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Read this Now! The Art & Science of Reminders

By Pamela Chan and Hyunsoo Chang, Guest Contributor on 09/24/2013 @ 04:00 PM

Tags: Behavioral Economics

Have you ever meant to do something so important or so forgettable that you created a reminder for yourself, only to find that you still failed to follow through? Maybe you wrote a note reminding yourself to pick up the dry cleaning on the way home from work, but you completely forgot after a busy day. Or maybe you wrote a phone number on your hand last night, but unfortunately (or fortunately) didn’t write down the name or the reason to call.

Too many reminders are not necessarily better than no reminders.

Reminders are helpful for overcoming prospective memory failures — failures that occur when people forget to do planned actions. But why do some reminders work, and some fail? We have found that when reminders fail, it is often for one of the following three reasons: (1) the wrong action was prompted, (2) the reminder was not specific or (3) the reminder came at the wrong time.

In diagnosing the behavioral bottlenecks for Accion Texas, the BETA Project team looked at Accion’s loan repayment process through the clients’ eyes. Taking this perspective allowed us to see that reminders may be helpful to encourage on-time payments as borrowers seemingly intended to pay, but failed to follow through. When designing reminders for Accion Texas, we made sure the reminders were actionable, specific and timely.

Prompting the Right Action

Accion Texas’ existing monthly statement emphasizes the importance of making a payment by the payment due date. However, most borrowers are enrolled in automatic payment withdrawals, and actually need to make sure that they make a deposit to have sufficient funds. Since it can take a couple of days to process payment deposit, they also need to make sure that any necessary funds are deposited well before the due date.

We were concerned that borrowers may not consciously realize how their Accion Texas loan payment process differs from many other monthly payments. As such, we designed our reminders to emphasize the action of making a deposit rather than making a payment.

Being Specific

To refocus borrowers on the action of making a deposit, we redesigned the monthly statement to include a Post-it note to help borrowers (1) create a detailed plan about when they will make the deposit before the withdrawal, and (2) commit to the plan. We also provided an emphatic “suggested deposit date” on the statement to help borrowers plan out when and how to make a deposit.

The email and text messages reinforced the statement and the Post-it note by explicitly directing borrowers to make sure they have enough funds in their account for the payment.

In each component of the design, our reminders didn’t simply tell the borrowers to “pay on time,” but were intended to elicit very specific behaviors.

Optimal Timing

When reminders are received is just as important as what the reminders say. Accion Texas borrowers need to ensure there are sufficient funds in their accounts before their due date when the withdrawal occurs. But because only the due date is made salient in the loan contract and monthly statements, a borrower may be wrongly anchored to the due date, when it is too late to take action.

Our email and text reminders were deliberately timed to be far enough before the due date to provide sufficient time to act, and sufficiently close to maintain the salience and urgency to make a deposit. The emails were sent ten days prior to a given borrower’s due date each month. The text reminders were sent three days prior to the due date. Both messages were sent in the morning so that borrowers could make a deposit during daytime business hours.

Without appropriate timing, even the best-worded reminder can fail.

Now that you’ve learned about the art of reminders, try making one to remind yourself to come back and check our next blog post!

Next BETA Project Post: Designing for Difficulty

All of us get fed up with the hassles in our lives. But sometimes, hassles can actually make our lives better. Our next post on the BETA Project will discuss the intentional design of hassles. This post and other helpful insights from the BETA Project are available on CFED’s Behavioral Economics blog and BETA Project website.

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Spotlight on Innovation in Entrepreneurship: Microloan Management System

By Heidi Pickman, Guest Contributor on 09/23/2013 @ 03:00 PM

Tags: Entrepreneurship, Innovation

From 2004 to 2010, the microbusiness sector was responsible for over 90% of all jobs created in the US. Microbusinesses (1-4 employees) created a net of 5.5 million jobs, while large businesses (those with greater than 500 employees) lost 1.8 million jobs during the same period.

Heidi Pickman, Communications Director, California Association for Micro Enterprise Opportunity

Despite their crucial role in the economy, only 0.10% of potential microbusiness borrowers are being served. In California, CAMEO’s microlenders struggle to achieve scale. Microlending is expensive for many lenders to sustain and as a result, some of CAMEO’s lenders have left the microloan market. With funding tighter than ever before and increasing need, microlenders have to deliver the same services as economically as possible. Our 28 member lenders made 1,500 microloans in 2012.

Many challenges exist that lead to inefficiencies and high costs of microlending:

  • Finding eligible borrowers is difficult.
  • Staff spend time on ineligible inquiries and building the pipeline of borrowers.
  • Microbusiness owners need extensive business technical assistance before, during and after the loan.
  • Microloans often undergo the same ‘traditional’ underwriting process that is used for large loans (i.e., a very extensive process).

CAMEO, as the effective small business CDFI coalition for California, supports the growth and sustainability of microlending by expanding resources and helping to decrease the cost of providing services. We decided to offer Accion Texas’ Microloan Management System (MMS) platform to members as a way to lower costs of microloans.

Accion Texas’s MMS streamlines the cost of underwriting and frees lenders to focus on recruitment and support. The loan turnaround is much faster. Accion’s automated review system allows instant feedback on borrower capacity and history, and underwriting takes three days instead of three weeks.

CAMEO believes that our member CDFIs will benefit in the following ways:

  • Improved loan quality through a standardized process that strengthens the lenders’ portfolio
  • CDFI’s can focus on spheres of excellence (e.g., business assistance)
  • Cost of screening, assessment and underwriting per loan decreases dramatically
  • Lender volume expands by 70-300% and thus increases revenues
  • Staff can concentrate on loan/deal development

For this project, CAMEO has bundled smaller lenders together in one license, allowing them to post a limited number of applications for a reduced price. As they scale, they graduate to a full license. CAMEO guides lenders through a complicated, multi-agency on-boarding process, then provides ongoing support (e.g., staff training, peer network calls, one-on-one, technology assistance). We are working with four members for the pilot: California Capital, CDC Small Business Development, TMC Development Working Solutions and Women’s Economic Ventures.

Systems change always presents difficult challenges. Organizational behavior and processes and ingrained staff habits are not easy to change. Roles and duties may need to change. Staff may not be used to the algorithm and may need to learn to trust new system. And the incentives to change are not clear.

This leads many organizations to implement MMS partially, which in turn leads to multiple systems and duplicated efforts and masks the benefits of streamlining, speed and consistency.

To work properly, MMS needs executive leadership and systems change. It requires ‘big picture’ thinking about roles and processes. A few DOs and DON’Ts…

DO: Allow access to be open to everyone. Rely on Auto Review for assessment.

DON’T: Make clients jump through hoops before trying Auto Review.

DO: Use MMS for all loans under $50,000.

DON’T: Run two systems or duplicate activity.

DO: Reassign staff and loan committee duties to new ones, such as building the pipeline.

