Recording from Net Impact Call
By Andrea Levere on 09/06/2011 @ 03:00 PM
Last month, I had the privilege of speaking on a Net Impact Call entitled “Closing the Wealth Gap.” The conversation was joined by about 35 highly engaged participants and I truly enjoyed the opportunity to interact with such an energized group.
I wanted to share the recording of the Net Impact Call on our blog and to thank Net Impact for providing the recording to our readers. To access the recording, click here. You’ll need a codec to view the file. To download the codec, click here.
I look forward to hearing your feedback on this lively discussion. To let us know what you think of “Closing the Wealth Gap,” use the comments feature below.
Forbes Interview with CFED Founder Bob Friedman
By Kristin Lawton on 09/06/2011 @ 09:28 AM
Forbes' Rahim Kanani recently interviewed CFED founder and general counsel Bob Friedman for his column that focuses on leadership in the social sector. The interview was published today and posted on the homepage of Forbes.com.
Below are excerpts from the interview. Please go to Forbes.com to read the full article.
Interview with Bob Friedman
By Rahim Kanani, September 6, 2011
Recently, I interviewed Robert Friedman, founder, general counsel and Chair of the Board of CFED—the Corporation for Enterprise Development—a national nonprofit based in Washington, DC dedicated to expanding economic opportunity for low-income families and communities. CFED uses a “think-do-invest” approach grounded in community practice, public policy and private markets.
Rahim Kanani: Describe a little bit about the founding and motivation behind The Corporation for Enterprise Development (CFED).
Robert Friedman: When I asked my mentor at the time what I should do, he suggested, “Hold out for a powerful job in the new Carter Administration or do what you want.” I was never offered a powerful job, so I did what I wanted: I started an institution devoted to finding new ways to create jobs and economic futures for low-income people with more capacity than opportunity. In 1978, at the suggestion of John Naisbitt, author of Megatrends, I organized a conference that unveiled innovative job creation efforts occurring at the community and global levels. On the strength of that conference, and the innovative power of common people, I founded CFED. John also counseled that, especially if the effort was fledgling, it was important to appear solid, and that a good logo was crucial; that logo, intended to show a third sector arising from the public and private and described as “copulating blue and green snakes” was later retired, but it did it’s job.
Rahim Kanani: Dig a little deeper into the current situation of low-income families and communities with respect to access to economic opportunity.
Robert Friedman: The twentieth century approach to reducing poverty, in the US and much of the developed world, focused on providing income supports (a safety net) and social services to needy people. It mitigated the pain and hunger of poverty, but often at the cost of undermining the self-esteem, aspirations and work of low-income people. The promise of the 21st Century is to build the ladder – to insure that every American (eventually, every citizen of the world) has a reasonable opportunity to go to college, start a business, buy and keep a home, and create a viable economic future for themselves and their families.
I believe that the vast majority of low-income and even very poor families have great strengths and productive capacity, and that the promise of America has always been that they would have a reasonable chance to earn their way in the world. We have proven over the past 30 years that having some savings provides “hope in concrete form,” and the confidence and wherewithal to move ahead. Most Americans, especially the poorer 60% of Americans lack the liquid savings to claim the future and move ahead.
Rahim Kanani: Looking ahead, paint a portrait of CFED’s activities and efforts 5 years from now.
Robert Friedman: I am generally optimistic, but I would probably have to admit that we will probably not have reached our goal of insuring that every American have a reasonable opportunity (and a few hundred or thousand dollars in savings) to unlock the American Dream of economic independence by then. I do hope, and think it is not unreasonable that as part of deficit reducing tax reform we will enact a refundable Saver’s Credit and savings platform which will provide a match to 50 million working families, a universal system of Child Savings Accounts, a reduction if not elimination of penalties in our income maintenance system for recipients who go to school, start businesses, save and work, and that we can increase recognition of the role of self-employed in entrepreneurship and job creation and ease their path forward.
But the work will have to go on to build the ladder. I expect we will have spawned several social enterprises by then – including but not limited to ROC USA which enables residents of mobile home parks to buy the land underneath them, and the 1:1 Fund that can match individual donors and low-income savers – which can yield revenues and impact simultaneously and enable us to fund and prove innovations before outside funders can see their merit. I hope that we will be able to speak to the common aspirations of this country, and show the potential of a savings-based investment in the genius of common Americans. I hope in my lifetime to see the America that Langston Hughes envisioned, “the America that never was yet still must be,” and the extension of real economic opportunity around the world.
Rahim Kanani is a writer, advocate, strategist and entrepreneur for global social change. His articles, opinions, and interviews with global leaders can be found at www.rahimkanani.com. Follow Rahim on Twitter @rahimkanani.
Hawaiian Comunity Assets Hosts Annual Housing Luncheon
By Kim Pate on 09/02/2011 @ 11:30 AM
EDITOR'S NOTE: This blog is a repost of a press release issued by the Council for Native Hawaiian Advancement during their 10th Annual Native Hawaiian Convention last week.
Honolulu, Hawaii – Department of Hawaiian Home Lands Director and Hawaiian Homes Commission Chairman, Alapaki Nahale-a, spoke to a crowd of over 550 at the Annual Housing Luncheon Tuesday, August 23, 2011 at the 10th Annual Native Hawaiian Convention. The luncheon, hosted by Hawaiian Community Assets (HCA), brought community stakeholders, government agencies, and HCA project participants together to highlight stories of families that have been touched by HCA financial literacy and asset building services. Chairman Nahale-a applauded HCA’s success and highlighted the Hawaiian Homes Commission’s focus on working with its beneficiaries.
HCA Executive Director, Jeff Gilbreath, emphasized the importance of financial literacy skills for the entire ohana, including the youth, in order to grow and sustain economic self-sufficiency. “We’re at a place where every family member is being asked to contribute to the well being of the ohana,” said Gilbreath, “HCA’s place is to provide the education and tools so our next generation and the entire family can learn together and build strong healthy communities.” Mr. Gilbreath also shared the organization’s plans for the next year. HCA, in partnership with the Sovereign Councils for Hawaiian Home Lands Assembly (SCHHA), plans on deepening their youth financial literacy program, working specifically with youth residing in Hawaiian homestead communities.
