DC Social Media Summit Redux
By Sean Luechtefeld on 06/21/2012 @ 05:00 PM
At the end of last month (how is it June already?), I presented as part of a session on blogging at the DC Social Media Summit, an event hosted by the Center for Nonprofit Success designed to help nonprofit leaders expand their communications reach and make sure their voices are heard. [For those of you who read my posts regularly and are wondering why they asked me of all people to present, keep your comments at bay.] Also presenting on this session were Julia Rocchi of the National Trust for Historic Preservation, Brad Weikel of EarthRights International and Mickey Panayiotakis of Infamia. I wanted to share my reactions to the session.
First and foremost, I had a blast.
I recognize that makes me sound like a nerd, but allow me to explain. First of all, the other presenters were great. Julia, for example, blogs exclusively about old stuff, and yet, by the end of her presentation, I wanted to visit her blog immediately. Mickey, on the other hand, gave a presentation about Search Engine Optimization. Did you know that when figuring out which part of a webpage gets the most attention from a user, they actually conduct retinal scans to see where your eyes focus the most? Retinal scans. My mind: officially blown.
Second, and more importantly, I guarantee I learned more from other participants in the session (presenters and attendees) than any of them learned from me. My top takeaways? Thanks for asking:
1. Good visuals are as important as good writing. This is something that people say a lot, but the extent to which people consume images is increasing way faster than the rate that people consume copy, and more and more web users receive the majority of their content visually. Need proof? Visit www.pinterest.com.
2. Partnerships are to content development as farmers are to vegetables. You can’t have quality content without having quality partnerships. Even if you don’t have formal content-sharing agreements, partners can provide information, expand your audience and provide guidance on how to frame key issues that might fall slightly out of your wheelhouse.
3. Not all audiences are conditioned to read your content. In other words, what you understand with ease as an assets practitioner may not be easily understood by a transportation specialist. But, there’s not a landing page for your blog that says “transportation specialists keep out,” so make sure your writing is inclusive of their level understanding. (Sidebar: One of Brad’s recommendations is to run your content through a readability meter before posting. My last post, for example, is written at the level of a first-year graduate student, which I consider a success, since I’ve been in graduate school for just shy of an eternity.)
Above all, I enjoyed this session because I think communicating the message – no matter what it is – is something we could all do better, and sharing insights with one another is one of many steps to achieving that higher level of impact.
3 Costly Mistakes Families Typically Make When Saving For College
By Stephanie Halligan on 06/18/2012 @ 04:00 PM
EDITOR'S NOTE: This piece originally appeared on The Empowered Dollar blog on June 14, 2012 and can be read here.
I’m still paying for the worst mistake my family made when it comes to saving for college. I totally regret it, and I didn’t even realize it was happening until it was too late.
But I’ll get to that later…
There are three financially huge and shockingly common mistakes that families make when they put aside money for their kid’s education. Certainly most of you weren’t even thinking about doing any of these in the first place… right?
The problem is that some of these mistakes seem benign, which is why I think so many families make them. Avoiding these three costly mistakes could save your retirement, thousands of dollars in financial aid, and your kid’s life after college.
Mistake #1 Your retirement account is part of your college savings plan.
Believe it or not, a large percentage of parents think their 401(k) accounts as part of their plan for paying for college. According to our How America Saves for College survey, 1 in 4 parents that are saving for college dip into their retirement accounts to help pay for school. Some parents will take disbursements or loans from their retirement plan to avoid taking out student loans.
Your retirement account may be the biggest financial asset you have, so it only seems natural to tap into those funds to cover a big expense like your child’s education. But it’s a terrible idea for a couple of reasons:
1. Money that you cash out of your retirement plan is considered income and it will count against you when you apply for financial aid the following year. Talk about backfiring.
2. Most parents with college-bound students are somewhere between age 40 and 60. That means if you’re 55 and sending your kid off to school, you don’t have much time before retirement to make up those withdrawn funds. Borrowing from your retirement plan could save you from taking out student loans, but it could also postpone your retirement.
3. It’s easy to get a loan to pay for college. It is not easy to get a loan to pay for retirement (I don’t know many retirement loan plans out on the market…). So while there are plenty of options to finance your child’s education, like grants, federal loans and institutional financial aid, there are not many options for you if you want to retire and you don’t have enough stocked away to pay for it.
Mistake #2 You’re saving under your child’s name.
It’s an easy step, and it’s one of the most important. If you want to maximize your family’s financial aid, make sure any accounts earmarked for college are under your name, not your child’s. Assets in accounts owned by a student, like a regular savings account or even Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts are taxed at a much higher rate when calculating financial aid than accounts under a parent’s name (20% vs. 5.64%). That means if your kid has $1,000 in his account, he’s expected to use $200 for college. But if that $1,000 was in your name, you’d only be expected to contribute $56 of that money toward school.
Also, investing your college savings in an account under your child’s name means you have limited control you have over that money. When your kid reaches the age of 18 or 21, depending on the state you live in, savings in a custodial account will transfer over to your child.
I’d bet that you have responsible and honest children. But do you really want to bet thousands of dollars of your savings on your kid doing the right thing and using all of that money for college?
I didn’t think so.
If I were a 21-year-old in school and $10,000 was suddenly transferred over to my name, you can bet I wouldn’t use all of that money for tuition… there are just too many expensive, “educational experiences” to be had in college.
Mistake #3 You stop saving once college starts.
Guess what happens after your kid graduates from college? Real life and student loans. Both of which cost a lot of money.
Whether you’re giving your kid a stipend, or he’s earning his own cash through a part-time job, keep encouraging your kid to save while he’s in school. If I could go back in time and give myself one piece of financial advice in college, it would be this: save up a few thousand dollars to use for post-grad life. When I graduated from school, I barely had enough money to put a security deposit on an apartment. My lack of cash meant my options were limited, and like many college grads in a bad economy, I had to take whatever job I could get so I could just pay the bills.
If you’re a generous parent who wants to help your kid get on her own two feet after college, consider setting some money aside as a “getting through the real world” fund to give you kid as a graduation gift. If you expect your grad to make it on her own, be sure she knows how much life after college costs and push her to save some of her disposable income.