CAMEO believes that in this fast-paced world, we change or become obsolete! Our role is to help our members adopt essential new technology that will help them compete and increase their lending capacity, serve more microentrepreneurs who will create jobs, and build strong, healthy and stable communities.

Heidi Pickman is Communications Director for CAMEO, the California Association for Micro Enterprise Opportunity.

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Asset-Building News Roundup - September 20, 2013

By Veronica Weis on 09/20/2013 @ 05:30 PM

Tags: News


The Asset Funders Network is hosting the Grantmaker Conference 2013 in Washington, DC from October 2-4. It will bring together a diverse group of national, regional and community-based funders concerned about a common goal – financial security for all. Click here to register.

Join us September 26 at 7:30pm for an early screening of Inequality For All, a documentary film about economic inequality in America, in Washington, DC. After the film, join CFED President, Andrea Levere for a short conversation and Q&A on solutions and pathways to financial security and opportunity for all Americans. To RSVP, click here.


The House voted to cut almost $4 billion a year, or 5%, from the roughly $80 billion-a-year SNAP (food stamps) program. That version of the bill would tighten eligibility standards, allow states to impose new work requirements and permit drug testing for recipients, among other cuts to spending. Currently, more than 47 million people are enrolled in a food stamps program, or 1 in 7 Americans. The bill now heads to the Senate.

From the Assets & Opportunity Network

The Coalition for a Prosperous Mississippi shared a blog post with takeaways from new census data that shows poverty increasing in Mississippi while median income dropped.

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CFED’s Kim Pate Testifies Before U.S. House of Representatives

By Ezra Levin on 09/19/2013 @ 05:00 PM

Tags: Federal Policy, Entrepreneurship

On Thursday, CFED’s Chief External Relations Officer Kim Pate testified before the House Small Business Committee’s Subcommittee on Economic Growth, Tax and Capital Access. The topic of the subcommittee’s hearing was “Private Sector Initiatives to Educate Small Business Owners and Entrepreneurs.” Click here to download Kim’s full written testimony.

In her testimony, Kim highlighted the importance of “microbusinesses”—those with fewer than five employees. While individually small in size, microbusinesses account for 90% of all businesses in the country. Taken together, these microentrepreneurs are responsible for creating millions of businesses and even more jobs. On average, these ventures create 2.9 full and part-time jobs each.

Not only are microbusinesses an important influence on the macro economy, they also offer a real opportunity for low- and moderate-income individuals and families to attain economic self-sufficiency and stability. Microbusinesses that survive, grow and become profitable, enhance household income and reduce families’ reliance on public assistance.

Kim also discussed the importance of tax time for microbusinesses. In 2005, CFED launched the Self-Employment Tax Initiative (SETI) with the goals of building assets for low-income households, creating jobs and increasing tax revenue by bringing the self-employed into the tax system. Through this effort, CFED has partnered with Volunteer Income Tax Assistance (VITA) programs, which provide free tax support to low- and moderate-income taxpayers. In short, VITA works and works well—a National Community Tax Coalition (NCTC) report found that VITA programs helped more than 3 million taxpayers claim $2.2 billion in tax refunds while saving the federal government $5.5 million in reduced processing costs.

Building on the success of SETI, CFED joined NCTC and the IRS to launch the Schedule C VITA Initiative, which aims to test new ways to expand support for microentrepreneurs through the VITA program. Also inspired by SETI, Representative Judy Chu (CA-27) introduced the Entrepreneur Startup Growth Act last Congress, which would have added much-needed additional tax assistance support for small entrepreneurs.

CFED looks forward to working with the Subcommittee and Congress as a whole to move forward on these and other opportunities to expand economic opportunity, create jobs and support the most powerful little engines for economic growth in the country—microentrepreneurs.

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Census Poverty Report: America’s Working Poor Still Waiting for Recovery

By Lebaron Sims on 09/18/2013 @ 10:30 AM

Tags: Economic Inclusion, Federal Policy, Financial Empowerment, Recommended Reading

Though the nation’s GDP has bounced back in the last six years, millions of Americans have yet to recover from the economic crisis.

Today the U.S. Census Bureau released its 2012 Income, Poverty and Health Insurance Coverage report and data, and the state of play for working Americans is as bleak as at the post-recession crest.

Median household income remained a full $4,500 (8.3 percent) below its pre-recession point, in real terms. The official poverty rate was 15%, representing 46.5 million Americans living below the poverty line. These trends are no different than 2011, highlighting the lasting effects of the Great Recession and the long road to recovery most Americans have yet to traverse. These findings only reinforce the importance of America’s safety net programs, like Social Security and the Supplemental Nutrition Assistance Program (SNAP).

Low- and moderate-income families have seen the largest proportional losses in family income over the last six years, and, as these latest Census Bureau data reiterate, little has changed over time.

Average family income for the lowest fifth of the income distribution (less than $20,600) has declined steadily since the 2001 recession, with that decline accelerating to greater than three percent annually after 2007. Families earning between $20,600 and $39,764 have seen annual declines in family income greater than two percent, and, like those in the lowest quintile, have watched their incomes slide downward since 2001.

The historical data on poverty rates by age serve as a brilliant illustration of our nation’s misplaced priorities regarding assistance programs. By the official poverty measure, 21.8% of all American children—over 16 million boys and girls—lived below the poverty level in 2012. In fact, only the age cohort 65 years and older has seen *any* decline in the poverty rate since the recession hit in late 2007. This disparity can be attributed, at least in part, to the success of Social Security and Medicare, the transfer programs in place specifically for older Americans. The importance of this safety net cannot be understated—without it, over 15 million more seniors would live in poverty. This protection, however, should not come at the expense of programs that assist low-income families.

The cuts to the SNAP already in effect, and the more extensive ones proposed by the House GOP as an addendum to the Farm Bill, would devastate low-income households that rely on these benefits to stave off poverty. The Census Bureau estimates that SNAP alone keeps 4 million low-income parents and children above the poverty line. The House GOP’s proposed cuts would almost entirely erase this benefit. In addition, the federal Earned Income Tax Credit keeps 3.1 million children out of poverty. Though neither estimate is included in the official poverty estimates released yesterday, both are included in the Census Bureau’s Supplemental Poverty Measure (SPM), to be released October 30.

Today’s data release only underscores the importance of America’s safety net. Until household incomes recover fully from the recession—which they continue to show no signs of doing in the immediate future—programs like Social Security, Medicare, SNAP and Medicaid are all keeping millions of children, working families and seniors out of abject poverty. Now, more than ever, is the time to strengthen our policies, and lend a hand to families working to climb out of poverty.

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Extreme Savers: From Owing $25K to Being Debt-Free in 2 Years

By Sarah Cocclimoglio on 09/17/2013 @ 06:30 PM

Tags: Financial Empowerment

EDITOR'S NOTE: This post originally appeared on the College Park Patch and can be read here

Credit: Randy Buckman and his family

The second time was the charm for Randy Buckman, who had to learn twice that living paycheck to paycheck and racking up credit card bills to maintain a lifestyle wasn’t worth the stress.