Oweesta First Nations Corporation, a Native Community Development Fund Initiative (CDFI) also presented a check for $200,000 to the Council for Native Hawaiian Advancement to continue its current energy program which provides grants or loans to eligible homestead beneficiaries to complete energy efficient retrofits. Poncho’s Solar Service was awarded the 2011 Native Hawaiian Housing Award for the company’s work to install solar water heaters in homestead communities.
The Council for Native Hawaiian Advancement (CNHA) is a national, member-based 501(c)(3) nonprofit organization dedicated to capacity building and providing support services to agencies and organizations focused primarily on Native communities in Hawaii and the Pacific. Its mission is to enhance the well-being of Hawaii through the cultural, economic, and community development of Native Hawaiians. They are a strong voice on public policy in addition to operating a community loan fund, delivering capacity building and leadership development services, and promoting community-owned enterprises.
New Report on Impact of College Education on Earnings
By Stephanie Halligan on 09/01/2011 @ 10:30 AM
A new report from the Georgetown University Center on Education and the Workforce finds that a person’s earning power is increasingly linked to a college degree. The report, The College Payoff: Education, Occupations, Lifetime Earnings, analyzes lifetime earnings for all education levels and earnings by occupation, age, race/ethnicity, and gender. The report finds that those with a bachelor's degree now make on average 84 percent more over a lifetime than those with only a high school diploma.
Post-secondary education is a critical component of an individual’s economic security. We also know that assets and savings play a key role in increasing college success for low-income, first-generation students. Recent research shows that young adults with school savings as adolescents are approximately two times more likely to be in college or have earned a degree. Similarly, when children have a savings account in their name, they are seven times more likely to attend and complete college than similar youth who do not have an account. This is regardless of race or socioeconomic status.
Through initiatives like the Partnership for College Completion and partnerships with school districts and municipalities, CFED is dedicated to closing the college completion gap for low-income families by promoting the availability of children’s savings accounts. For more information on CFED’s current children’s savings account initiatives, please visit our Asset Building for Children Initiatives page.
2011 Poverty Summit - Fort Worth
By Kim Pate on 08/31/2011 @ 02:30 PM
2011 Poverty Summit, September 18-19, 2011, Fort Worth, TX
Join the first annual national poverty summit bringing together national leaders, local experts, practitioners, volunteers, advocates, academics and others to advance the work that needs to be done to reduce poverty in America and in our world.
The Poverty Summit strives to:
- Inspire active participation in a national movement to reduce poverty in America.
- Re-imagine the way America addresses poverty.
- Strategically identify, design and implement innovative and measureable tactics towards the common goal of reducing poverty in America.
Visit www.NationalPovertySummit.com to see the full schedule and register.
Commentary Featured by NC Policy Watch
By Bill Schweke on 08/31/2011 @ 01:45 PM
Below is a copy of my commentary, Why Misguided ‘Common Knowledge’ Holds Back our Economic Recovery, which was featured on the front page of NC Policy Watch’s website yesterday. To read the article on the NC Policy Watch website, click here.
The American economic picture remains very grim. The recovery from the Great Recession can only be called “tepid” – especially on the job creation front. New cuts in government spending resulting from budget shortfalls are only making matters worse by eliminating more jobs in the short run.
At the same time, the nation is experiencing divided government – both electorally and philosophically – with little consensus on what should be done for the economy and jobs.
Given these facts, the parameters for action are quite narrow – particularly for those that wish to see public action to create significant job growth.
To break through this logjam will not be easy.
Whereas most Americans would have happily supported strong public action to create jobs a few decades ago, attitudes and perceptions of joblessness in the U.S. have shifted. Today, sadly, Americans are not as accommodating of serious government interventions to expand employment opportunities as they were a few decades ago.
Indeed, much of this economic pain and woe of the last few years has been self-inflicted, even unnecessary. The debt ceiling debate was the classic example. It did nothing about our most pressing problem – unemployment.
Unfortunately, several decades of well-funded conservative propaganda has taken its toll. Today, a collection of widely-held, conservative myths are at the root of these failures of understanding and action. (This is not to say that there aren’t economic myths on the left as well. Some people, for instance, still cling to the myth that government can solve all problems.)
Right now, however, it is not an overreliance on government that is at the heart of our problems; it is rather a series of conservative illusions about macroeconomics.
First and foremost, is the failure to comprehend the differences between household and public finance. For ordinary families, assets are good and liabilities are bad. This is an easy-to-grasp concept and it’s perhaps understandable that so many want to apply it directly to the public sphere. But it is a mistake to apply such an idea simplistically on a large scale.
At the national economy level, assets and liabilities simply reflect different ownership groups — bond sellers and buyers.
In other words, analogies can mislead. Household common sense is not always right. The world is often paradoxical.
Here’s another illusion – the notion that the widespread pursuit of “self-interest” always promotes the common good. In fact, collective failures in the marketplace frequently occur when individual households act “rationally” in the near term for the good of their family but ultimately, despite their good intentions, lower productivity or magnify inequities.
Think about household savers and home builders, for instance. When conditions lead to more saving and less buying, these events will only slow the economy further. At such points, the seemingly rational act of more household saving is akin to hoarding, not building a nest egg for the future.
And, of course, economy-wide failures, such as various “bubbles” abound. Stock buyers can get too excited and overreach, thereby sending stock values to unrealistic prices, or act, like an escaping herd, selling at the same time.
Pejorative wording and dogmatic doctrines can harm too. Too often, politicians and policy makers fall back on simplistic ideas they think sound good or bad – terms like “sound finance,” “gold standard,” “free enterprise,” “balanced budget,” “wasteful spending,” “budget deficit” and “property rights.”
The upshot of all this is that the American economy would be much better off if more leaders and citizens understood and promoted the pragmatic and flexible, but activist, prescriptions of the great economist John Maynard Keynes. Indeed, reliance upon a consistent Keynesian position on all these issues is more likely to promote economic health during periods of both deflation and inflation.
Though frequently blasted by those on the far right, Keynes was no leftist. He was very open to changing his mind and disagreed with many orthodox left ideas. In addition, Keynes wrote a great deal on probability and did not believe that economics could escape from risk. He would not be surprised by the recent financial crisis.