Oh, and the worst mistake my family made saving for college?
Not saving anything at all.
It’s part of the reason I’m thousands of dollars in debt. Whatever you do, start saving for college early. Don’t worry about maximizing your tax claims or signing up for the right account – you can figure it out as you go. The most important thing is to just get started.
Register Today for More Than Just a Wish: Planning for Your AFI Project
Posted on 06/15/2012 @ 02:30 PM
Wednesday, June 27, 12:30-1:30 p.m. PST / 3:30-4:30 p.m. EST
An Upcoming Webinar from the Assets for Independence (AFI) Resource Center
French author Antoine de Saint-Exupéry said, “A goal without a plan is just a wish.” Do you have a clearly defined plan for your AFI project – or are you just wishing for success? Do you know if you’re on track to meet your AFI goals over the “life cycle” of your five-year grant? Have you identified key milestones along the way that will help you keep track of your progress?
If the answer to any of these questions is “no,” please join us for an hour-long webinar that will focus on suggested planning activities in the design, implementation and close-out phases of your AFI grant. The webinar will offer ideas and strategies for setting ambitious but attainable goals for each year of your grant; measuring your progress along the way; and what to do if your program slips off track. These planning suggestions can be applied to any project design, whether you administer one AFI grant or several, and regardless of where you are in the five-year grant period.
- Denise DeVaan, AFI Resource Center
- Leigh Tivol, CFED (moderator)
Click here to register now!
The webinar is free to all interested participants. In advance of the webinar, please send any questions you would like our panelists to address during the session to Jimmy Crowell at firstname.lastname@example.org, or call 202-207-0147.
Setting a ‘Recognition Budget’
Posted on 06/14/2012 @ 03:30 PM
Media reports often make entrepreneurship seem like a glamorous endeavor.
The truth is, though, that many of those who pursue self-employment identify with Rodney Dangerfield’s famous quote: “I don’t get no respect.” That’s because entrepreneurship is a solitary pursuit that often involves chasing ungrateful clients and struggling to define – let alone achieve – business success.
Even accomplished entrepreneurs can feel as though they toil in obscurity
Consider the public relations professional who helps others gain fame and fortune but who remains relatively unknown. The success he’s earned brings him a surfeit of work and money, but he’ll likely resent the prominence his clients have earned. With no stake in their companies, he stands to gain only from the reflected glory that comes with having worked for them. He’ll soon find that time and distance weaken such glory to almost nothing.
So what should he do?
He should give some serious thought to what needs to happen in order for him to feel appreciated.
Perhaps this means getting mentioned in news articles, delivering a seminar on public relations to a group of leaders in the industry he serves, writing a bestselling book, or achieving external validation in some other way.
Once he’s given this issue some thought, he should write a list of goals (each with deadlines) for gaining acclaim in his field. I call this list a “recognition budget.”
Let’s pause for a moment to note that the idea of seeking out praise and recognition makes some people leery.
Many people will claim they don’t care about acclaim; they say they are in the business to please customers and build a strong organization. That all sounds nice on the surface, but it falls apart upon some deeper digging.
Think about it this way: many people also say they don’t care about money. What they really mean is that they want to avoid becoming ruthless private equity barons who slash jobs in favor of short-term profits. They are really saying they are unwilling to compromise their values in the interest of enriching themselves. Fair enough, but they still need money to live.
Recognition works the same way. We mock reality TV stars who devote their lives to grabbing attention, but we, too, require some degree of recognition to stay motivated and regard ourselves as successful. (But if your goal is to have a reality TV show, sit tight. Recent trends suggest everyone in New Jersey will eventually get one.)
You already (I hope) make a budget for your business each year and project the amount of customers you intend to serve. Your next step should be making a list of ways in which you would like to be recognized.
Consider options that allow you to share your expertise with a mass audience or a few influential people. Speak at conferences, write opinion editorials, start a blog, write a book. Do something.
After all, making yourself known is your best chance to get the respect you so richly deserve.
Alternative Financial Services Aren’t Just for Low-income People
By Sean Luechtefeld on 06/12/2012 @ 02:30 PM
As the Bank On Site Administrator, one of my jobs is to keep up with news about Bank On and other financial access initiatives. Like everything else in my life, I do this with Google. Among my Alerts for ‘Bank On’ are notifications that “the bank on 14th Street was robbed” and “you can bank on the Celtics winning the Eastern Conference Finals.”
Imagine my surprise, then, when one Alert was about financial access but didn’t have to do with Bank On. In an article published on May 23, Spectrem’s Millionaire Corner highlights findings from a report that concludes that middle-income Millennials – and not just low-income individuals – rely on alternative financial services. For example, the rate of prepaid debit card use is as high for those making between $50,000 - 75,000 per year as it is for those making under $25,000 annually.
What struck me about this article – aside from the obvious omission of Bank On initiatives despite the article being titled “Millennials Bank on Alternative Financial Services” – was that no mention of alternatives to these “alternatives” was made. In other words, the Think Finance report and Millionaire Corner’s accompanying recap simply state that use of pawn shops, payday lenders and the like is ubiquitous among a wide swath of the population, but no discussion of how we might approach this problem exists. In fact, the data aren’t even presented as a problem at all.
But, a problem it is. That a sizeable barrier exists not only for low-income people but also for somewhere around half the population would seem like impetus enough to do something. Yet, inaction has been the path for policymakers who see the issue simply as a challenge among many rather than as one of the largest factors preventing people from building assets.
Luckily, there is good news: an alternative to predatory lending practices and products that keep people from accumulating wealth exists in the form of the Bank On USA initiative. The 70 or so state and local Bank On initiatives have proven immensely important, and their value should be expanded at a national level so financial access can be a reality for everyone in the United States, not just the people lucky enough to live in the select locales where enough support for the initiative exists.
Of course, as I see it, there’s another takeaway from the Millionaire Corner article: if you’re going to talk about financial access and put “bank on” in the headline, at least reference Bank On so I don’t get overly excited when sifting through my daily Google Alerts.