At 25, he was still living at home with his parents, with credit card debt, a car loan and no savings account. Buckman wasn’t born a saver, but he realized his financial future was uncertain if he continued spending more than he was earning.

“I thought to myself one day, ‘If this is the way I am living while I live with my parents, how is it going to be when I am on my own with a family to take care of?’” he said.

This realization inspired Buckman, of Rochester, Mich., to start teaching himself about personal finance, saving a little bit of money and paying off some credit cards. Two years later, he was engaged and househunting. He and his fiancee found a 1,700-square foot foreclosure on two acres and bought it for $60,000 less than it had been worth the previous year.

“We patted ourselves on the back as we signed our income away for the next 30 years,” Buckman said.

Despite his newly learned financial lessons, Buckman and his future wife went through their savings and started to rack up credit card debt fixing and updating their new home. “We were wearing out the magnetic strips on our numerous cards,” he said.

Finally, still reading about personal finance and looking for “that one thing, that one piece of advice, that one tip that we just weren’t doing,” Buckman, now 32, said he came across a book, Dave Ramsey’s The Total Money Makeover, that told him to cut up the credit cards and quit borrowing money of any kind, and to live off a written monthly budget every month.

“Prior to that, we had been saving and paying extra toward debt when we could, but it wasn’t a priority,” Buckman said. “If ‘life’ happened, we would use our savings and if that wasn’t enough, we would use debt to catch the remainder, then start the cycle over of trying to save and pay off debt. Not only did we not have a plan for the unknowns of everyday life, but we didn’t have a plan for the knowns either.”

The couple then committed to acting like borrowing money was illegal. It changed the way they viewed their income and expenditures; they vowed to pay off all of their non-mortgage debt—from car and student loans to credit cards—in two years.

Nine months later, they had paid off $25,000 using money from their wedding, a pay increase Buckman’s wife received when she took a new job, and money Buckman earned working overtime at his first job as a firefighter and paramedic, and by taking on a second job. The couple even accumulated six months' worth of living expenses in savings.

Eventually, they decided to downsize, selling their house at a loss for a 750 square foot apartment closer to work. This way, when kids came along, the Buckmans could afford to live on one income so that Buckman’s wife could stay home with the kids.

“We don’t plan on remaining in an apartment forever, but when we do buy a house, it will be more well thought out and fit our lifestyle,” Buckman said.

Here are some lessons Buckman learned along the way to financial stability:

  • Start at the bottom. Pay off balances starting with the smallest amount, irrespective of interest rates. After you pay off the smallest debt, apply the monthly payment you were making to the next smallest debt plus the minimum payment. You won’t feel any out-of-pocket loss and your debt will start to disappear.
  • Buy used. The Buckmans save money by shopping at thrift stores, Craigslist and mom-to-mom sales, especially for clothing and kids’ items. If you must buy new, try to buy refurbished items or floor models.
  • Spend some to save some. If diaper bills have you in a budget crunch, consider going cloth. Buckman and his wife laid out $200 up front for cloth diapers and wipes, but ended up saving thousands because they didn’t buy disposable diapers.
  • DIY. Buckman makes his own laundry detergent, makes almost all meals at home from scratch and uses baking soda and vinegar for almost all of his household cleaning.
  • Plan for the unknown. To break the cycle of having to deplete their savings account for unexpected expenses, the Buckmans initially saved $1,000 in an account to cover the “what ifs” of life before they started their debt-busting. “Once we had that money in place and used it properly, it was much easier to concentrate on not only getting out of debt, but staying out of debt,” Buckman said. “We didn’t have to stay in the cycle of paying off debt, just to go back into debt when the car broke.”

TELL US: What are your tips for staying debt-free? Share them in the comments section below.

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New Projects Symbolize New Approaches to Helping Low-Income Families Build Wealth

By Sean Luechtefeld on 09/16/2013 @ 11:30 AM

Tags: Assets & Opportunity Initiative, Financial Empowerment, Integrated Service Delivery

Since last summer, CFED and the Assets & Opportunity Network have worked together to convene learning groups. These opportunities offer CFED and participating organizations the chance to work with and learn from each other about strategies that improve the well-being of economically disadvantaged members of communities across the country. This summer, four new peer learning opportunities have been made possible thanks to the Administration for Children and Families’ (ACF) ASSET Initiative Partnership, Bank of America Charitable Foundation, the MetLife Foundation and Wells Fargo, and we’re excited about the ways that these new opportunities will drive innovation, collaboration and scale in the field.

Here’s a preview of these four exciting new opportunities:

  • Head Start Integration Cluster: This Intensive Learning Cluster will focus on integrating and/or expanding integration of financial-empowerment strategies into Head Start programs. On August 29, CFED—with support from the ACF’s ASSET Initiative Partnership—released a Request for Expressions of Interest for Head Start programs interested in receiving peer and expert advice on how to better offer, partner to provide or refer Head Start families and staff to asset-building services.
  • Integrating Financial Capability into Social Service Delivery Systems: This Intensive Learning Cluster—sponsored by Bank of America Charitable Foundation—will bring together programs providing housing, workforce development and emergency assistance services that wish to strengthen the financial capability of the clients they serve. Technical assistance and peer learning opportunities will be provided over an 18-month period as organizations pilot an asset-building intervention and document outcomes and lessons learned.
  • Savings Innovation Learning Clusters: These learning clusters—sponsored by MetLife Foundation—will bring together six direct service organizations that will develop and test innovative, “next generation” savings program models that help clients build emergency savings or save for longer term asset-building goals. Selected organizations will participate in peer learning opportunities both in-person and virtually over the course of 15 months, as well as receive individual technical assistance, to facilitate piloting and evaluation of their savings program models.
  • Assets & Opportunity Network Peer Learning Groups: Starting this fall, CFED will facilitate the formation of Peer Learning Groups, sponsored by Wells Fargo. These groups will come together over the course of 3-6 months to advance a shared learning agenda about common topics of interest, including coalition building, asset limits, prepaid cards, curbing predatory lending and more.

Each of these new projects are exciting, both because of the valuable insights and relationships we know our partners will develop, and because of how these new connections and collaborations will build capacity and catalyze the field to even greater levels of scale, innovation and impact. We hope you are as enthusiastic about these opportunities as we are, and we look forward to formally inviting you to participate this fall.

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All-In Nation: Making the America that Works for All

By Bob Friedman and Jeremie Greer on 09/13/2013 @ 11:30 AM

Tags: Economic Inclusion, Federal Policy, Recommended Reading

We were delighted last month when the Center for American Progress (CAP) and Policy Link released All-in Nation: An America that Works for All. The book, edited by Vanessa Cárdenas and Sarah Treuhaft, is an eloquent explanation of how strong communities of color are the linchpin to a vital economic future in the United States. We were also extremely pleased to see that saving, college access, education, homeownership and so many other issues typically left out of the conversation were thoughtfully included in this treatise on inclusivity.