He would have also conceded that even if we act appropriately in the current situation by designing and executing a strong stimulus package, many key decisions (things like magnitude, timing, implementation/administration, the mix of tax and spending measures) will be more akin to an art than a science.
Ultimately, though, he would have agreed with one overriding fact: More must be tried to help the jobless and speed the recovery. Mere reliance upon hoary clichés and simplistic bits of “common knowledge” is a recipe for continued economic stagnation.
Use the comments section below to share your thoughts on this piece.
CDCs Step In Where Banks Fear to Tread
By Matthew Brian Hersh, Guest Contributor on 08/30/2011 @ 12:00 PM
Early in 2010, the Congressional Oversight Panel for the Troubled Asset Relief Program released a report indicating that half of the $1.4 trillion in short-term commercial real estate loans coming due in the next four years were underwater. Half.
What’s more, commercial real estate has devalued by 42 percent since 2007, according to Marcus Weiss, president of the Boston-based Economic Development Assistance Consortium, in his article published in the latest issue of Shelterforce.
Weiss, who is also a consultant to federal agencies, financial entities, foundations, CDFIs, and CDCs, writes in his article that private sector entrepreneurs and real estate developers “have been stunned” as banks have backtracked on commitments, and in some cases ignoring long-term relationships with successful borrowers. “Even government guarantees and subsidies haven’t been enough to bring the big banks back into the game,” Weiss writes, pointing to Wisconsin’s Housing and Economic Development Authority or WHEDA, an independent agency created by the state legislature:
“WHEDA provides capital for economic development through its small business guarantee and related programs. WHEDA regularly furnishes 80 percent loan guarantees and enhances projects with subordinated debt, a percentage of which (often 10 percent) frequently can be converted to equity or forgiven entirely. And yet, WHEDA’s participation doesn’t generally bring financing down to the 60 percent loan-to-value level that national banks have been demanding.”
The article quotes WHEDA’s director, Farshad Maltes, who says that national banks have virtually left the equation in WHEDA deals, leaving local CDCs and CDFIs to fill in the gap:
“CDCs and CDFIs have long played critical roles in targeting capital for commercial projects to underserved commercial areas, but now many CDCs and CDFIs have found themselves called upon to step into a wider range of deals to keep important economic development projects on track.”
Weiss goes on to list several examples, including those in Los Angeles and Milwaukee. And despite these positive advancements, the future is less than certain with the possibility of less foundation and federal money. Read more here.
Matthew Brian Hersh is Senior Editor at Shelterforce Magazing, the journal of affordable housing and community development published by the National Housing Institute.
Payday Plus SF
By Sean Luechtefeld on 08/30/2011 @ 11:15 AM
Our partners at the San Francisco Office of Financial Empowerment sent us an announcement about Payday Plus SF, an alternative, low-interest payday loan. This is just one of many examples of how the San Francisco Office of Financial Empowerment is working to ensure Bay Area residents get to keep the money they work hard to earn.
The Office of Financial Empowerment has partnered with five credit unions to offer an alternative payday loan at interest rates far below what commercial payday lenders charge. Now clients can borrow up to $500 and pay it back over 6-12 months at a maximum APR of 18%.
Our aim is to reduce the practice of payday lending in San Francisco by offering a healthy alternative that will help payday loan customers get out of -or avoid -the debt trap. Payday lending, sometimes known as a cash advance, is a short-term, usually high interest loan that is intended to bridge the borrower's cash flow gap between pay periods. At for-profit payday lenders, interest rates can run as high as 400% APR - usually $15 per $100 borrowed. The majority of borrowers are unable to pay off their loan within the two-week loan term and there is often no option to pay the loan in installments. The typical payday customer will repay $793 on a $325 loan (Center for Responsible Lending). The volume of Payday Lending businesses in the United States is estimated at $28 billion a year, and has grown by over 100% in the past five years.
Payday Plus SF is available at Community Trust - a division of Self-Help Federal Credit Union, Northeast Community Federal Credit Union, Redwood Credit Union, San Francisco Federal Credit Union, Spectrum Federal Credit Union.
Clients can call 2-1-1 for more information.
In Case You Missed It - August 29 Edition
By Sean Luechtefeld on 08/29/2011 @ 02:00 PM
After a brief hiatus, here’s your recap of the last couple weeks' top posts from in and around the assets & opportunity blogosphere.
Housing as a Human Right?
Kathryn Baer at the Poverty & Policy blog writes a thoughtful piece about whether or not we should treat housing as a human right. As Baer illustrates, there are arguments on both sides of the issue, but implementing such an approach to ending homelessness is no small endeavor. Read the commentary here.
Financial Capability Resource
The folks at the New America Foundation’s Asset Building Program have posted a brief podcast on barriers to financial capability and education for youth. Check out the podcast and leave your comments here.
Meta-level Asset Building
As we often focus on elements of our policy and program work, it’s easy to forget about the importance of engaging a diverse community for raising the funds needed to do our work. Katya’s Nonprofit Marketing blog discusses exactly this topic, which you can read in full here.
Have a link you’d like to share with our readers? Send us an email!
Related Blog Posts
Melissa Bradley to Deliver 2011 NMI Closing Plenary
By Sean Luechtefeld on 08/25/2011 @ 01:45 PM
Last week, we learned that longtime CFED friend and Strategic Advisor to innovation@cfed, Melissa Bradley, will be the closing speaker at Stanford Social Innovation Review’s 2011 Nonprofit Management Institute. Melissa, who is CEO of Tides, will present “Partnering for Scale and Impact” as part of NMI’s closing plenary.
According to the release, “The focus on scale within the social sector has dramatically increased. However, scale is often hard to achieve due to lack of capacity and capital. Melissa will discuss the importance of partnerships as a means of achieving scale and increasing impact. Leveraging her executive experience in the public, private, and social sectors, she will offer case studies of successful collaborations and critical success factors to maximize impact.”
The 2011 Nonprofit Management Institute will take place September 27-28 at Stanford University. The early bird registration deadline is tomorrow, August 26. To read more information or to register, click here.
