating in the management of the community, paying their rent on time and attending monthly association meetings. Residents can ultimately withdraw their equity and take loans against them during their residency.
Cornerstone wants to facilitate the replication of this approach beyond Cincinnati by launching the Renter Equity Bank, a CDFI that will partner with and provide guidance to other organizations interested in implementing renter equity programs across the country.
After describing some of the tenets behind THA’s engagement in strategies to embed financial security and wealth building strategies in their housing system, Michael explained many of the ways they’ve put these core concepts into practice. While many public housing authorities think of themselves in limited terms – as managers of rental assistance programs or landlords – they really need to be more comprehensive. THA views the families they work with not just as tenants or homeowners, but as parents, students, wage-earners and asset builders. When THA learned that nearly half of Washington’s students were not taking advantage of the state’s promise to offer to make college tuition affordable to any student who earns acceptance to a state educational institution, they leveraged their access to families to ensure that every child signs up for this program. After the first year that THA made a push to enroll more students in the program, they increased enrollment by nearly 30%. After the second year, all students were enrolled. More recently, THA has begun developing a Hope VI mixed-income neighborhood – Salashan – after tearing down a 200-acre public housing development. At Salashan, they’ve increased the community’s density by 70%, designated 25% of homeownership units for families making less than 60% of area median income and offered matched savings accounts for all children moving into the community.
These speakers shared some sage advice - informed by their expertise in the affordable housing field - for the asset-building field. In particular, Kris stressed the need to link asset building to community building because poverty lives in place and will take hold in place. Helping individuals build wealth is one challenge, but at what point do we bring place into the asset building equation? When people do well, they’re likely to leave and move on to places where others have invested heavily to make bring opportunity to life. We need to build up communities so that people want to stay and invest in the places where they build their individual wealth. Kris also reminds us that while evidence-based work and impact measurement is important, but we need to be mindful of the humanity of these strategies.
Eliminating Asset Tests Session at ALC 2012
By Ethan Geiling on 10/02/2012 @ 05:00 PM
Of the 65 Concurrent Sessions at the ALC, one of the ones I was most looking forward to had to do with one of my favorite policy topics: asset tests in public benefit programs.
Asset limits are a problem because they force applicants and recipients to “spend down” personal reserves in order to get any government help. These reserves are precisely the kind of personal safety net that can keep families from falling deeper into poverty and help them move to financial security and opportunity. Inconsistencies in the treatment of assets mean confusion and a patchwork of complex rules with no overarching logic. And most importantly, asset tests send a signal that the poor should not save.
During the session, I provided an overview of the state of asset limits in the country. Rachel Black from the New America Foundation then discussed new research on the impact of eliminating asset tests. Finally, Aubrey Mancuso and Ross Yednock, two state advocates, shared their experiences advocating for asset limits change, including key messages and strategy tips for other advocates.
During the session, I also handed out a preview of CFED’s updated Scorecard Resource Guide on Asset Limits (which won’t officially be released until later this month). The Resource Guide shows what’s changed over the past year.
From Saver to Homeowner: IDA Success Stories Part 5
By Bank of the West on 10/02/2012 @ 11:00 AM
To help families achieve the goal of homeowner¬ship, Bank of the West has partnered with CFED to match the money that low-income individuals saving for a down payment and to support the nonprofits that provide financial education to these savers. This is the fifth story in a six-part series featuring Individual Development Account (IDA) program graduates from across the country. This story comes from the IDA program at Community HousingWorks in Escondido, CA.
As part of a third-generation family from Poway, California, Crystal Lucca dreamed of owning a home locally. After starting a family at the age of 17, owning a home “seemed impossible.” The Lucca family of five was barely making ends meet and living paycheck to paycheck. Crystal saw a picture-perfect home in her future, but didn’t know how to get there.
While living at a Community HousingWorks’ (CHW) affordable housing community, Crystal saw a flyer for the Individual Development Account (IDA) program that gave her hope. She signed up for the program, excited about the challenges and possibilities that awaited her.
The Lucca family soon began making changes and sacrifices that would bring them closer to buying a home. After attending a Financial Fitness class as part of the program, Crystal says, “We changed our lifestyle to be conscious of money and how it ties into future goals.” The family made small changes that led to big savings, such as planning meals, cutting out financial services fees, and lowering the cable bill. In addition, Crystal raised her credit score by nearly 100 points using the tools from the class.
Crystal feels that “having moral and financial support in the program gave us a step up.” An experienced CHW financial coach encouraged the Luccas to take the steps needed to achieve their homeownership goal. After saving $2,000 and receiving a match for a down payment, Crystal and her family moved into their first home in time for Thanksgiving.
After spending years dreaming of her own home, she has now realized her dreams. “Becoming a homeowner in Poway is like a dream come true,” says Crystal. “The IDA program is perfect for so many out there who are dreaming of homeownership but need that extra support to bridge the gap between a dream and reality”
Winning Strategies for State Asset Policy Change in a Time of Budget Shortfalls
By Jennifer Brooks on 10/01/2012 @ 01:15 PM
Faced with budget shortfalls and continued high unemployment, federal, state and local policymakers are focused on trimming spending and creating jobs. Anti-poverty advocates want to protect funding to address immediate needs. Assets advocates (who may also care about those same programs) want to protect spending on assets, but are also still looking for the “big win” that would require new spending on asset-building incentives.