All-in Nation is noteworthy for how it advances the conversation about asset-based strategies that create pathways for economic security. As one example, we love the recommendation that Congress turn certain tax deductions into refundable tax credits as a method for incenting saving. Likewise, the proposal for a savings tax credit to be used for a variety of purposes such as retirement savings or health care is one that Congress ought to seriously consider if they want to move the dial on our country’s burgeoning racial wealth gap. It’s policies like these—moveable, meaningful and manageable—that actually have the potential to make a difference when it comes to ensuring fair financial footing for communities of color.

All-in Nation also gains kudos for including in its pages descriptions of many of the collaborative efforts to close the racial wealth gap and advance America’s assets agenda that are springing up around the country.

An additional example to consider is the Asset Building Policy Network, or ABPN. Made possible through support from Citi, who is also a member, the ABPN is a coalition of the nation’s preeminent civil rights and advocacy organizations—including CAP and PolicyLink—committed to improving economic opportunity and security for low- and moderate-income families and communities of color. The ABPN engages in policy advocacy, such as authoring several comment letters to federal agencies, which has resulted in action by the agencies that supports ABPN issues. The Consumer Financial Protection Bureau, for example, directly quoted the ABPN’s comment letter on financial education. ABPN members have also collaborated to conduct research, including the recent collaboration among member organizations National Council of La Raza, National Urban League and National CAPACD to study the financial access challenges facing low-income people of color in the financial marketplace.

These examples, and the broader message of All-in Nation, reaffirm one of CFED’s core values: collaboration. As a special organizational calling and competency, engendered by a conviction that our success requires the varied talents and contributions of many, that a rich diversity of race, gender, background and perspectives and a commitment to learning from others strengthens our work, collaboration has defined our work since the beginning.

As Dr. King reminded us some 50 years ago, change doesn’t roll in on the wheels of inevitability; it comes through continuous struggle. That struggle is as important now as ever before; CFED’s own research finds that about two-thirds of households of color find themselves living in asset poverty, meaning they lack the resources necessary to sustain themselves at or above the poverty line in the event that an emergency like illness leaves them without their primary source of income.

While we cannot undo past discrimination, we can change the trajectory of its future. This is the call that organizations like CAP and Policy Link and coalitions like the ABPN are heeding every single day. Books like All-in Nation are precious moments when that call is amplified, so we hope you’ll read it as soon as you have the chance.

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Saver Success Story: Meet the Rojos

By Jimmy Crowell on 09/11/2013 @ 03:30 PM

Tags: Individual Development Accounts, Matched Savings

Now with expanded geographic eligibility: Accepting submissions from nearly 230 counties in 19 states!

CFED and Bank of the West have partnered to bring IDA practitioners a unique opportunity to support their homeownership savers. To advance homeownership and encourage the work of IDA practitioners, CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers in eligible counties within the 19 states Bank of the West serves. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted. This will be the last opportunity to receive programmatic support in exchange for saver stories in 2013, so act fast!

IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.

Need some inspiration? CFED and Bank of the West are pleased to share the story of one family’s participation in an IDA program and their subsequent journey to financial stability through homeownership:

Jennifer and Ruben with their children in front of their new home, 2013

In May 2012, Ruben and Jennifer decided to take the first steps toward homeownership. Saving money had always seemed hard, but they were determined to provide a better home and a safer environment for their children. The Rojos believed that if they wanted to make a change in their lives, it would be up to them to make it happen.

Ruben found out about Catholic Community Services’ Individual Development Account (IDA) Program through Habitat for Humanity and immediately enrolled. Unfortunately, his weak credit made it difficult to secure a mortgage. Through the financial education classes required by the IDA program, Ruben began working diligently to repair his credit score. He also learned how to budget for his family, and plug “spending leaks” so that the family could build their savings. Suddenly saving felt much easier – and Ruben was pleasantly surprised that the family only had to make a few small lifestyle changes to reach their savings goal.

In May 2013, one short year after enrolling in the IDA program, Ruben and Jennifer accomplished their goal of homeownership. They had always lived in apartments and had never owned a home before. The difference, Ruben says, is “like night and day.” For the first time, the family feels truly at home, and has enjoyed a sense of community and stability that had previously been lacking – and the children have quickly made friends in their new neighborhood.

Looking back on the experience, Ruben is astounded by all the unforeseen benefits homeownership has brought them. “My family and I started to have a healthier life. Our lives became more stable,” he explains. Now, the Rojos have adopted a new mindset when it comes to their finances, and plan to continue using the skills they learned through the IDA program. “We think differently now and feel, if we really want to, we can do almost anything,” says Ruben. And he’s passing on his learning to the next generation: “I plan to teach my kids good habits like saving,” he says with pride.

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How Food Stamps Keep Families in a Cycle of Poverty

By Mercedes White, Deseret News on 09/09/2013 @ 12:00 PM

Tags: Assets & Opportunity Initiative, Federal Policy, News, Recommended Reading

Image courtesy of Deseret News

EDITOR'S NOTE: This article originally appeared in Salt Lake City's Deseret News and you can read it here.

On a recent Monday evening, 6-year-old Esther lugged a jar of Nutella from the kitchen into the living room where her mother Melissa, nine months pregnant, rested on the sofa in their modest Utah County home. Esther held the jar out to her mother, smiling shyly as she asked for permission to have some. Melissa let out a gentle sigh as she unscrewed the lid. “Not too much,” she said as she handed the jar back to her daughter. In one week she may not be able to give her daughter luxuries like a spoonful of Nutella.

Until recently, Melissa and her husband Jimmy received $400 a month from the Supplemental Nutritional Assistance Program, also known as food stamps. Combined with the $21,000 Jimmy earns as a security guard at a local hospital, it was just enough to feed their four (soon to be five) children ages 2 to 10.

Since 2007, the number of Americans on SNAP has exploded, going from approximately 22 million people at the start of the recession in 2008 to more than 45 million in 2013. The program provides these families a much-needed safety net as they struggle to get back on their feet, according to Jennifer Brooks, policy director with the progressive Corporation for Enterprise Development based in Washington, D.C.

Jimmy and Melissa say they would like to get off food stamps altogether and be on their own, but the rules governing eligibility for the program make it hard. In particular, federal policy stipulates that no matter how small the income or how large the family, persons with assets more than $2,000 — which include savings accounts — are not eligible to take part in SNAP.

According to many social policy experts, this rule needs to be changed. “Asset tests impede the process of moving from dependence on government assistance to self-sufficiency,” said Michael Sherraden, professor of social work at Washington University in St. Louis. Savings are an important part of economic development, he said. “In order to develop capacity, families and communities must accumulate assets and invest for long-term goals.”

A safety net of three months worth of living expenses can ensure that low-income families have some cushion when their car breaks down or work hours get cut, said Brooks. “It will be the difference between going right back on government assistance when an unexpected expense comes up and being able to absorb the cost and remain self-sufficient.”