Budget Deal Endangers Crucial Asset-Building Programs
By Jade Olson, Guest Contributor on 08/24/2011 @ 11:30 AM
Now that the drama of the eleventh-hour budget deal is over, those of us in the asset-building, economic opportunity and anti-poverty networks have our work cut out for us.
In case you missed it, or were too frustrated to keep following, here’s the short version: The Budget Control Act of 2011 has provisions for two key mandates, which are raising the debt ceiling and reducing the national debt/deficit. The debt ceiling increase is split into two stages, allowing a total increase of up to $2.4 trillion. The deficit and debt reduction component establishes a 12-member “supercommittee” (also called the Gang of Twelve) charged with finding at least $1.2 trillion in cuts over ten years, $21 billion of which is applied to FY 2012. The supercommittee must report back to Congress by November 23, and Congress must make a decision by December 23. In other words, our representatives must do in just a few weeks what they have been unable to do for this entire legislative session.
But for us, that’s not even the tricky part. If they fail, the Office of Management and Budget must “sequester” however much it takes to fill the gap, and that means putting social programs on the chopping block. Now, here we have good news and bad news. First, the good news: a number of low-income programs are exempt from sequestration, including Temporary Assistance for Needy Families (TANF), the Earned Income Tax Credit (EITC) and food stamps (SNAP). When combined with entitlement programs, these form the most basic social safety net that low-income families and individuals rely on, and it looks like this net will remain mostly intact.
Now for the bad news: crucial programs that help people and communities achieve economic independence are in trouble. Very few housing assistance programs, and no community action programs, are immune from sequestration. These programs will face deep cuts, directly hindering their ability to provide needed services.
I want to focus on community action programs for a moment, and not just because they are my organization’s primary responsibility. Rather, it’s because they are a rare breed among social programs. No two community action agencies are alike, and it is their flexibility and adaptability that make them effective. Community action programs depend especially on the Community Services Block Grant (CSBG), which is for most agencies the primary source of discretionary federal funding. Put simply, CAAs choose what services their communities need most, so they are able to provide a tailored, locally-driven set of programs that address their communities’ specific issues. For many of these agencies, those issues include housing counseling and financial education.
Hundreds of CAAs provide housing counseling, and a great many are HUD-certified. For example, take Skyline Community Action Partnership in Virginia. Last year, they provided 641 households with housing counseling and helped 18 families successfully avert foreclosure. If CSBG and other low-income program funds are cut enough to force Skyline to close its doors, executive director Kim Frye Smith notes that clients will be forced to drive 25 or more miles to locate another housing counseling program (and will likely be turned away due to geographic restrictions). In Illinois, the Will County Center for Community Concerns provided default/loss mitigation counseling for 204 households last year. And in Maryland, United Communities Against Poverty saw 40 out of 49 clients successfully graduate from their pre-purchase housing counseling program. These are just a few examples, and they are not the exceptions—they are the rule.
The story is much the same when it comes to financial education and debt counseling. In New Jersey, NORWESCAP’s executive director Terry Newhard reports that the agency’s family loan program provided 53 loans to low-income families in 2010. This program has seen a 100% payback rate so far. On the other side of the country, Kitsap Community Resources in Washington had 853 participants in its asset-building and financial education programs last year. And in the Midwest, Central Nebraska Community Services saw their 202 debt counseling clients pay off more than $450,000 last year. Hundreds more programs provide similar services, along with IDAs, small business loans and more innovative financial programs for the low-income population.
I could go on. The examples I have provided (and believe me, we have hundreds of them) demonstrate the bracing reality that programs providing financial education, housing and debt counseling, and other services geared toward expanding economic opportunity are vulnerable under the budget deal. Times have been lean for community action agencies for years, and unless the Gang of Twelve is convinced of the central importance of these elements to a prosperous future, I’m afraid it’s only going to get tougher.
The Democrats want jobs. The GOP wants fiscal responsibility and self-sufficiency. President Obama wants to “win the future.” Anybody who has worked in the economic opportunity field for any length of time knows that educating our citizenry to make good financial choices and to be in control of their own economic destinies is a clear means to achieving all of these goals and more.
Jade Olson is Policy Fellow at the National Community Action Foundation (NCAF). For more information about Jade's work or about NCAF, please visit www.ncaf.org.
Refund to Savings (R2S) Initiative
By Tiffany Anderson and Carl Rist on 08/24/2011 @ 10:30 AM
Refund to Savings (R2S) Initiative: Exploring the Intersection of Behavioral Economics and Asset Building at Tax Time and Beyond
If a natural disaster struck your home or vehicle, how soon would you be able to access the funds to make the necessary repairs? Recent research reveals that 47% of Americans couldn’t raise $2,000 within a month in the event of an emergency. The Refund to Savings (R2S) Initiative aims to address Americans’ lack of savings by encouraging taxpayers to save part or all of their tax refunds.
In a previous blog post, researchers from the University of North Carolina at Chapel Hill described the R2S initiative and outlined its primary goal—to apply the principles of behavioral economics to design and test savings prompts, financial incentives, and various financial products integrated into the customer experiences in tax preparation software, such as TurboTax. R2S, spearheaded by partners from UNC, Duke University, and Intuit Inc., has a number of promising features, such as:
- A focus on increasing savings without relying on federal resources
- An innovative partnership between researchers and private industries to test ideas
- Potential for broad impact and reach through partnership with Intuit Inc., a leader in tax time products and services
In a one-day meeting in February 2011, UNC researchers convened leaders in the field of savings and asset building to discuss the R2S project components and the project’s potential implications for policy and practice. A new report from UNC, based on this meeting, sheds light on what we already know and what remains to be learned about saving at tax time.
What We Know
Research suggests a number of key findings on tax-time savings for LMI individuals and families:
- People often intend to save a portion of their tax refund, but they just can’t for various reasons (i.e., debt payments, home repairs or other expenses that claimed their money long before it was received).
- Providing matching incentives for saving is a good way to encourage participation in savings; however, raising the match cap is a better predictor of savings rates.
- Framing and providing information about tax savings opportunities is important to a filer’s reception of savings programs. As a result, the tax preparer plays a significant role in the take-up rate of consumers’ tax-time savings products.
- Many individuals that open savings accounts through the refund process are first time savers.
- By offering chance rewards to participants, instituting lotteries can be an effective incentive for increasing saving.