Asset-Building and the Racial/Gender Wealth Gap
By Inemesit Imoh on 06/08/2012 @ 02:30 PM
Perspectives from the National Council of Negro Women’s National Convention
On Thursday, May 24, I participated in a workshop at the National Council of Negro Women (NCNW) 55th National Convention. The workshop panel entitled Exploring Public Policy Solutions to Narrowing the Race/Gendered Wealth Gap also featured NCNW Executive Director Avis Jones-DeWeever and James Carr, Chief Business Officer of the National Community Reinvestment Coalition.
Each of our presentations highlighted aspects of the growing racial and gender wealth gaps--the differences between the median net worth of individuals of different racial and ethnic groups, and between men and women. Ms. Jones-DeWeever framed the conversation by explaining the history of the racial and gender wealth gaps and how both grown substantially as a result of the recession. Mr. Carr explained the origins of the foreclosure crisis and how deeply it impacted communities of color. Finally, I spoke on the various other dimensions of the wealth gap, particularly around the inability of people with disabilities and young adults to invest in themselves.
Attendees brought up several issues that impact their communities:
- The lack of sustainable employment and income in communities of color makes it extremely difficult for households to consider saving and/or investing in themselves.
- The foreclosure crisis has devastated minority households’ primary source of wealth, homeownership, and has greatly set back the decades of progress minorities had made to improve their economic mobility.
- Young people of color with low-income and low-wealth families face difficult decisions for their college education—high levels of debt or no college at all.
The discussion among presenters and attendees revealed that the racial wealth gap is a significant problem that impacts people of color on a daily basis and also limits opportunities for long-term wealth building. Throughout the conversation, attendees emphasized their interest in identifying public policies that can help narrow the wealth gap. Some of those include:
Employment and Wages
When high quality jobs are not available within a community, many people turn to self-employment and entrepreneurship. These small businesses are often supplementary sources of income for workers whose traditional jobs aren’t sufficient to make ends meet. There is a successful national network of service providers who help these business owners maximize their income, grow their businesses, and achieve their entrepreneurship goals. The federal government and many states provide some support for this field, but could do more. In particular, research demonstrates that providing technical assistance to businesses that are not finance-ready is a particularly important intervention, but also difficult to support through private donations and fee-based service delivery. Governments should therefore provide more for technical assistance and training targeted at new entrepreneurs.
Owning your own home has long been considered the hallmark of the American Dream. Families must have access to services that help them make this dream a reality. Families with limited means could qualify for an individual development account program in their area, which are matched savings programs designed for low-income households to save and purchase an asset, including a first home. Research has found that IDA programs can improve homeownership outcomes for low-income households.
A college education is a proven tool in improving someone’s economic security and mobility. Research shows that savings is a powerful strategy for increasing the likelihood that students will attend and complete college. One way to make college more affordable for low-income students is to create incentives for them to save in tax-free 529 college savings accounts. Several states have already taken steps to encourage college savings for young residents within their state. In addition, when paired with a savings account, financial education gives children and young adults a stronger and more tangible chance to test financial decisions. CFED has examined how states use their public education systems to improve personal financial literacy and lists financial education policies and standards by state.
EITC Gains and Losses: 2012 Legislative Update
By Elvis Guzman on 06/07/2012 @ 12:15 PM
The Earned Income Tax Credit (EITC) is one of the strongest public benefit programs that help to reduce poverty and is mainly intended to increase the incomes of low-wage families with children. Over 27 million families claimed the federal EITC in 2009. The amount of the credit depends on the recipient’s income, marital status, and number of dependent children. In 2010, the federal EITC lifted 6.6 million people (including 3.3 million children) out of poverty. Twenty-five states, plus the District of Columbia, supplement the federal credit with their own state-level versions of the EITC. States typically calculate the credit as a percentage of the federal EITC and most programs are refundable.
For years this program has been praised by both major political parties; in fact, the federal EITC was first proposed by the Nixon administration and was later expanded by administrations from both parties. State EITCs, however, continue to face political challenges. Following is a brief overview of changes or proposals to state-level EITC programs in the past year.
In the wake of the recent economic recession, state EITCs have been part of several public programs targeted for possible austerity. Recent fiercely contested battles in Kansas and Oklahoma demonstrate the strong opinions surrounding the credit. Kansas Governor Brownback proposed to eliminate the EITC and Child and Dependent Care Tax Credit (CDCTC), along with the state’s income tax. Ultimately, legislative negotiations resulted in a “compromise” where the EITC was left intact, while the CDCTC and other provisions were eliminated. Similarly, Oklahoma Governor Fallin proposed to eliminate the state’s EITC, CDCTC and Child Tax Credit (CTC), to help fund the elimination of the state’s income tax. After similar bills passed the House and Senate, groups advocated critically against these cuts. Ultimately, both chambers could not come to an agreement and no tax reform was passed in the recent legislative session.
EITC programs in other states faced similar legislative challenges. In 2011, Michigan legislators voted to decrease the state’s EITC rate from 20 to 6 percent of the federal credit. Earlier this year, House Bill 5407 was introduced to amend these changes but has made little progress. North Carolina’s EITC is set to expire at the end of this year. After the legislature proposed eliminating the credit in 2011, this year a bill was introduced and is under consideration in the House and Senate to extend the EITC, CTC and CDCTC. In Iowa, the Senate passed Senate File 2161 to increase the EITC from the current 7 percent to 20 percent of the federal credit by 2014. Governor Branstad, gave his support for an increase in the EITC if commercial and industrial property taxes were cut in a reform package. The state legislature ended its session in May with no agreement on a bill.
Wins and Opportunities
While the economic recession has posed threats to existing state-level EITC programs, some states have proposed or enacted legislation to improve this credit. After a long push by local advocates dating to 2003, in late 2011 Illinois passed a bill that doubled its credit to 10 percent of the federal EITC over the next three years. The measure also increased the personal exemption and indexed it to inflation. In New Jersey, Governor Christie pledge to slowly increase the state’s EITC back to 25 percent, after he reduced the rate to 20 percent in 2010.