Wrong to save

Melissa and Jimmy didn’t know about the asset limitation when they decided to put a $3,000 tax refund into a savings account. The couple was eager to get off government assistance as soon as possible. “I never thought I would be in a position where we needed this kind of help,” Jimmy said. Putting some money aside for unexpected expenses and towards a down payment on a home seemed like important first steps.

Several months after depositing their refund, the couple received notice that their food-stamp benefits would be cut at the end of July. The couple understands why the rule exists, but they said it came as an unexpected blow. “You don’t want people with no income and $50,000 in savings taking government benefits,” Jimmy said, “but that isn’t what was going on here. They need to look at the totality of the situation.”

Melissa and Jimmy weren’t sure what to do. Without SNAP they’d need to use their nest egg to feed their family, defeating the purpose of saving in the first place. Not only would they lose their savings, their monthly food budget would go from $400 on SNAP to $250. As she looked at the numbers, Melissa wasn't sure if she could feed six people on that. Though the family eats modestly on SNAP, there is room for some fresh fruits and vegetables and the occasional treat. Without SNAP, the only way they could get by is by cutting out fresh produce altogether. Melissa is reluctant to go this route: "I'm worried this kind of diet will jeopardize my kids' health," she said.

The alternative is to spend some of their savings so they can again qualify for SNAP. “It felt like a no-win situation,” Melissa said, “like we were being forced to choose between what is good for our family in the long term and what our kids need right now.” Survival in the short term and financial security in the long term seemed completely at odds.

Melissa and Jimmy's experience is not unique — according to Reid Cramner, a director with the New America Foundation's Asset Building Program — it is how American welfare works. The rules force "families to choose between a small emergency cushion and putting food on the table," he said in a recent statement for the New American Foundation. "We're forcing them to accept long-term poverty in exchange for short-term assistance."

Changing objectives

Prior to 1996, federal social assistance programs like food stamps focused on providing long-term income support to poor Americans. “Essentially, people could be on welfare indefinitely,” Brooks said. “In this context (when the goal of the program is to provide income support), an asset test makes sense,” Brooks added, explaining that it reduces the likelihood that individuals with the resources to support themselves will claim government assistance.

However, the “Personal Responsibility and Work Opportunity Reconciliation Act,” signed by President Bill Clinton in August of 1996, marked a fundamental shift in the American approach to social welfare programs. “The goal of the welfare reform was to move families off government assistance,” Brooks said. “You couldn’t be on welfare forever anymore.”

But when the federal government made these sweeping changes to welfare, the assets test remained in place. The problem with assets tests, however, is that they are “contrary to the goal of getting people off welfare,” according to Brooks. “If a program has the explicit goal of moving people from dependency to self-sufficiency, people need to have an opportunity to build up a safety net before they transition off government assistance.”

The states’ role in welfare

Welfare is federally funded, but it is up to each state to determine how to administer the programs, including SNAP, Medicaid and Temporary Assistance for Needy Families. Shortly after welfare reform, some states recognized that assets tests didn’t make sense anymore. Since 1996, 35 states eliminated assets tests for SNAP benefits. Five states (Nebraska, Pennsylvania, Texas, Michigan and Idaho) increased the amount of assets beneficiaries can hold from $2,000 to between $5,000 and $25,000. Ten states (including Utah, Wyoming, Virginia and Alaska) use the federal government’s $2,000 assets threshold.

Moving off dependence on government benefits is difficult everywhere, but the challenges are especially formidable in states with strict assets limits. In many circumstances it means that families, like Jimmy and Melissa, are getting pushed out of the nest before they can fly. "These programs are supposed to help people transition out of poverty," said Martha Wunderli, state director of the Fair Credit Foundation in Utah, a non-profit organization that provides financial services including education, debt management and asset building programs for low-income families. “Building assets is a big part of getting out of poverty ... and it is not fair to remove benefits that help them get out of poverty before they are ready."

Some states are reluctant to change their policies due to fears people will abuse the system. Brooks notes several states reinstituted assets tests after allegations of lotto winners and wealthy elderly retirees receiving benefits were made public by the press.

Brooks recommends that instead of re-instituting assets tests, governments change the rules about what counts as income. “The situation with the lottery winners could have been avoided if state law considered their winnings income, not assets,” Brooks said.

But not everyone agrees. Some conservative lawmakers want to hold all states to the federal assets limit. For example, Rep. Paul Ryan (R-Wis.) and Rep. Frank Lucas (R-Okla.) would like to add a condition to the Farm Bill that would force states to adhere to the federal government's assets test. This could result in millions of people losing benefits, Brooks said, adding that supporters of this policy consider it a way to decrease fraud.

Weeks away from delivering her fifth child, Melissa isn't in a position where she can work. Even after the baby comes she's unsure about whether she will be able to work. The couple's eldest daughter has a rare chromosomal abnormality, which requires extensive medical care and behavioral therapies. Someone needs to be there to take her to these appointments and communicate with the doctors and therapists about her progress. She'd love to take on some part-time work from home, but it will be some time before she's in a position to do that.

Jimmy is looking for better-paying jobs, too. He'd like to apply for the police force in their city, but at this point, his fitness level isn't where it needs to be to meet the requirements. He's working on it, but it will be a few months before he can apply for the police force and several more before he would start working — assuming he gets hired.

As they look at the numbers and their current situation, Jimmy and Melissa feel they don't have much of a choice but to spend some of the money they saved so they can again qualify for SNAP benefits. They would prefer the security and potential for leaving welfare that the savings represented, but as Jimmy puts it, ”When you have kids, you have to put the needs of your family before your pride.”

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Asset-Building News Roundup - September 6, 2013

By Sean Luechtefeld on 09/06/2013 @ 12:30 PM

Tags: News


On September 16-18, the National Housing Conference will host Solutions 2013, their National Conference on State and Local Housing Policy in Atlanta. Learn more here.

Registration for CFED’s Assets & Opportunity Network Leadership Convening will open on September 16. The event will take place at the Holiday Inn Capitol in Washington, DC, on December 3 & 4. Stay tuned for more details.


Bank of the West has announced the final round of its Saver to Homeowner Story Contest. If you work with savers in an IDA program who are working toward homeownership, your organization could win up to $3,000. Read more here.

The Christian Science Monitor published an article, authored by Next Step CEO Stacey Epperson, about how manufactured homes represent an asset-building opportunity for low-income families, both by providing a stock of affordable homes and also by helping families to save money on energy costs. Check it out.

From the Assets & Opportunity Network

Using the Urban Institute’s mapping tool, the YWCA of Metropolitan Dallas finds that over the past 30 years, poverty among Hispanic families in Metro Dallas has grown significantly. Read about it and other findings here.

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CFED & Bank of the West Announce the Final Round of the 2013 Saver to Homeowner Story Fund

By Jimmy Crowell on 09/05/2013 @ 05:00 PM

Tags: Housing and Homeownership, Individual Development Accounts

Now with expanded geographic eligibility: Accepting submissions from nearly 230 counties in 19 states!