Data from TurboTax on their customers’ behavior sheds further light on the savings behavior and intentions of taxpayers.
- Regardless of household income, intent to save for retirement is low—lower income households plan to spend more of their refund for living expenses.
- Settling debt is one of the most popular uses of refunds, regardless of household income.
- Flexibility to spend on non-essential items goes up as the refund amount increases.
Aside from the fact that people generally don’t like paying taxes in the first place, participants at this meeting discussed a number of obstacles to greater savings at tax time:
- Uncertainty about the level of tax savings significant enough to positively change an individual’s financial security
- The need to shift pre-tax spending intentions to incorporate a more savings conscious mind-set
- Complexities of opening savings accounts which may deter people from saving
- Banks tend to worry about accounts with low deposits and numerous overdrafts
What Remains to be Learned
During the meeting, attendants discussed the merits and limitations of saving “prompts” used to help accumulate savings. These prompts require careful consideration and are important in the promotion of actual behavior change at tax time. These include:
- Social proofs that provide data on the savings behavior of one’s peers. Listing, for example, the number of people saving in a particular zip code can serve as a benchmark for taxpayers.
- Providing positive testimonies about the products offered, with the rationale that others will listen to people like them and be influenced.
- Affirmations that evoke positive emotions (i.e. think of something happy before asking about refund savings) can influence the willingness to save.
- Regret opportunities prompt taxpayers to think of the future and consider what will happen long term if they don’t save today.
Spotlight on innovation: Opportunity Fund’s New Take on Traditional IDA Programs
By Gwendy Donaker Brown, Guest Contributor on 08/23/2011 @ 03:00 PM
“I really want to start saving, but I’m not ready to go back to school.” “I’d like some help with saving– not for anything specific - just to have some savings.” I’ve heard variations of this sentiment countless times over the years – from young single mothers, seniors recovering from foreclosure and many people in between. Our clients’ requests for a flexible savings account to get started were based on their understanding that you can’t really think about long-term assets (like a business, college degree or home) without having a basic level of financial stability. And stability means you have savings available in case of life’s emergencies.
We created our newest savings innovation, Start2Save, based on the need we saw within our community. For many applicants (and some of our unsuccessful IDA participants) our existing IDA products simply didn’t take into account their financial reality. In the paycheck to paycheck reality, you are only one unexpected expense (car repair, medical bill etc.) away from falling behind. So in order to have the stability and confidence to dream big, first you need some rainy day savings.
Here’s how Start2Save is similar to traditional IDA programs:
- Savers complete a comprehensive financial education course
- Monthly savings deposits are required - minimum of $20
- Case managers supports savers to work through problems and meet their goals
Here is how Start2Save is different:
- The savings account is the asset – so it doesn’t need to be withdrawn or spent down within a certain time period. Success is when someone is able to build up a savings balance – and rebuild it after the inevitable emergency.
- Smaller savings goal and match amount. Participants aim to save $500 within 1-2 years, which is matched 2:1 (for a total balance of $1,500). This makes the product accessible to people with even lower incomes – and makes it easier to scale due to smaller match requirements.
- No list of “allowed” purchases. Once someone reaches their $500 savings goal, they automatically receive the match in their account. We trust our savers to make the right financial decisions with their own savings – and monitor the accounts as an added protection.
- Wider target population. Rainy day savings is a (far-too) universal need that is relevant at every stage of life. Because Start2Save is privately funded, we’re able to serve individuals without traditional incomes – such as those living on disability or social security income.
- New improved account features. Together with Citi we are piloting their Microfinance Savings Account which (unlike our traditional account structure) offers no deadline to closeout, an ATM card for easier deposits (rather than requiring in-branch deposits), online and mobile access, ability to set up electronic deposits from other accounts, and easy monitoring for outcome evaluation.
We launched Start2Save this spring to very high demand – we’ve already “sold out” the first 50 accounts and have another 100 slots to fill this fall. We’ll be evaluating the program impacts by monitoring savings behavior and interviewing a sample of savers every six months over a 3 year period. Our goal is to show that rainy day savings serves two critical functions:
- Prevention: Savings keeps a minor issue (e.g., needing new brakes for your car) from turning into a major problem (e.g., Inability to pay for car repairs leads to missing work, even risking losing a job or taking out a high-interest payday loan).
- Aspiration: Having some savings set-aside makes it possible to set and achieve longer term goals – you have the confidence to try something new (e.g., take a class to improve your skills) and the reserves to stick with it (e.g., not drop out of class after you have to miss a day of work staying home with a sick kid).
My personal aspiration is that eventually, emergency savings is understood to be an essential piece of the asset-building spectrum – and is offered by IDA programs around the country with full support from both private and public funders.
Gwendy Donaker Brown is Director of Policy & New Initiatives at Opportunity Fund in San Jose, CA. Gwendy helped develop and launch Opportunity Fund’s groundbreaking savings products including Start2Save emergency savings, Saving for Citizenship and customized products for foster youth and single mothers. www.opportunityfund.org.
Save the Savings Bond
By Sean Luechtefeld on 08/23/2011 @ 01:30 PM
EDITOR'S NOTE: The story below is a re-post of an op-ed by Fred Goldberg and Peter Trufano that appeared in the New York Times last week. To read the piece on the Times' website, click here.
FOR generations of children, the idea of saving first became real when a savings bond landed in a birthday or holiday card, the image of a famous American staring out from the elaborate, earth-tone etching on a stately certificate. These fond memories may explain why this year nearly 50,000 Americans — the vast majority of them modest wage-earners — decided, under a new I.R.S. policy, to buy savings bonds with a portion of their precious tax refunds.
But taking advantage of this crucial form of savings is about to get much harder. The Treasury Department announced last month that in January it would end over-the-counter sales of savings bonds. While paper bonds will still be available at tax time and electronic bonds will still be sold online, bonds will no longer be sold at banks, savings-and-loan institutions and credit unions.
Given the continuing debate over fiscal policy, now hardly seems like the time for Treasury to make it harder for Americans to support their country by buying its debt. The savings bond program, which began in 1935, has helped millions of Americans save for a home, for college tuition or for a first car. More than a financial instrument, savings bonds are an instrument of hope. Pamela Sinclair, a 48-year-old Baltimore mother who works in health care, told us that she bought bonds for her children, using her tax refund, because “they could be president of the United States someday.”