Legislatures in Maryland and Utah proposed measures to improve or create EITC programs, however both sessions ended with unsuccessful results. The Maryland state Senate proposed to increase the state EITC to 30 percent of the federal credit, along with an increase in the income tax, however the house failed to pass this package. The Utah state Senate passed a bill to create a state EITC at 5 percent of the federal credit, but the session ended with no resolution. While these pushes were not successful, they demonstrate that there is clear support for state EITCs and have opened the window for local advocacy groups and policymakers to take future action.
There are a few upcoming political battles that may affect the federal EITC during the lame-duck session, including the extension of the Bush tax-cuts, the cuts in the Budget Control Act and the looming debate over raising the federal debt ceiling. Advocates are closely watching these highly-contested issues since they may result in cuts to the federal credit.
Benefits of the EITC
States often see cutting tax credits for low- and moderate- income families as an easy way to reduce spending. However, legislators frequently fail to see the benefits tax credits provide to working parents and their children. Enacting state-level EITCs is linked to better health related outcomes for children, including higher rates of private insurance and less reliance on public health programs, such as Medicaid and the Children’s Health Insurance Program (CHIP), (Baughman, 2012). This research also indicates that parents receiving the EITC are more likely to move into better paying jobs with more benefits, particularly health care. Other studies indicate the EITC increases employment, shifting dependence away from cash and food assistance programs; between 1993 to1996, economists estimate over a half million families moved from AFDC and the food stamps program to employment (Greenstein, 2005). Millions of hard-working families and children thrive with EITC assistance and it’s counterintuitive to cut these essential programs.
To help protect the federal and state EITCs, keep yourself updated on legislative changes. Lend your voice to local advocacy groups and contact your state’s elected officials. We must continue to act in unison to ensure low- and moderate-income families are not left behind.
ALC Alert: Program in Development Now Available
By Veronica Weis on 06/06/2012 @ 02:00 PM
We're excited to announce our Program in Development for the 2012 ALC. Stay tuned as we revise and add more! Below is the list:
Wednesday, September 19
9:00 am - 5:00pm
- AFI Grantee Institute
- Assets & Opportunity Advocates College
- Children's Savings Institute
- Savings and Entrepreneurship Institute
- CFSI Bidders Conference
- Native CDFI Network Meeting
- First Nations Oweesta Corporation Building Native Assets Training
Thursday, September 20
8:15 am - 9:30 am - Plenary I: State of the Field
9:30 am - 10:45am - Concurrent Sessions I
- Entrepreneurship Development Systems: Creating Strong Native Communities
- Philanthropy, Social Enterprise and Impact Investment
- Prize-Linked Savings in Asset-Building Programs
- Behavioral Economics
- Success Measures Financial Capability Tools
- Asset-Building for Children: The Role of the Public Sector
11:00 am - 12:15 pm - Concurrent Sessions II
- Success Measures Financial Capability Tools
- Self-Employment Tax Preparation and Business Development
- Social Enterprise Innovations
- Financial Education for Youth
- Asset-Building for Children: The Role of the Public Sector
- CFSI Financial Inclusion Innovation Fund
12:30 pm - 2:00 pm - Plenary II: Assets & Opportunity Award
2:00 pm - 3:15 pm - Concurrent Sessions III
- How to Talk About Assets: What Works with Policymakers, Allies and the Media
- Credit Builders Alliance Score to Win Initiative
- Entrepreneurship as a Community Building Strategy
- Asset Building for Low-Income Fathers
- The Future of Financial Education
- Capitol Hill Visit Training
3:30 pm - 4:45 pm - Concurrent Sessions IV
- Integrated Service Delivery
- Setting the Stage: Building the Advocacy Network
- Avoided Costs and Asset Building
- Kids, Assets and Opportunity: Recent Research Advances
- Winning Strategies for State Asset Policy Change in a Time of Budget Shortfalls
- Immigrants and Financial Access
5:00 - 8:00 pm - Networking Reception
Friday, September 21
8:15 am - 9:30 am - Plenary III: Conversation with Savers
9:30 am - 10:45 am - Concurrent Sessions V
- Asset Building and Disability Partnerships
- Youth Savings Banks
- AFI Program Basics
- Credit Building is Asset Building
- Foreclosure Mitigation and Prevention
- Cooperatives and Their Role in Asset Building
11:00 am - 12:15 pm - Concurrent Sessions VI
- Housing as an Asset Building Platform
- Eliminating Assets Tests
- Helping Domestic Violence Survivors Build Assets
- Applying Behavioral Strategies to Improve Asset-Building Outcomes
- State and Local Strategies to Curb Predatory Small Dollar Lending
- Asset Building in Communities of Color
12:30 pm - 2:00 pm - Plenary IV: Call to Action
2:00 pm - 5:00 pm - Capitol Hill Visits
For more information about the 2012 ALC, please visit the conference site.
CFEDers Spend Too Much Time Thinking About Savings
By Sean Luechtefeld on 06/04/2012 @ 04:00 PM
You might think that when they leave the office each day, CFEDers’ attention turns away from asset building and toward simpler things like walking the dog or vacuuming the house. You might also think that at the end of the day, the last thing we want to think about is finances, since that’s how we spend 8 or more hours a day.
If these are things you think, consider yourself mistaken.
Take Inclusive Economy contributor and Savings & Financial Security Program Manager Stephanie Halligan, for example. Last week, Stephanie launched her own personal finance blog, aptly titled The Empowered Dollar.
The new site is premised on the idea that by empowering people to take control of their finances at a young age, they can avoid financial disaster and grow into successful and wealthy adults. Stephanie’s personal story – and the motivation for The Empowered Dollar – hits too close to home for too many of us. Plagued by student loan debt and making a mere $12,000 per year despite her college degree, Stephanie made money management and fiscal responsibility somewhat of a hobby. Now, just a few years later, she’s offering her insights to the public in an attractive and easy-to-navigate website.
The content of the site is organized into simple principles like “invest early,” “save often” and “stay out of debt.” The tools, tips and tricks offered are geared toward kids, teenagers and college students and their parents, but the lessons gleaned are almost universal. In a recent post on allowances, for example, Stephanie discusses the Entitlement Effect, which suggests that when paid for nothing, people will be disinterested in getting paid to do “crappy work.” This doesn’t just apply to kids’ allowances and the need to attach allowances to opportunities for money management; it also explains the common misconception that people on unemployment have no incentive to work. In actuality, they have incentive to work; they don’t, however, have incentive to do something that most people are unwilling to do for less money than it takes to pay rent, much less a mortgage payment or a tuition bill or anything else.