Karis and her two sons in front of their new home, 2013

CFED and Bank of the West have partnered to bring IDA practitioners a unique opportunity to support their homeownership savers. To advance homeownership and encourage the work of IDA practitioners, CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers in eligible counties within the 19 states Bank of the West serves. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted. This will be the last opportunity to receive programmatic support in exchange for saver stories in 2013, so act fast!

IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.

Need some inspiration? CFED and Bank of the West are pleased to share the story of one family’s participation in an IDA program and their subsequent journey to financial stability through homeownership:

Karis Bituin knew she had to find a way to buy a home when her five‐year‐old son started asking for a backyard to play in. Originally from the Philippines, Karis is a single mother who wants the best life possible for her two sons. “They’re getting older. They need more space,” she says.

As an employee of the County of San Francisco, Karis has devoted her career to helping people get on track toward a brighter future. She works in employment training, helping low-income workers develop skills that will help them find and keep better jobs. Yet even as she worked to assist others, the expensive rent on her small apartment in San Francisco was making it hard for Karis herself to get ahead.

That all changed when Karis joined Opportunity Fund’s Individual Development Account (IDA) program and started saving for a home. Karis was able to participate in a special program partnership between Opportunity Fund and WANDA, a donor circle that provides support services specifically for single mothers. Karis already knew that budgeting and saving money were important, but the additional information and support she received from Opportunity Fund and WANDA made all the difference. “I was more conscious about eating leftovers, making sure we weren’t throwing things away,” she remembers. “I felt more united by participating in this program. There are other people in the same boat!”

With her savings – and encouragement from Opportunity Fund and WANDA – Karis and her sons moved into their new home in May 2013. It was a major milestone for their family. “The day the purchase closed was big for me,” Karis reflects.

Now Karis is turning her attention to the future. “I want to put my kids through school, so they can have a good education. I want to pay off the house, and maybe get another rental house for extra income,” she explains. “The goal of programs like this is to help people like me, and that really inspired me.”

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Asset-Building News Roundup - August 30, 2013

By Veronica Weis on 08/30/2013 @ 11:30 AM

Tags: News


On October 2-4, the 2013 Grantmaker Conference, Access, Opportunity and Mobility: Strategies that Move Families Forward, will bring together a diverse group of national, regional and community-based funders in Washington, DC concerned about a common goal – financial security for all.

On October 3-5, The Council for Economic Education is hosting the Annual Financial Literacy and Economic Education Conference, which will feature a diverse selection of presentations, workshops and events to enable educators to raise the levels of economic and financial literacy among K-12 students.


The big news in Washington, DC this week was the 50 year celebration of the March on Washington. The full name, March on Washington for Jobs and Freedom, notes the racial wealth gap, an important injustice that Martin Luther King Jr. hoped to call attention to. Despite progress in tumbling so many racial barriers, economic inequality and poverty still persists among African Americans.

Following President Barack Obama's College Affordability tour, the Washington Post is spotlighting the rising cost of higher education with a series titled, The Tuition is Too Damn High. And as students head back to school and off to college this month, it's important to remember those who won't be able to attend, despite having studied so hard and gaining admittance because of financial hardship.

From the Assets & Opportunity Network

From CFED: It’s been nearly a year since the public launch of the Assets & Opportunity Network. And in that short time, the Network has accomplished a surprising number of milestones. Read more here.

The Connecticut Voices for Children's Annual Report, focused on young Connecticut workers, finds that the growth in youth unemployment over the last decade, along with racial and ethnic wage gaps, are warning signs of long-term economic trouble for the state. Demographic trends indicate that Connecticut’s aging population will increasingly rely on the coming generation of young workers to fuel its economy, including a fast-growing Hispanic population. To read the full report, click here.

To commemorate 50 years after the March on Washington, the Illinois Asset Building Group highlights the widening racial wealth gap in this blog post.

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Data Boot Camp Teaches Dallas-area Nonprofits to Measure the Good They Do

By Dallas Morning News on 08/28/2013 @ 12:00 PM

Tags: News

EDITOR'S NOTE: This story originally appeared in yesterday's Dallas Morning News, which you can read here.

More than a dozen nonprofits that serve the working poor will be coached this year to measure their impact in the community and sharpen their methods of solving social problems.

The D3 Institute, which stands for Data Driven Decision-Making, is presented by the Communities Foundation of Texas. This year, 16 of 49 nonprofits that applied were selected to participate in the 12-month program of seminars on gathering, analyzing and presenting data.

The institute began last year as a result of a Corporation for Enterprise Development study that showed nearly 40 percent of Dallas residents live in asset poverty. That means they would not have enough wealth to sustain themselves in the event of a medical emergency or job loss.

The Communities Foundation created the institute to help nonprofits address some of the findings of the study, which profiled the financial instability and struggles many in Dallas face.

“The selected agencies have important daily experience serving working families,” said Brent Christopher, president and chief executive of the foundation. “They in turn will teach us about the tangible challenges of those struggling to make ends meet — something that numbers and statistics can’t always capture, and that foundation staff can’t always see.”

Last year’s class included the Dallas Area Habitat for Humanity, Genesis Women’s Shelter and the Interfaith Housing Coalition. This year, the 16 nonprofits include Vogel Alcove, YMCA of Metropolitan Dallas and the Richardson Adult Learning Center.

Staffs members from the nonprofits attend sessions over 12 months, and the organizations receive their own data coach and a $10,000 general operating grant. The kickoff meeting for this year’s participants is scheduled Tuesday.

“Participating in the D3 Institute has pushed us beyond community-level metrics to look also at family-level metrics and how our programming affects our partner families in the short and long term,” said Jane Massey, director of neighborhood research and revitalization for Dallas Area Habitat for Humanity.

After going through last year’s classes, the Dallas Area Habitat for Humanity is about to survey more than 1,000 of its current homeowners to find out how their lives have changed since they purchased their homes.

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San Francisco Saver Story: Teaching Cole to Save

By Blanche Brown on 08/27/2013 @ 01:00 PM

Tags: Children's Savings Accounts, Matched Savings, Featured Stories

EDITOR'S NOTE: This post originally appeared on the 1:1 Fund blog, which you should check out here.

Lauren Sigurdson is the mother of Kindergarten to College (K2C) Saver, Cole Basowski. The family received the K2C Steady Saver Award, which is given to families that save at least $10 for 6 months in a row. A San Francisco resident for twenty-five years, Lauren lives in the Inner/Outer Sunset neighborhood.

Please tell us about your Kindergarten to College student.

Cole just turned six. He is a special needs child and has a sensory processing disorder. He attends Lakeshore Elementary, which has a great special education program. He is very happy there and just a happy kid in general. He loves taekwondo and is very friendly. We live a block away from the Golden Gate Park. We love to go on the trails together. I am a single parent but have yet to receive any child support. So, this program really helps me.

Could you describe a typical weekday, from when you wake up to when you go to sleep?

