Only Half of Americans Have Good Savings Habits
By Katie Bryan on 02/28/2013 @ 04:00 PM
EDITOR'S NOTE: This post originally appeared on the America Saves Week blog and can be read here.
The sixth annual national survey assessing household saving, released February 25 as part of America Saves Week, revealed that only about half of Americans reported good savings habits.
For more information, please click here.
Children’s Savings Accounts: Helping Kids Attain Higher Education
By Vince Lampone on 02/27/2013 @ 09:00 AM
EDITOR'S NOTE: Vince Lampone interned with CFED's Savings & Financial Security Team in 2012 and is now pursuing a Master's in Public Policy at Harvard's Kennedy School of Government with a focus on educational achievement gaps.
For more than a century, the strength of the U.S. educational system has earned the envy of leaders worldwide, and fueled our country’s dominance in the world. Yet in past few decades, America’s number one perch in higher education has slipped out of our fingers. These days, three in five adults between 25 and 34 are failing to earn a four-year degree; this is no improvement upon their parents’ generation, and a lower college graduation rate than Russia and France.
This is an urgent problem. While a college degree alone is not an iron-clad guarantee of success, America’s current share of college graduates simply is not large enough to sustain our country’s competitive advantage in today’s global economy. And this failure explains so much of what we see in the newspaper and our own lives – growing inequality between the “haves” and “have-nots,” stubborn unemployment and an economy that continues to function well below its full potential.
Particularly vexing is the widespread academic misfortune of today’s low-income children: only one in ten kids from economically disadvantaged families is currently earning a Bachelor’s degree.
How do we improve upon this situation? Politicians give us standard-issue solutions – breaking up teachers’ unions, distributing vouchers for private education, increasing financial aid. Each may be worth exploring. Yet they all overlook one of the most important barriers to educational success: a lack of motivation and psychological investment among many children themselves. If young people don’t believe that “kids like them” are made for college, and they aren’t intrinsically committed to it, then all the academic and financial readiness in the world won’t convince them to take full advantage of their opportunities.
This is why one solution – Children’s Savings Accounts specifically devoted to higher education – holds such great promise. Imagine a country in which kids, no matter their means, know that they have a special pot of savings dedicated in their name, for the sole purpose of attending a college or vocational school of their choice when they grow up. Furthermore, imagine what would happen if every child and parent received effective training on how to save for college, along with financial incentives to save, and education on the exciting career paths that a college degree opens up to bright young minds.
We all know that skyrocketing tuition fees have pushed higher education out of reach for too many families. Children’s Savings Accounts (CSAs) are one way to empower all families with a tax-free way to build the financial assets necessary to secure a path to college. Even more importantly, these accounts serve as a powerful vehicle for lifting children’s expectations about what they can achieve for their own futures. In both cases, the strong potential of CSAs to succeed is based on the principles of behavioral science that underpin their design.
Investing the effort for college preparation is a classic example of what behavioral psychologists call a “want/should conflict.” In other words, kids may see a college degree as a distant goal, but Hannah Montana is more compelling for them this afternoon. Parents and educators can help children build their commitment to academic work by enlisting concrete “buy-in” for their future college attendance from a very young age. This helps them to construct a college bound identity that can be further reinforced by adults over time, and that is more resistant to outside temptations.
To put it another way: When a young girl saves pennies and dollars in her savings account, she is openly and freely committing to the goal of attending college. By making this public declaration, she subconsciously reinforces her motivation to act in ways that support this goal. (After all, she doesn’t want to back down on what’s she’s expressed to the people around her!) This makes the prospect of not following through more painful – and the likelihood of actively investing in her studies more real.
For both kids and their parents, CSAs offer another essential perk – funds invested in a Children’s Savings Account can only be used for higher education, not for any other purpose. Thus, like a 401(k), this pool of money cannot be raided for emergencies or impulse purchases. This program feature is particularly valuable for low-income children, whose families often discount the value of long-term savings in order to meet their immediate needs.
Without concerted intervention, too many children will miss out on the well-documented benefits of higher education, suffering from limited life opportunities and human potential as a result. This does not have to be the case.