Moreover, the tried-and-true savings bond is a universal product. Where else can someone with as little as $50 invest in a virtually risk-free, inflation-protected, giftable, fee-free savings product with returns that often exceed the meager interest on savings accounts?
Savings and financial literacy are particularly critical for working families with limited assets. The nonprofit group Doorways to Dreams Fund, which encourages low-income families to save (and which we serve as board members), found that up to 10 percent of low-income tax filers ordered savings bonds with their tax refunds, when offered the opportunity in pilot tests conducted between 2006 and 2009. Most said they saved for their children and grandchildren; nearly a third developed a savings habit, buying bonds year after year.
In the past decade, opportunities for saving money at tax time have improved. Under President George W. Bush, the I.R.S. introduced a “split refund” feature — an option for filers to send their refunds directly to more than one account. Last year, the Obama administration added the option to use refund money to buy savings bonds. As a result, all taxpayers now have the option to save, even if they do not have bank accounts.
The decision to eliminate the sale of paper bonds at banks is only the latest of several actions that have blunted the impact of these positive developments. The federal government has for years done little to support the savings bond program — eliminating its marketing budget, ending a program that allowed employees to buy savings bonds through payroll deduction, lowering annual purchase limits and making savings bond terms less favorable for small investors. Despite these obstacles, Americans still buy more than $1 billion in paper savings bonds every year.
It’s true that Americans will still be able to buy savings bonds electronically, through a Web-based platform known as TreasuryDirect. But the system isn’t user-friendly, and it presupposes ready Internet access, which about 35 percent of all Americans and 65 percent of low-income Americans do not have. And the system requires a user to have a bank account, effectively excluding the 17 million American adults who are “unbanked.” This may explain why less than 1 percent of the 55 million people who own savings bonds have TreasuryDirect accounts.
Rather than making savings bonds less accessible, the government should encourage thrift by reinventing the bond program for the 21st century. The option to buy a savings bond at tax time is a wonderful first step. Another promising opportunity is to offer savings bonds in retail stores via a savings-bond card, similar to the gift cards and prepaid bank cards in ever wider use. (Imagine if you could “buy savings” in a checkout line.) And the TreasuryDirect site should be updated and made more accessible, particularly for those who are less adept at navigating financial information.
While we applaud the Obama administration for retaining paper savings bonds at tax time, we urge the Treasury Department to reverse its decision to eliminate their sale, year-round, at financial institutions. We must not take away one of the few proven tools — one born during the Depression — that empowers working people to save for themselves and their children.
Fred T. Goldberg Jr. was commissioner of the Internal Revenue Service from 1989 to 1992. Peter Tufano is the dean of the Saïd Business School at Oxford University.
Play Games, Have Fun and Build Financial Prowess
By Denisse Dubrovsky, Guest Contributor and Nick Maynard, Guest Contributor on 08/22/2011 @ 10:00 AM
Are you playing Angry Birds on your smartphone? Have you taken a break from work to play some Tetris or Bejewelled? Stopped by FarmVille while on Facebook? Chances are you have, since almost everyone is playing video games these days. And the explosion of gaming on smartphones and Facebook is only enhancing this trend. With Financial Entertainment, Americans now have the opportunity to engage with financial education through fun, addictive casual online games.
National Council of La Raza (NCLR) and Doorways to Dreams (D2D) Fund have partnered to improve financial capability among American households. Through a new, bilingual (English/Spanish) online casual game platform, these award winning games now have the potential to benefit a much larger audience. Earlier this week, we launched a national Farm Blitz Tournament to engage families in this exciting financial education. Join us!
Combining the most popular casual game mechanic in the world—a “Match-3” puzzle game like Bejeweled — and farm motif with financial education content, Farm Blitz has an addictive, immersive quality. Players cash in crops by matching veggies in a row and save to plan for emergencies like time warps and other “natural” disasters, all the while watching out for the hungry bunnies ready to munch if debt gets out of control!
So, since it’s addicting, it might as well be good for you, right? Farm Blitz teaches about:
- The power of compound interest, both positive and negative
- The value of low-interest, long-term savings
- The perils of high-interest, short-term debt
Farm Blitz has won an EIFLE award and been nominated for a Games for Change Direct Impact Award.
D2D (www.d2dfund.org) is a national nonprofit 501(c)3 organization focused on innovations that expand savings and personal finance opportunities for all Americans, in part by creating, testing, and deploying innovations like financial entertainment. Taking cues from business and entertainment strategies, this innovation project works with and for consumers in the development of engaging new media to improve personal financial capability, self-confidence and knowledge. Financial entertainment captures the immersive quality of casual online games to teach important financial lessons. The current financial entertainment library features five titles, three of which are in Spanish and English.
D2D partners with organizations to distribute these games to consumers; partners include the military, community colleges, financial services firms, employers, government and community organizations. In addition, financial entertainment is regularly played in middle school and high school classrooms across the US.
2011 KIDS COUNT Data Book Now Available
By Kristin Lawton on 08/18/2011 @ 10:27 AM
CFED is pleased to join the Annie E. Casey Foundation as a 2011 KIDS COUNT Data Book outreach partner. The annual Data Book is a comprehensive resource on the status of U.S. children, featuring state-specific data on ten key indicators of child well-being. Please visit the Data Book homepage to download the report and create maps, graphs, and charts at the national, state, and local level. The new mobile Data Center offers hundreds of measures of child well-being available on any smartphone: http://mobile.kidscount.org.
The 2011 KIDS COUNT® Data Book shows that since 2000, five of the 10 key indicators of child well-being improved, three indicators got worse, and two areas are not comparable based on the most recent year of data available. Overall improvements in child well-being that began in the late 1990s stalled in the first part of the current decade with family economic well being declining in the wake of the current recession.
- Five areas have improved: the infant mortality rate, child death rate, teen death rate, and teen birth rate; and the percent of teens not in school and not high school graduates.
- Three areas have worsened: the percent of babies born low-birthweight, the child poverty rate, and the percent of children living in single-parent families.