In the morning, Cole plays with his cat. And then I walk him to school and I go to work. I work as a sales and marketing coordinator for a software company that sells to HR managers. I do a lot of planning and graphic design. We are a smaller company of about fifty people. Then, when I get off work, we go home. On the weekends, we try to ride our bikes and we go to the zoo a lot. Cole likes to make things so we do a lot of crafts.

How did you first hear about the K2C program?

I first learned about the program from a flyer that was sent home in Cole’s backpack. It was very comprehensive. I scanned it and emailed it out to my family almost immediately. They try to help us out when they can and I thought this account would be a great [way] for my family to consolidate the money they had been putting aside to help us. The matching program was a huge incentive. I don’t want to give away free money, especially when we don’t have a lot to go around. Kindergarten to College is really clear and easy to understand, which helps me and my family take action.

Are you an active saver? If so, why?

Yes, I’m an active saver through the automatic direct deposit I set up. I give ten dollars from every pay check. I wish I could do more. I only make ten dollars over the limit for what you need to be in the free lunch program, which is frustrating but it is good to see that you all give more money to those in the program. It is difficult for me to afford to stay in the city and rent a place. We just moved to a smaller place, but things are close. We don’t do things like go to the movies. But, I really want to stay in San Francisco so Cole can stay in this great school and so we can continue to be in this program.

What were your initial reactions to the program? What drew you to start participating in K2C?

My initial reaction was, ‘Oh, I have to share this with my family.’ I acted pretty much immediately after reading the flyer. I knew I had to take advantage of what’s being offered. It is a really good and important thing that is being done.

Were you nervous about any aspect of the K2C account?

I don’t think so. I just wanted to know more about how the program will develop in his other years in school. I didn’t have any trepidation though. It seemed clear to me.

These days, saving is difficult for many families. How do you make savings a priority?

It is hard being a single mom without any child support. I have to rely on my family. I don’t think ten dollars a month is the difference between food and not food. So, I contribute that. At one point, I was worried I would have to take Cole out of Taekwondo because of the costs. But my family always comes through. It is the same with the K2C account. When it is something important like this, we find a way to make it happen.

How do you think K2C will make a difference in your child’s education?

It will definitely give him the possibility of going if he decides he wants to go to higher education. He may be a special needs student but he is very smart and creative. He could design a new vacuum cleaner or something. I want this option to be available to him. This is an opportunity that I just couldn’t provide on my own.

What can your child learn from being part of K2C?

He can do a little bit of math now but I don’t know if he would fully comprehend what the program is or means. Cole can seem very creative but he wouldn’t understand what a lot of his peers do. Although I don’t know if the other kids in his grade know about the program either. He does understand getting his allowance of one dollar a week and saving that; he kind of hoards it. He always wants me to pay for things so he doesn’t have to touch it. He likes that his wallet is filled up with dollar bills.

Any advice for other K2C parents?

I would say take full advantage of every aspect of the program. They shouldn’t be missed. I can’t afford not to and I think it is kind of crazy for anyone to pass up this kind of opportunity.

When you were growing up, did you have any experiences with saving?

I had a bank account I was not allowed to touch. I knew not to ask for things or ask about the account. We didn’t have that much money. My mom showed me how to write a check and taught me about how banks worked. I didn’t have a lot of experience but I did know that if I wanted something I would have to save up my allowance and get it myself. It takes time. There isn’t that instant gratification that I think a lot of kids these days are used to. They don’t know how to save and work towards something. For Christmas, my parents bought Cole an iPad mini. And one of the first words he learned to read was “free” because he knew those were the games he was allowed to get.

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Partner News: Next Step Launches as Separate Social Enterprise

By Kristin Lawton on 08/26/2013 @ 04:30 PM

Tags: News

Our partner, Next Step, announced their formal separation last month from parent organization, Frontier Housing, with the launch of the social enterprise, Next Step Network, Inc.

Frontier Housing created the Next Step Network in 2010 with the mission to put sustainable homeownership within reach of everyone, while transforming the manufactured housing industry one home at a time.

Since 2010, the Next Step Network has grown its membership to 18 nonprofit affordable housing providers, expanding from its Appalachian core to 20 states across the country. To date, the Network has supported 137 families to purchase homes that will save a collective $4 million in utility bills and $12.6 million in interest over the life of their 30 year loans, while reducing greenhouse gas emissions more than 9,247 tons over 30 years.

Best of luck to Next Step in taking their plans forward to national scale with the products, programs and principles developed in Kentucky! We are excited to continue our partnership.

For more information, don't miss this blog post from Stacey Epperson, President and CEO of Next Step.

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Asset-Building News Roundup - August 23, 2013

By Sean Luechtefeld on 08/23/2013 @ 04:30 PM

Tags: News


This coming Wednesday, the CFPB will host a conference for financial coaches and vendors who are interested in learning more about providing direct financial coaching to transitioning veterans and economically-vulnerable consumers. In-person registration is sold out, but interested participants are welcome to join via conference call.

On September 6, the Midas Collaborative will host an Assets & Opportunity Breakfast in Boston to honor Senator Elizabeth Warren for her work in consumer protection.


The Baltimore Sun reports that in Maryland, the Division of Financial Regulation has launched an effort to curb illegal online predatory lending by going after predatory lenders’ banks. Although many of these banks are outside Maryland and therefore out of their reach, the Division hopes making banks aware of their clients’ illegal activities will cut down on the number of unauthorized online loans.

In housing-related news, USA Today reports that because of rising prices and mortgage rates, homes are less affordable now than they were a year ago. Whereas 74% of home sales a year ago were affordable to families earning the median U.S. income of $64,400, now only 69% of home sales were affordable to that same group.

On Tuesday, the Obama Administration announced that it would be making a series of proposals aimed at improving college affordability. Read the New York Times analysis here.

From the Assets & Opportunity Network

Derek Thomas of the Indiana Asset and Opportunity Network writes about a recent Harvard/Berkeley study which finds that children from low-income families typically less than a 10% of escaping poverty. With this data, advocates can better make the case for states and municipalities to take steps to improve the economic mobility of their citizens. Read more here.

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CFED & Bank of the West Announce the Final Round of the 2013 Saver to Homeowner Story Fund

By Jimmy Crowell on 08/22/2013 @ 11:00 AM

Tags: Housing and Homeownership, Individual Development Accounts, Matched Savings

Making investments in homeownership within Bank of the West’s 19-state footprint

CFED and Bank of the West have partnered to bring IDA practitioners a unique opportunity to support their homeownership savers. To advance homeownership and encourage the work of IDA practitioners, CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers in eligible counties within the 19 states Bank of the West serves. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted. This is the final round of funding for the Saver to Homeowner Story Fund in 2013.

IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.

Need some inspiration? CFED and Bank of the West are pleased to share the story of one family’s participation in an IDA program and their subsequent journey to financial stability through homeownership:

In December 2012, William Lo and his wife Len achieved the dream of homeownership– a dream that at first seemed impossible to reach. With the help from the Alliance for African Assistance’s IDA program, the Lo family achieved tangible change in their lives.