“Winning Strategies for State Asset Policy Change in a Time of Budget Shortfalls” was an ALC session that explored three concrete strategies to win on in the current environment.
Robb Gray, from the Center on Budget and Policy Priorities, started off the session talking about how state assets coalitions can build alliances with “revenue coalitions” that have emerged in the past few years to protect spending on the poor in the face of budget shortfalls. Amy Saltzman, from The Hatcher Group, focused on the need to frame your issues in ways that policymakers and the media can “hear.” I then focused on ensuring that your policy agenda has some items that are achievable now - while teeing up bigger investments for down the road. I also shared a couple concrete policy ideas that you may want to consider for your own agenda. Our last speaker was Robin McKinney, from Maryland CASH, who shared her coalition’s recent policy successes deploying some of these strategies.
Income Taxes: Check the Box for College Savings
EDITOR'S NOTE: This post originally appeared on Washington Monthly's College Guide on Friday. To read the original story, click here.
As a federal taxpayer, you’ve no doubt noticed the $3 “check-off” for the Presidential Election Campaign Fund-and you probably skipped it. In 2011, just 6.4 percent of American taxpayers “checked the box.”
Originally created in the 1970s to support public financing for presidential campaigns, the Fund now seems increasingly anachronistic and insignificant. After the Supreme Court opened the floodgates to unlimited campaign spending in its Citizens United decision, private political spending has skyrocketed. Neither President Barack Obama nor Republican challenger Mitt Romney has opted for public financing, and this year’s presidential race is expected to cost an all-time high of $2.5 billion, says the Center for Responsive Politics.
But while the presidential campaign fund may have lost its relevance, the $3 check-off remains an effective, easy way to raise money for a dedicated purpose. It’s simple to administer. It captures people at a time when they have to interact with government anyway. And it provides taxpayers with something rare-a chance to choose where their tax money goes.
What if this money went toward something more Americans would get excited about-such as helping kids save for college?
Instead of the Presidential Election Campaign Fund, taxpayers should get the option of sending $3 to a new fund-one dedicated to providing a dollar-for-dollar match for young people saving for college. In particular, this new fund could help support special “children’s savings accounts” increasingly being created nationwide to help lower-and middle-income children save for college.
Under these programs, children typically receive an initial deposit in an account and a 1:1 match of savings they contribute, up to a specified maximum (e.g., $500). In the pioneering Kindergarten to College program in San Francisco, every kindergartener in the city gets $50 to “seed” their savings account ($100 for those on free or reduced lunches), followed by additional incentives to save. Research finds that children with savings are not only more likely to expect to go to college, they are also six times more likely to attend than kids without savings.
A college savings match fund—in which children and their families would contribute up to $500 and the $3 contribution from tax returns would generate matching funds—could ease a major source of financial anxiety for today’s families. According to Pew, 71 percent of Americans say it’s harder to pay for college today than it was a generation ago; 75 percent say college is now too expensive for most Americans to afford. Meanwhile, a global economy demands that young people go to college if they are to succeed in the middle class, let alone compete against their peers in China, India and other aggressively developing countries.
Even a relatively low participation rate in a college savings check-off could generate significant revenues. Despite last year’s low participation, the Presidential Election Campaign Fund collected nearly $40 million. If participation levels reach what they did in the early 1970s-young savers could benefit to the tune of hundreds of millions of dollars.
Without doubt, American families could use help to keep up with soaring college costs. Many states now offer 529 college savings plans, which provide an implicit savings match through tax preferred growth of savings and, in some cases, tax deductions for contributions. These accounts, however, work best for middle- and higher-income households, while a college savings match could provide equal benefit to low- and moderate-income households as well.
While two-thirds of parents are actively saving for college, a survey by Fidelity Investments finds most parents are also far behind in their ability to save enough to meet costs. According to Fidelity, the typical family is on track to meet just 30 percent of the expected cost of college.
Helping students save for college could also reduce the growing burden of student debt. The Federal Reserve Bank of New York says the average student debt burden in the first quarter of 2012 was $24,301, while the overall balance owed by students was a whopping $902 billion. Indeed, a survey by the think-tank Demos found that 13 percent of households whose credit card balances included college costs reported leaving school to address these debts.
Perhaps most importantly, letting taxpayers check the box for college savings would bypass the partisan paralysis that has stalled Washington’s efforts to help students and their families. Instead of watching Congress squabble over support college students deserve, let Americans act on their own. Many states already do this by sponsoring check-off programs on state tax returns to benefit veterans or seniors or to fund disease research.
While a match for college savings can’t erase the growing burden of college costs and debt, it can help put children on the path toward saving earlier, saving more, and raising their college-going aspirations. With the help of this new fund, every child in America might someday have a savings account to help ensure a brighter future-and all for just $3 per taxpayer.
Anne Kim and Carl Rist collaborated on this piece. Kim is a senior policy strategist at CFED, a Washington-DC based non-profit, and senior fellow at the Progressive Policy Institute. Rist is the executive director of the 1:1 Fund, an organization that promotes savings and educational opportunities for low-income students.
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