- Two areas are not comparable: changes made to the American Community Survey’s (ACS) 2008 questionnaire regarding employment affected the ability to track trends for the percent of teens not in school and not working, and the percent of children in families where no parent has full-time, year-round employment. Although comparisons cannot be made back to 2000, both indicators worsened between 2008 and 2009.
To learn more, download the Data Book here.
To see how your state compares, use the widget below! Select a state and an indicator of child well-being and see the results instantly.
West Virginia Launches New College Savings Initiative
By Ethan Geiling on 08/16/2011 @ 11:06 AM
West Virginia recently launched the SMART529 Matching Grant Program to incentivize college savings for low- and moderate-income residents. Eligible residents will receive a 1:1 match on contributions to any of the state’s 529 plans, up to $500 per year with a lifetime maximum of $2,500. The matching grant program began on June 15, 2011 and was approved by the Board of Trustees of the West Virginia College Prepaid Tuition and Savings Program earlier this year.
I recently blogged about 529 plans a couple months ago, when North Dakota launched a similar college savings program. For those of you that missed that post, let me quickly get you up to speed:
A 529 savings plan is a state-sponsored, tax-preferred savings plan for college. Every state has at least one 529 plan, and many states offer multiple plans. 529 plans can be a powerful vehicle to help families save for college, especially when the state offers matching grants for contributions, like West Virginia just began doing.
According to a recent survey by the College Savings Foundation, about 76% of parents with a 529 plan have saved at least $5,000 per child, compared to only 29% of parents without one. Of course, this type of survey always brings up the correlation versus causation question (someone taking the initiative to open a 529 account is probably more likely to save regardless of the benefits of the 529). But it’s still encouraging!
West Virginia is now one of 13 states that incentivize college savings through the state 529 plan.
I'M HOME National Partner Update
By Lauren Williams on 08/10/2011 @ 04:00 PM
The Next Step™ Network of Members is Growing
Next Step™ is a nonprofit social enterprise whose mission is to build a national distribution system to deliver high quality, energy efficient, factory built housing at scale. This allows nonprofits to help homeowners achieve wealth by growing equity, preserving assets and replacing substandard mobile homes with new ENERGY STAR homes. Next Step Network Members will be supported by experienced factory built housing experts and developers who understand the unique nonprofit business model, yet can also "speak the factory language." By participating in the Next Step Network, Members can achieve greater predictability in managing construction time and costs, employing local subcontractors, serving more families annually, meeting their mission and enhancing their financial sustainability. The Network now has a total of nine members:
- NeighborWorks® Montana, Sheila Rice, Executive Director, Montana
- NeighborWorks® Columbus, Cathy Williams, Executive Director, Georgia
- Community Frameworks, Linda Hugo, Executive Director, Washington
- Primavera Foundation, Peggy Hutchinson, Executive Director, Arizona
- Community Housing Partners, Janaka Casper, Executive Director, Southeastern U.S.
- Colorado Rural Housing Development Corp., Al Gold, Executive Director, Colorado
- Frontier Housing, Sherry Farley, President & CEO, Kentucky
- HOPE, Inc., Andy Kegley, Executive Director, Virginia
- Eastern Eight Development Corp., Retha Patton, Executive Director, Tennessee
Since Our Launch
Since the summer of 2008, ROC USA®, through its two wholly-owned subsidiaries and its network of certified technical assistance providers (CTAPs) has:
- Helped homeowner groups purchase 25 communities by assembling more than $53 million in total project financing.
- Preserved 1,725 homes in 11 states.
- Directly financed $21.5 million in purchase loans on nine project loans.
After more than two years of low market activity caused by the sub-prime crisis and ensuing market turmoil, the second quarter of 2011 has shown evidence of a return of community owners willing to sell. With 10 TA Providers operating across the country, the Network is positioned with the skills, experience and financing to capitalize on this up-tick in activity.
Market Research & Marketing
ROC USA’s market research in 2009-2010 helped underscore key considerations as a new entrant in this marketplace, including a focus on relationship building in the industry. The "Grow Pipeline! Campaign" was launched in 2011 to increase the number of transactions, and as a part of the campaign, ROC USA increased their presence at tradeshows – including four shows so far in 2011 – and some CTAPs have begun advertising in their state MHA newsletters. ROC USA also launched a "Just Purchased" post-card series in 2011 and the results have been strong, with at least five calls from brokers following each of now four cards that were emailed to over 150 MHC brokers. Paul Bradley began writing for the Manufactured Home Marketing Sales Management website in March to increase exposure with a key target market: mom and pop and small regional investors. Soon, long-time industry consultant Greg Harmon will join ROC USA as a consultant to assist with market development planning and execution.
Pass-Through Grants for CTAP Work in Senior Communities
The Cooperative Development Foundation Fund is providing a pass-through grant program for CTAPs. That funding has been used to support TA in three rural senior communities thus far: CASA and RCAC ($10,000) for the Anchor conversion in Gold Beach, OR; PathStone ($5,000) for Meadow Valley in Unadilla, NY; and CDI ($10,000) for Wamsutta in North Attleboro, MA.
Black Young Adults and College Completion
By Tiffany Anderson on 08/10/2011 @ 11:03 AM
If you could choose one thing that could most help a young person succeed in the world today, what would it be? For many Americans, college plays a vital role in achieving the American dream, and for many black young adults, earning a college education is the most important pre-requisite for success.
In light of the discrepancy between college attendance and actual college completion and the growing role education plays in fostering employability and financial security, policymakers are continually striving to create greater access and raise completion rates of low-income, minority households. Finding promising ways to promote college progress- which don’t rely on the accumulation of debt- is a growing concern, and Children’s Savings Accounts have emerged as an important strategy to help families finance college.
College-going statistics from 2007 show that 63% of white young adults between the ages of 17 and 23 were either in college or had graduated, compared to only 35% of black young adults. Research suggests that blacks who are on course to graduate from college experience increases in college debt. This ever-increasing debt can lessen the return on education, making college appear less desirable, attainable, and even out of reach for some students.
Recently our partners at the Center for Social Development released a study testing the direct effects of assets and savings on the college progress of black young adults. The results revealed that young adults with school savings as adolescents are approximately two times more likely to be on course (either as a current college student or graduate) regardless of race.