William and Len outside their new home, 2013

William Lo and his wife Len are originally from Myanmar, formerly known as Burma, where they had virtually no access to financial institutions. Due to unstable political and social conditions, William had trouble making ends meet as a pastor and was forced to flee to Thailand and Malaysia. While a refugee, William never dreamed of coming to the U.S., let alone owning a home. However, in 2003 the UNHRC discovered his case and referred him and his family for refugee status. They arrived in San Diego in June 2009.

William and Len didn’t even imagine owning a house until discovering the IDA program at the Alliance for African Assistance. William explains that the IDA program helps clients outline a goal for which they are saving, such as education, a business, a car, or buying a home. William was the organization’s only IDA saver in 2012 to identify homeownership as his IDA goal, “just to be different from the other Burmese who need only cars for work,” he jokes. He didn’t quite expect that it would actually happen, nor did he anticipate the enthusiasm, success and independence it would bring him.

Slowly but surely, the Los were able to save money every month until they accrued enough to start the home buying process. William attests that while saving money was difficult, it was nothing in comparison to the complexities of buying a home. He recalls that, as the purchasing process was in escrow, he sat down with his wife one evening and talked about what kind of feelings they should be having about the prospects of owning their own home. They both found it hard to label just how exactly they were feeling: “Should we be happy? But we are not yet, because the process is too complicated. Should we be sad? No, we cannot because a house is a big blessing. So what should we feel?”

Today – now that they have successfully closed on their home – William and Len Lo are able to report exactly how they feel: “extremely blessed.” Although the experience was daunting at times, they had worked hard to prepare, and with the support of the Alliance for African Assistance, the Los were up to the challenge.

But the story doesn’t end here. Now that they’ve seen their own dream come to fruition, the Lo family hopes to “pay it forward” – and help usher other members of the Burmese community through this process in the future.

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The Affordable Care Act & The Unbanked, Part II

By Lucy Mullany, Guest Contributor on 08/21/2013 @ 10:00 AM

Tags: Assets & Opportunity Initiative, Bank On, Economic Inclusion

EDITOR'S NOTE: This is the second blog in a two-part series on the Unbanked and the Uninsured. Special thanks to Lucy Mullany at IABG for sharing on the Assets & Opportunity Network blog.

In our first blog of this series we discussed the unique challenges facing unbanked households when they try to pay for health insurance.

An estimated 36% of currently uninsured households in our state have no checking or savings accounts and are effectively “unbanked.” The problem is that the vast majority of insurance companies require individuals to pay their monthly premiums via automatic withdrawal from a checking account. This means if you don’t have a checking account, you can’t get insurance.

In an effort to address this challenge, the Department of Health and Human Services released proposed rules that would require insurers to accept a menu of payment options, including paper checks, cashier's checks, money orders, and prepaid debit cards.

In response to these proposed rules, IABG submitted a letter in partnership with 78 other organizations engaged with CFED's Assets & Opportunity Network. The letter includes recommendations on how the Department and other state and federal agencies can ensure that a pathway to safe banking opportunities is a part of ACA implementation. The recommendations include:

  • Deductions from Paychecks: Automatic withdrawals from payroll help facilitate on-time payment. Similar to retirement savings or social security deductions, payroll deductions for insurance purchased on the exchange will ensure regular on-time payments.
  • Ability to Pay in Advance: If open enrollment in states across the country were aligned with tax time, consumers could pay for their premiums via their tax return. The Department of the Treasury should explore mechanisms for streamlining payments through resources consumers receive at tax time. Many Volunteer Income Tax Assistance (VITA) sites work with the unbanked population and can facilitate community outreach for this payment option.
  • Use of Navigators: Navigators should be required to provide payment information to each consumer who is purchasing health insurance via the Marketplace. Navigators can be key ambassadors of this information. We recommend creating FAQs on payment options for this formerly uninsured population.
  • Website Development: Each state will have either its own website or they will be referring people to the federal website to access the Marketplace. Payment information should be provided on the website and should be sent to consumers via email or traditional mail upon purchasing their insurance. Given that immigrants make up a significant percentage of the unbanked community, this information should be accessible in a variety of languages.

Pathway to Safe Banking

While we support efforts to ensure that the unbanked have access to health insurance through the marketplaces, we also strongly believe that DHS should use this as an opportunity to provide pathways to safe affordable banking. Being banked will facilitate on time payments which will ensure continuity of coverage and access to health care. While the alternative payments proposed by the Department are important to improve access to health care, they are costly and not a long term solution. IABG will continue to work with healthcare advocates to implement changes that will create a pathway to banking.

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The Affordable Care Act & The Unbanked, Part I

By Lucy Mullany, Guest Contributor on 08/20/2013 @ 10:00 AM

Tags: Assets & Opportunity Initiative, Bank On, Economic Inclusion

EDITOR'S NOTE: This is the first in a two part blog series on the Unbanked and the Uninsured. Many thanks to Lucy Mullany of the Illinois Asset Building Group for permission to share this timely blog series.

When the Affordable Care Act (ACA) goes into effect this October, Illinois residents who don’t have a bank account could find themselves without access to new healthcare opportunities.

Under the Affordable Care Act, 957,440 Illinois residents are expected to qualify for tax subsidies that can be used to purchase insurance through new health care exchanges. However, an estimated 36% of uninsured households in our state have no checking or savings accounts and are effectively “unbanked”. The problem is that the vast majority of insurance companies require individuals to pay their monthly premiums via automatic withdrawal from a checking account. This means if you don’t have a checking account, you can’t get insurance.

As Illinois works to set up health exchanges, the question of how unbanked households will purchase insurance has largely been overlooked. In an effort to address this challenge, the Department of Health and Human Services released proposed rules that would require insurers to accept a menu of payment options, including:

  • Paper Checks
  • Cashier’s Checks
  • Money Orders
  • Prepaid debit cards
  • Electronic funds transfer from a bank account
  • Automatic deduction from a credit or debit card

IABG believes insurance companies should be required to accept alternative payment options in order to ensure that thousands of our residents are not denied health insurance as the ACA is implemented in Illinois. However, we also believe that we need to go further.

One in four Illinois households are either unbanked (with no checking or savings account) or underbanked (they may have a bank account, but still use alternative financial services like check cashers and payday loans). With individuals signing up for health insurance in communities across the state, this is a great opportunity to connect them with programs and services that help families become financially secure. These include community Volunteer Income Tax Assistance (VITA) programs, Bank On initiatives, and financial counseling services.

While existing programs are helping a percentage of households that need their services, with support from government leaders, they can leverage the implementation of the ACA to help even more residents safely connect to the financial mainstream.

IABG is working with other advocacy leaders engaged with CFED's Assets & Opportunity Network to develop recommendations on how the Department of Health & Human Services and other state and federal agencies can insure that a pathway to safe banking opportunities is a part of ACA implementation.

In part 2 of this blog series, we will share these recommendations and ask for your support in moving them forward. If you have feedback please contact Lucy Mullany.

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