Call for Presenters: National Community Tax Coalition 2013 Conference
By Veronica Weis on 02/26/2013 @ 03:00 PM
The National Community Tax Coalition is holding its 9th national conference this September in New Orleans. This year’s conference centers on advancing, sustaining and growing the community tax preparation and asset building field. It is clear that there has been a significant shift in the landscape, with tax reform, affordable health care, and improving the nation’s fiscal health all being national priorities. It is essential that the VITA field seize the moment and realize the opportunity to design and launch innovations in sustaining the viable services that are provided to the most vulnerable and most difficult-to-serve populations by elevating promising practices, practical policies and applied research that will move the field forward.
In preparation, they'd love for engaged, knowledgeable partners such as you to consider not only joining them, but presenting on matters of interest to their members and conference attendees - hundreds of folks who are interested in helping low- to moderate-income, working people through good policies and practices involving taxes, community-based tax preparation, asset building and financial education services, among other things.
Please take a look at the invitation to present here and note that the March 8 deadline for submission of proposals about workshops and research papers is fast approaching!
Six Steps that City Leaders Can Take to Increase Family Economic Security
By Kristin Lawton on 02/25/2013 @ 02:30 PM
EDITOR'S NOTE: We're happy to help promote National League of Cities' webinar this Thursday, which features CFED's Chief Program Officer, Ida Rademacher.
You're invited to a free, hour-long webinar, which will be held this Thursday, February 28, at 2:30 pm EST. The webinar will feature strategies described in a new report published by the Corporation for Enterprise Development (CFED) and the YEF Institute. The report, Taking the First Step: Six Ways to Start Building Financial Security and Opportunity at the Local Level, highlights innovative, low- or no-cost ideas for how city officials can get started in helping families achieve financial stability. These strategies include raising awareness about available services and consumer protections; increasing access to financial education and safe, affordable financial products; preventing foreclosures and predatory lending; and developing model human resource policies.
Webinar speakers will include:
- Sybongile Cook, Program Manager - Economic Development, Banking Bureau, Department of Insurance, Securities and Banking, District of Columbia
- The Honorable Ann M. Horton, Mayor Pro Tem, City of Bryan, Texas
- Ida Rademacher, Chief Program Officer, CFED
Speakers will discuss how the six strategies featured in the report have laid the foundation for robust, citywide financial empowerment agendas.
Gearing Up for America Saves Week 2013
By Kim Pate on 02/22/2013 @ 02:30 PM
America Saves Week 2013 officially kicks off on Monday, February 25 and runs until Saturday, March 2! CFED is joining hundreds of leading not-for-profits, government agencies and financial institutions to support the week-long event coordinated by America Saves and the American Savings Education Council. Started in 2007, ASW is an annual opportunity for organizations to promote good savings behavior and a chance for individuals to assess their own saving status. Typically thousands of organizations participate, reaching millions of people.
CFED plans to share America Saves Week content next week on Twitter and Facebook so please follow the conversation along with us there using #ASW2013. Ready.Save.Grow., a campaign sponsored by the U.S. Department of the Treasury's Bureau of the Public Debt, complements this year’s America Saves Week theme of “Set a Goal. Make a Plan. Save Automatically.” For example, people can start saving with just $25 to buy U.S. Savings Bonds. Plus, contributions can be made to TreasuryDirect accounts by using annual tax refunds and IRS Form 8888, and automatically through payroll direct deposit.
If you're interested in raising up this important campaign next week through your networks, the U.S. Department of the Treasury is offering sample newsletter content, social media posts or a banner for your organization's website in a toolkit. You can also download the official ASW 2013 toolkit here.
College Board’s 2013 CollegeKeys Compact Innovation Award Presented to FUEL
By Jimmy Crowell on 02/21/2013 @ 11:00 AM
Last month, at the College Board’s New England Regional Forum, the CollegeKeys Compact Innovation Award was presented to Families United in Educational Leadership (FUEL). FUEL, a Boston-based nonprofit that motivates and assists low-income families trying to access higher education, won the award for demonstrating innovation and success in increasing the number of low-income students entering and completing college. Along with this recognition, the organization will receive $5,000 from the College Board to support their programs.
FUEL, which offers programs that help students save for college, identify local scholarships and prepare for academic success, was also recognized by the College Board for their impact and potential to be replicated and brought to scale. The award is given to high schools, colleges or nonprofit organizations across the country that can demonstrate their efficacy in combating the financial and social barriers that often limit the amount of low to moderate income students that attain college degrees.