The results of the study revealed that white young adults are more likely to be on course for completing college than black young adults. Adolescent school savings is significantly related to both white and black young adults’ college progress, where net worth is not. However, parents’ savings for their child is not significantly related to college progress among white or black young adults. Only adolescents’ school savings is statistically significant to the affordability of college completion.
Other related research examines the relationship between different forms of assets and college attendance and/or graduation. In this particular study, researchers identified a number of factors – social capital, cultural capital, economic capital, and human capital – as key predictors of college attendance.
According to the study, a key barrier to attending college is black high school students’ perceived barriers to college, identified financial anxiety, and psychological barriers, such as the belief that only the wealthy can afford college. Over time, this could dampen a student’s motivation for investing effort into applying to school.
The study also recognized that the fear expressed by black children and parents of not being able to finance college was partially due to high attendance cost. This factor, the fact that black young adults earn less on average than their white peers, and the trend of black young adults’ college debt increasing over time perpetuate the negative perception of college. College-educated blacks are also more likely to borrow money to pay for college, borrow larger amounts on average, and earn less than their white counterparts; these concerns further contribute to the perception that the return on college is less than its cost.
More research is needed, and the study further suggests that researchers may want to examine whether or not academic successes achieved early-onwards amongst black young adults lessen their hesitations about pursuing college. It will be a great deal of time before researchers can test the way in which the results of the CSA research that is being conducted in Oklahoma (such as the SEED OK project) affects college completion. Accounts in SEED OK are issued at birth, and participants will not reach college age for several years to come.
In the meantime, finding other ways to test casual relationships and promoting asset-building policies are important next steps to help close the college completion gap. Children savings policies that promote asset accumulation among young adults may ameliorate the ongoing problem of increasing college debt. Various examples of CSA policies include the ASPIRE Act, Young Saver’s Accounts, 401Kids, Baby Bonds, and Plus Accounts.
For more research and resources related to CSAs and education attainment, please visit CFED’s CSA Resource Library.
CFED Partner Announces Launch of Chicago Credit Building Coalition
By Rashmi Joshi on 08/09/2011 @ 11:30 AM
CFED's Vice President of External Relations Kim Pate passed this along - how interesting!
Chicago, IL (July 22, 2011) — Representatives of 11 Chicago-area community development organizations and Citi will gather today to applaud Chicago City Treasurer Stephanie D. Neely’s launch of the Bank On Chicago financial inclusion initiative and to announce that they have joined together to form the Chicago Credit Building Coalition (CCBC).
The CCBC will expand financial inclusion for low- and moderate-income residents in the Chicago area by complementing existing financial education programs with a financial tool, provided by Citi, that supports credit-building. The community development organizations Justine PETERSEN and Credit Builders Alliance will provide the CCBC members with assistance and tools to increase their capacity to provide these services and to monitor the impact that financial coaching complemented by the use of this product can have on individuals’ credit profiles.
“Having a good credit profile is essential for lowering an individual’s day-to-day transaction costs, growing their assets through small business or homeownership and securing employment, said Stephanie D. Neely, Chicago City Treasurer. “These organizations are demonstrating their commitment to helping underserved Chicago residents, and by working together they will have a tremendous, positive impact.”
The Chicago Credit Building Coalition members are: Chicago Urban League; Citi Community Development; Illinois Hispanic Chamber of Commerce; JVS Chicago; Local Initiatives Support Corporation of Chicago; Mercy Housing Lakefront; National Latino Education Institute; Neighborhood Housing Services; Partners in Community Building; The Resurrection Project; South Side Community Federal Credit Union; and Spanish Coalition for Housing. Supporting partners of the CCBC are Justine PETERSEN and Credit Builders Alliance.
Highlights of the program include:
- Financial coaching and education to help participants improve their financial behavior and learn credit- and asset-building best practices.
- Client access to a secured or unsecured credit card provided by Citi subsidiary Banamex USA to help individuals build their credit history.
- A streamlined, Web-based system to help nonprofit partners assist clients with applying for and monitoring their use of the credit card. Nonprofit Justine PETERSEN developed the system along with Citi Microfinance and will provide technical assistance to the CCBC members for card processing.
- The ability for CCBC members to monitor changes in their clients’ credit score, through the assistance of Credit Builders Alliance, which will provide training and access to CCBC members and the opportunity to identify those programs that are most impactful.
“Especially in the current economic climate, being creditworthy is essential to economic empowerment,” said Donna Rockin, Director of the Illinois SBDC / Duman Microenterprise Center at JVS Chicago, which is serving as the lead coalition member. “We have provided one-on-one credit counseling for over 20,000 individuals since 1997. We’ve seen that the right kinds of intervention can take people with low or no credit scores and with significant debt to the point where they can buy a home or start a business. By coming together to offer this innovative package of financial tools and education, we are going to have a tremendous impact in terms of helping Chicago residents establish and raise their credit scores. It’s a collaborative and comprehensive model that other cities will want to adopt.”
"The communities we serve need not only financial coaching but also access to financial products and services in order to achieve financial inclusion and success," said Elba Aranda-Suh, Executive Director of the National Latino Education Institute. "Citi's ability to provide useful financial tools that also will enable people to raise their credit scores complements the critical financial coaching and education that the coalition members are already providing."
The Banamex USA credit card is already in use in other programs to help people with low credit scores or no credit to build their histories and increase their credit scores. For applicants with no or limited credit history, the secured card requires a small minimum cardholder security deposit of $300 and a commitment as prescribed by the community organization to attend a series of free financial education classes on improving one’s credit scores and financial capability. Early pilots indicate that customers have increased their scores by an average of 50 points through the use of the card and financial education resources. Close to 23 percent of customers opening a Banamex USA card originally had no reported credit history.
“This initiative is the kind of collaborative approach that we’ve found to be effective in our ongoing efforts to expand financial inclusion,” said George Wright, Midwest Region Director for Citi Community Development. “These local partners, with in-depth knowledge of the financial challenges impacting Chicago residents, are combining forces to maximize impact and scale of their credit building efforts. We think that’s a smart strategy and we’re proud to provide the technical assistance and the financial product to move this initiative forward.”
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