The site is still new, so I’ll be looking forward to what else The Empowered Dollar has to offer. In the meantime, I encourage you to check out the site and let Stephanie know what you think.
Department of Education Announces Plans for Children's Savings Accounts Through GEAR UP
By Leigh Tivol on 06/01/2012 @ 04:30 PM
CFED is delighted to share an exciting new announcement from our friends and colleagues at the U.S. Department of Education. For the past several years, CFED and others have been working closely with the Department to explore the potential of linking children’s savings and financial education with efforts to help more students get to and through college. One particular effort the Department supports is the GEAR UP program, a federal initiative that helps low-income middle- and high-school students prepare for college.
Yesterday, at an event hosted by the New America Foundation, the Department of Education took the idea to a thrilling new level with the announcement of a College Savings Account Research Demonstration (click here for a summary), which will offer savings accounts and financial education to 10,000 students in GEAR UP programs across the country. The project will include a robust research component that will compare educational outcomes for these students with similar students who do not receive accounts. Not only will this project offer the opportunity for matched savings to thousands of low-income students – it also represents the largest research effort to date on children’s savings accounts in the U.S., and will provide important new insights into the power and impact of college savings.
The demonstration will leverage the extensive network of GEAR UP grantees across the country, which are already providing high-quality, comprehensive support, information and encouragement to low-income children and families to prepare them for college. GEAR UP is an ideal delivery system for children’s savings; by linking the two, the Department of Education has created a perfect marriage of college readiness and asset building.
The Department of Education has asked for public comment on the proposed demonstration. CFED will offer comments through this process, and we welcome your input; please share your thoughts and ideas with us at email@example.com. Of course, we also encourage interested stakeholders to submit comments on your own. Please note that the comment period closes on July 2, 2012.
Policymakers Can Help Low-Income Families and Score Political Points
By Andrea Levere on 06/01/2012 @ 10:30 AM
EDITOR'S NOTE: Andrea's post below originally appeared on the Huffington Post on Wednesday.
In the current polarized political environment, many people assume that more government intervention equals more spending which in turn leads to an ever-expanding federal deficit. This assumption has infiltrated debates over the federal budget and contributed to legislative gridlock.
But let us imagine an alternative scenario where members of Congress could improve government programs that grow our economy and support struggling families without adding to the federal deficit or jeopardizing their political standing. Wouldn't they all be lining up to cast their "yea" votes?
My organization, the Corporation for Enterprise Development (CFED), has identified 20 inexpensive policies that would allow our representatives in Washington to pull off this seemingly impossible feat. We call them "stroke of the pen" policies because they are easy to implement and cost little or nothing. Each policy is a political winner, offering a concrete and positive step forward in a nation hungry for good news about what government leaders are doing to improve the lives of ordinary Americans.
We identified these policies according to how meaningful they are to vulnerable families; how moveable they are in the current climate considering factors such as cost and political will; and whether they seem manageable when it comes to actual implementation. Each supports families by giving them the tools they need to build a financial cushion and create long-term economic opportunity. Here are a few examples:
- Enact no-cost legislation to curb foreclosures through mandatory mediation. Congress should enact legislation requiring in-person mediation between lenders and homeowners prior to eviction and sale of a home in foreclosure. Mediation programs are inexpensive because they rely on existing systems, such as local courts. They require officials to simply add a step to their management of the foreclosure process rather than costly additional interventions.
- Build credit through your phone bill. As many as 70 million Americans face the risk of not being able to find a place to live or work simply because they lack credit scores. Including telecommunications payment history in credit files is a straightforward solution that would enhance credit access for millions of households. Congress should pass legislation that allows telecommunications companies to report all payment history to the "big three" consumer credit bureaus. Such legislation would provide a no-cost solution to a problem that currently limits financial options for millions of families.
- Integrate saving and asset-building initiatives into programs aimed at low-income families. Adding initiatives such as financial education, access to mainstream banking products and services, and credit and debt management into existing public social service programs will help more families move out of poverty. For example, strategies could be put in place to improve the financial literacy of Head Start parents and teachers, with a focus on saving for their children's education. These actions do not require new legislation and can be implemented directly by the responsible agency.
- Eliminate or reform public benefits programs that place a limit on family assets. Asset limits are a relic of entitlement policies, many of which no longer exist. Personal savings and assets are precisely the kind of resources that allow families to move off public benefit programs and should be embraced. For little or no cost, Congress can eliminate asset limits or significantly raise the savings threshold in the Temporary Assistance for Needy Families and Supplemental Social Security Insurance programs, no longer penalizing families who save to buy a home, invest in a child's education or start a business.
These policy changes alone will never substitute for greater investment in programs that address systemic income and wealth inequality in our nation. But they are a practical step forward with the potential to help millions of vulnerable families achieve economic stability - while allowing policymakers to score political points.
CFED Launches Child Savings Accounts Program in Michigan
By Stephanie Halligan on 05/31/2012 @ 10:00 AM
CFED is pleased to announce the launch of the LINC Future Fund: Scholarship and Accounts Program in Grand Rapids, MI, on May 31, 2012 at four elementary schools in the Grand Rapids Public School District. LINC Community Revitalization Inc. is joining CFED and Huntington Bank to bring scholarships and college savings accounts to kindergarteners enrolled at Campus, Campau, Martin Luther King, Jr. and Caesar Chavez elementary schools in Grand Rapids.
The program will launch with a press conference Thursday, May 31 at 10:30am at Campus Elementary. Grand Rapids Mayor George Heartwell, Interim-Superintendent Teresa Weatherall Neal, Renee Williams of Huntington Bank, and LINC’s Co-Executive Directors Jeremy DeRoo and Darel Ross will share remarks. Three-hundred LINC Future Fund Scholarships & Accounts will be made available to current GRPS kindergartners at Martin Luther King Leadership Academy, Campus, Campau and César E. Chávez Elementary schools. Next year’s enrolling kindergartners at these schools will also receive a scholarship.
Developed in partnership with CFED and with support from the W.K. Kellogg Foundation, the Future Fund will the program will establish a scholarship fund linked to a college-savings account at Huntington Bank for each participating child. LINC will offer financial coaching and support to families through their Opportunity Center and Huntington will be providing in class educational supports, teaching children the importance of saving and offering tools to use in saving money.
“We have a model with a place to start and hope that this is just the beginning for future collaboration around our children’s education,” says Jeremy DeRoo, LINC’s Co-Director. Research shows that children with savings accounts in their own name are six times more likely to attend college than their peers. Through this pilot program, the partnership seeks to expand opportunities for low-income children and families to accumulate assets and increase children’s college-going aspirations.
Each school will host a Scholarship Party to celebrate with kindergartners and their families, the first will be held at Campus Elementary following the press conference on May 31.
The Future Fund seeks to address the gap in higher educational attainment affecting low income students in Michigan, and to incentivize the recruitment and retention of children in the Grand Rapids Public School system. The program will help children create a financial nest egg, increase economic opportunity, and transform their aspirations for their own futures, including plans for college.
CFED Announces 2012 Assets Learning Conference Sponsors
By Sean Luechtefeld on 05/30/2012 @ 03:00 PM
CFED wishes to extend deep gratitude to the Sponsors of the 2012 Assets Learning Conference. Their generosity makes it possible for us to convene the largest group of assets advocates to identify clear ways of translating ideas into action.
New Resource: FDIC Model Safe Accounts Pilot Final Report
By Sean Luechtefeld on 05/30/2012 @ 11:30 AM
Last month, FDIC released the final report from its Model Safe Accounts Pilot, a one-year exploration into the costs and sustainability of lower-cost, electronic transaction and savings accounts. The final report is now available online and it’s an excellent read for anyone interested in financial access.
“Safe Accounts,” according to the report, have limited maintenance costs because they focus on electronic payments and do not come with paper checks. This isn’t only a win for the financial institutions offering the accounts, though; they prevent overdraft or nonsufficient funds fees, meaning that accountholders can save a great deal of money while still having easy access to their money. During the yearlong pilot, 662 transaction accounts and 2,883 savings accounts were opened.
The findings of the pilot suggest that among the over 3,500 Safe Accounts opened, retention rates were particularly high, especially when compared with other financial products. Further, individuals with transaction accounts maintained an average balance of $243, while average monthly balances for savings accounts varied according to account design. These findings and others lead FDIC to the conclusion that “opportunities exist for financial institutions to offer save, low-cost transaction and savings accounts to underserved and LMI consumers.”
Full data on participating institutions and account structure, along with more detailed findings, are available in the report, which is available for download here.
Can Crowdfunding Accelerate Economic Development?
By Jimmy Crowell on 05/25/2012 @ 03:00 PM
EDITOR'S NOTE: This is the third and final installment in our self-employment blog series celebrating National Small Business Week 2012. Click the links at the bottom of this page to check out the first two blog posts and use the comments to let us know what you think about the potential of crowdfunding. CFED gratefully acknowledges the support of Sam's Club for their support of small business owners and of National Small Business Week.
With Obama’s recent signature on the Jumpstart Our Business Startups (JOBS) Act, crowdfunding has been receiving a lot of buzz lately. But, can crowdfunding really accelerate the growth of entrepreneurship and economic development?
Prior to the JOBS Act, businesses couldn’t rely on crowdfunding for capital because of government restrictions and red tape. Often times, small business owners had to finance their enterprises through loans, sometimes backed by the value of their homes. This is a dangerous game, especially for low income entrepreneurs who have trouble accessing fair and secure lines of credit. Other options for obtaining capital, such as from venture capitalists, are few and far between and not a possibility for microbusinesses operated by low to moderate income entrepreneurs. Although 65% of all jobs are created by small businesses, only 17% receive business financing from venture capitalists, angel investors or bank loans.
Existing laws and regulations put in place by the Securities and Exchange Commission (SEC) prohibited unaccredited investors looking to spend small amounts of money to capitalize small businesses. With the JOBS Act, Main Street will have access to capital from small time investors who could previously only invest in giant public companies on Wall Street. Small businesses can raise as much as $1 million a year without having to do a public offering, a process that can cost thousands of dollars.
But still, what type of an impact will crowdfunding have on microbusinesses operated by low income entrepreneurs? Microfinancing, or giving small loans to low-income entrepreneurs who have no access to credit, has helped many microbusinesses. Crowdfunding essentially does the same thing; it circumvents traditional funding mechanisms to open up capital to a larger market. With the internet and social networks as the main platform for crowdfunding, funding opportunities can reach many more people.
Donation-based crowdfunding, from websites like Kickstarter.com, may be the best option for low income entrepreneurs who may not make enough profit from initial investments to offer a return on loans made. However, there are other unique ways to incentivize loaning small amounts of money to microbusinesses. LuckyAnt.com reminds funders of the important service they are providing their communities but also allows businesses to offer coupons and special deals for small time funders.
Will crowdfunding have the same impact microfinancing has had on low income entrepreneurs? Only time will tell, but the potential of crowdfunding is definitely exciting.
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CFED Awarded $350,000 to Support Small Business Owners
By Jimmy Crowell on 05/25/2012 @ 10:00 AM
On May 23rd, Greg Cathey, Vice President and Regional General Manager of Sam’s Club in the Northeast, and Sam’s Club regional representative Bill Witt, visited the CFED national offices to present a grant award to support our small business development strategy, the Self-Employment Tax Initiative (SETI). The award, totaling $349,545, will enable CFED to continue advancing SETI, which takes advantage of the tax code to help low-income, self-employed individuals formalize and grow their businesses, create jobs and access tax-based asset-building opportunities.
Specifically, this grant will enable us to intervene during tax time and connect small business owners who are filing taxes with microenterprise organizations and other business development services. Throughout the 2012 and 2013 tax seasons, we will continue working with partners like Brooklyn Cooperative Federal Credit Union and Mission Economic Development Agency to provide support, catalogue best practices, share them with the field and catalyze improvements in small business tax service provision. We’ll also explore ways to leverage behavioral insights to improve practice techniques and tools at tax assistance programs and microenterprise development organizations. Finally, this grant will help CFED stage a media campaign that highlights the importance of entrepreneurship and microbusiness as engines of economic development and job creation.
Sam's Club has a strong history of charitable giving, with more than $101.3 million in cash and in-kind contributions made in 2011. The Sam’s Club Giving Program, which focuses on preventative health and wellness and small business support, pledged more than $2 million this year to help micro lenders and others to grow small businesses in the U.S.. As part of the program, leading nonprofits were awarded grants to continue their work. The organizations include ACCIÓN in the US, CFED, Count Me In For Women’s Economic Independence and the National Association for Latino Community Asset Builders.
Sam's Club President and CEO Rosalind Brewer reaffirmed the company's commitment to supporting American small business. At the Dream Big Small Business of the Year awards luncheon, part of the annual U.S. Chamber of Commerce Small Business Summit, Brewer spoke to over 800 small business owners in the country.
"At Sam's Club our small business owners are our partners, and we want to put our money where our mission is – which is to be agents for and support our members and the small business community," Brewer said. "I realize that I have an incredible opportunity to lead Sam's Club and to be an advocate for our small business owners in America. You are the heart and soul of our economy, and no one takes more risks and works harder every single day than those of you who are out there following your dreams and running your own businesses."
Cathey echoed Brewer’s words at the CFED offices and voiced his excitement for our partnership. He reminded us that Walmart founder Sam Walton created Sam’s Club to “be in business for small business” and to help small business get access to products and services at prices traditionally only available to big business.” Sam's Club has more than 600 clubs across the US and serves around 600,000 Business Members daily. In addition to stocking products for work or home, Sam's Club also offers Business Members access to microloans and health plans through third-party providers.
A Major Breakthrough Looms for Owners of Manufactured Homes
By Ignatius MacLellan, Guest Contributor on 05/24/2012 @ 11:00 AM
A two-year long effort is about to reach a climax in July, when the Uniform Law Commission (ULC) will consider passage of a Uniform Act on Manufactured Homes. The Uniform Act to be presented by the drafting committee to the full commission will improve the ability of most owners of manufactured homes to title their homes as real property – like site-built homes – and to access long-term, fixed rate residential mortgages – also like site-built homes.
Why is this a big deal? First of all, you need to appreciate that manufactured homes (MH) constitute the largest source of affordable housing in the United States. The median sale price for new MH in a recent year was one-fourth the price of a site-built, detached house. Modern MH is safe, factory-built to a national building code, and more energy-efficient than most homes and apartments.
Only my state of New Hampshire automatically gives MH owners the same legal rights as other homeowners, by titling MH as real property. Outside New Hampshire, most MH is titled as personal property – like an automobile – rather than as real property like a house. The ULC’s action in July will make a giant step forward by publishing a Uniform Act for states to adopt that will rectify this situation by allowing owners to choose to title their manufactured homes as real property in a simple and consistent manner.
From my vantage point, I can unequivocally state that improving the ability of manufactured homes to be titled as real estate will improve the access of homeowners to a greater range of affordable home finance options.
Real estate mortgages, including those purchased by both Fannie Mae and Freddie Mac, are already available to manufactured homes titled as real estate. While Fannie Mae and Freddie Mac are significant investors in home mortgages, they are not the only ones. They are joined by the Federal Housing Administration (FHA), State Housing Finance Agencies, USDA, Veterans Administration and many other capital sources and investors that support millions of dollars of real estate mortgage lending for manufactured homes.
The Uniform Act which will emerge from the Uniform Law Commission’s efforts has the potential to make it possible for more manufactured home owners to title their homes as real property. Real property titling can and should benefit homeowners who own the land beneath their home (fee simple) as well as those who lease the land in a community such as a resident-owned community (ROC) or other types of community. Real estate mortgages offer borrowers many advantages compared to chattel loans or personal property loans, including longer loan terms up to 30 years, the option of fixed or variable interest rates and typically lower interest rates compared to chattel/personal loans. The lower costs and lower monthly payments of real estate mortgages are especially important to low- and moderate-income households.
Titling manufactured housing as real estate is an essential step to ensure fair access to credit for low- to moderate-income people who happen to live in manufactured housing. While titling manufactured housing as real estate will not solve all of the issues related to manufactured housing finance, such a step will solve a major initial barrier. If MH is more generally titled as real estate, existing financial institutions such as Fannie Mae and Freddie Mac, mortgage lenders and housing finance agencies would collectively work to improve the manufactured housing finance system.
The ULC’s action in July will not be the end of the road. States will to adopt the Model Act in order to benefit their residents. But it will be a major milestone that will eventually improve access of millions of households to affordable, long-term financing.
Ignatius MacLellan is Managing Director of Homeownership for New Hampshire Housing Finance Authority, the state’s housing finance agency, which helps finance home loans including loans on manufactured homes. Previously, he was Director of Fannie Mae’s Northern New England Community Business Center where, as part of his mandate, he helped advance manufactured home finance and designed a program of real estate lending for manufactured homes on leased land in resident-owned communities in New Hampshire.
Entrepreneurship Opportunities for the Recent College Grad
By Jimmy Crowell on 05/23/2012 @ 01:00 PM
EDITOR’S NOTE: Jimmy’s blog post is the first of a three-part series focused on entrepreneurship in commemoration of National Small Business Week 2012. Check back tomorrow and Friday for the second and third installments in this series
As a wide-eyed 20-something American, I have watched my peers struggle to prove their worth, build their skillsets and find employment in today’s tight job market. I considered myself one of the lucky ones; I had the opportunity to leave my small town in Massachusetts, attend a large university and gain employment in Washington, DC. Now, when I look back at my town and my old high school classmates, most of them, including my peers that attended college, are struggling to start their careers. Today, half of college graduates under 25 are either jobless or underemployed and college debt and defaults are at their highest levels in history. Fortunately, another trend has developed that could be the solution to these epidemics: the growth of youth entrepreneurship.
The labor market is slowly recovering, but prospects for recent high school and college graduates will continue to remain grim for quite some time. With opportunities hard to come by, young adults need to create their own opportunities. Entrepreneurship is one way to do this. However, young adults with little collateral and fledgling credit scores have very restricted access to start-up capital. Not only do aspiring entrepreneurs face these obstacles when trying to obtain capital from traditional financial institutions, there are few alternatives. Microloan programs do not currently reach the vast amount of young Americans trying to develop their entrepreneurial skills. Help from family and friends, as my father relied on when he began his 40 year career as a self-employed commercial fisherman, is no longer a viable option for many young Americans. Family and friends struggling with their own financial problems are less likely to invest in young entrepreneurs. There needs to be a better support system for eager, unemployed Americans with innovative ideas.
One resource that young workers who are receiving unemployment insurance compensation need to know about is the Self-Employment Assistance (SEA) Program. SEA is an optional federal program that states can opt into; it has a more than 20-year history of connecting unemployed workers to entrepreneurship training and development services. Currently, seven states have active programs. In 2011, Senator Wyden’s (D-OR) START UP Act proposed an expansion of SEA so it would be easier for states to start their own programs. Most aspects of this bill were included in unemployment insurance reforms that became law in February 2012. The law allows states to offer SEA to unemployed workers who are receiving Emergency Unemployment Compensation (EUC), the extended benefits available to the long-term unemployed. Workers can participate for up to 26 weeks and can receive between $10,000 and $13,000 in benefits that can be used as start-up capital. Most simple service-based and technical ventures cost a few thousand dollars to get off the ground and to operate, so these funds could help aspiring entrepreneurs usher their ideas to fruition while supporting their basic living expenses. Unfortunately, SEA can’t reach many of the youngest unemployed Americans because they are not eligible for unemployment insurance unless they have been laid off from a job they previously worked at least half-time. We also need additional policies to reach the many high school and college graduates who enter the workforce and are unable to land that first job.
Another option for aspiring entrepreneurs to access capital would be to turn to the emerging field of microlending and microenterprise development. Very common abroad, the popularity of microlending has been growing in the U.S. in recent years. Organizations like ACCIÓN Texas , Grameen Bank, Community Reinvestment Fund and Self-Help offer loans from $1,000 to $50,000 along with other business development services. These organizations often look at the big picture and take into account passion and opportunity, not just credit scores and experience. Programs and organizations that support entrepreneurship, particularly youth entrepreneurship, need to be expanded and taken more seriously as a method for combatting unemployment. For example, the Small Business Administration could make more funding available for microlending via intermediary organizations and establish a funding priority for those who target training opportunities to youth entrepreneurs.
I know first-hand from watching my father that self-employment is a fulfilling career option. Young Americans with good work ethics and an entrepreneurial spirit should be afforded the opportunity to start their own businesses. This entrepreneurial spirit should be fostered from an early age in the U.S. education system with a stronger financial education curriculum. When given the tools and knowledge to succeed, young entrepreneurs can rebuild the American economy. Not only will youth entrepreneurship reduce joblessness among the under-25 age group, it will also help the American economy to recover and prosper.
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Upcoming Events @ CFED
By Sean Luechtefeld on 05/18/2012 @ 12:00 PM
We’ve got a couple events coming up in the next few weeks, and we wanted to make sure all of our readers were in-the-know. Note that the events below are online events. For these, advanced registration is free, but required. If you have questions, don’t hesitate to shoot us an email at firstname.lastname@example.org.
- Opening Doors to New Funding Streams
A free webinar co-presented with NeighborWorks America
This webinar will discuss how two housing organizations, CASA of Oregon and Beyond Housing, have cultivated new funding streams for programs to expand their work into other areas of asset building such as financial education and college savings. Register here.
- State & Local Frameworks for Federal Funding: Manufactured Housing in Consolidated Plans
This free webinar will explore how consolidated planning can serve as a powerful tool for leveraging federal resources for affordable manufactured housing preservation, replacement and development. Register here.
We hope that you’ll be able to join us for some or all of the events above!
Budget Cuts Threaten Critical Source of Data on U.S. Households Via the American Community Survey
Last week, the House of Representatives approved appropriations legislation that would eliminate the American Community Survey (ACS), a Census Bureau product that provides much of the best data on American families' income and finances, as well as demographic and socioeconomic characteristics. Losing this tool would significantly impede our ability to understand communities and states.
Without the ACS, federal agencies would not know how to distribute nearly a third of federal funding for low-income families and communities; block grant funds such as Medicaid, Temporary Aid to Needy Families (TANF) and Community Development Block Grants (CDBG) are allocated based on the needs of each state’s population. Researchers, such as the Urban Institute, would not be able to analyze the relationships between poverty and educational attainment, family structure, and race and ethnicity. Businesses that rely on ACS data to determine where to locate new stores or make major investments would be left “flying blind.”
If the ACS is eliminated, the asset-building field will also lose access to critical information about people’s savings and wealth. Examples include:
- The Assets & Opportunity Scorecard relies on ACS data to paint a picture of financial security at the state level, providing data like cost-burdened homeowners, high school attainment and asset poverty.
- The unbanked population data tool available at www.joinbankon.org was built using Census tract-level information from the ACS. It provides estimates of un- and underbanked households for every city and county in the nation.
- Our research team uses ACS data to understand aspects of wealth in the communities featured in Local Profiles.
- ACS data was also instrumental in developing Upside Down: The $400 Billion Federal Asset-Building Budget, CFED’s analysis of federal support of asset building.
Insights from these publications and resources inform our program offerings and policy advocacy efforts, and they help us identify specific needs and trends in the states and local areas we work in across the country. The American Community Survey is integrated into nearly every aspect of CFED’s work.
CFED has joined The Census Project and more than 450 organizations to urge the Senate to support the ACS when it debates and votes on its version of the House bill. We have also shared this information with our partners across the United States, in sectors ranging from manufactured housing, to financial access, to matched savings. The diversity of organizations and firms that have joined this effort demonstrates that federal funding for high-quality data that describes American households, communities and states is not a partisan issue. We hope that members of the Senate agree and prevent the elimination of the American Community Survey.
If you value the ACS, help protect it! Email your senators, or call their offices and speak with the Appropriations staff. As the Senate moves forward with its bill, we will keep you informed.
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