“Guided by the College Board’s principles of excellence and equity in education, the Advocacy & Policy Center works to ensure that students from all backgrounds have the opportunity to succeed in college and beyond,” said Christen Pollock, Vice President, College Board Advocacy & Policy Center. “The winning programs embody the mission we seek to fulfill, and we are proud to support them as we work towards a common goal.”
CFED’s President, Andrea Levere, has also been an advocate for FUEL’s expansion and development by serving on their Advisory Board. CFED applauds FUEL for their award and for their dedication to bringing incentivized college savings accounts to low-income students.
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New From Citi: Money Matters EITC Report
By Sean Luechtefeld on 02/20/2013 @ 10:30 AM
For the second time, Citi has created Money Matters, a free publication available in English and Spanish that is customized for a number of states across the country. This four-page publication is designed to enable hard-working taxpayers to take advantage of the tax benefits that are available to them, and provides information on savings, claiming the EITC, and connecting with local organizations. Most importantly, Money Matters provides lists of local Volunteer Income Tax Assistance (VITA) sites, where IRS-certified volunteers provide free assistance with preparing and filing tax returns.
One of the most important services that these volunteers provide is to ensure that working people claim the benefits to which they are entitled, like the Earned Income Tax Credit (EITC), which can result in substantial tax refunds.
The Money Matters publication provides details about the EITC, the availability of free tax preparation services through the VITA program of the Internal Revenue Service (IRS), partner spotlights and helpful tips on how to save your money and make the most of your tax return.
To read the Money Matters publications, visit the Citi Community Development website today.
New Data on Student Debt Highlights Need for College Saving
By Carl Rist on 02/15/2013 @ 10:00 AM
Last week’s release of CFED’s 2013 Assets and Opportunity Scorecard was another reminder that too many American families are living on the edge. One particular finding that is drawing considerable public attention is the growing burden of student debt on American households. According to data from the Institute for College Access and Success (as reported in the Scorecard), 66% of all seniors graduating from four-year colleges are carrying student loan debt, and the average size of that debt is more than $26,000. One wonders about the future of young graduates in states such as New Hampshire, which has both the highest average debt per college senior ($32,440) and one of the highest rates of graduates with debt (75%). Given these statistics, it should be no surprise that, as the Scorecard reports, default rates for student loans are on the rise. In the most recent year for which data is available, 13.4% of borrowers (almost 1 in 7) had defaulted on their student loans, indicating that recent graduates have either unsustainable debt burdens or have been unable to secure jobs that pay a sufficient wage to cover debt payments. Some of the worst statewide default rates (e.g. Arizona’s at 22.9%) make student debt look like junk bonds.
So, what is the average American household to do? On the one hand, data indicates that college graduates earn, on average, almost $1 million more than high school graduates. What’s more, President Obama has pledged to increase the college graduation rate in the U.S. to improve the global competitiveness of our economy. On the other hand, mounting college debt and the related financial stress would seem to make earning a degree a daunting challenge. In fact, new findings from the National Survey of Student Engagement indicate that money troubles interfere with the academic performance of about one-third of all college students.
One solution that’s gaining traction sounds old-fashioned, but it works: saving for college. Research indicates that a student with a college savings account is four times more likely to go to college, and six times more likely if the account is in his or her name. But saving is difficult for all households – less than 50% of American families with dependent children have college savings, according to a FINRA survey, and it is even more difficult for low-income households who face significant challenges meeting day-to-day expenses. Indeed, given the financial barriers to college success, it is no wonder that less than 10% of students from low-income homes graduate from college by their mid-20s.
That’s why CFED has created the 1:1 Fund, an online community that promotes saving and educational opportunity for low-income students. We believe in the importance of saving for college and want to bring this opportunity to all children, especially those from lower-income backgrounds.. Leveraging the power of social and traditional media, the 1:1 Fund connects low-income students with individual donors who match their savings in qualified children’s savings accounts (CSAs). Donors can search online to find the community or sponsor organization they would like to support and are assured that all matching funds will be held until the child reaches college age and will only be used for qualified educational expenses. To find out more, go to www.1to1fund.org.
Graduating from college has long been part of the American Dream, and it especially critical for expanding opportunity for children from lower income families. With help from the 1:1 Fund and our donors, young savers not only build a nest egg for college expenses, but they add college and a bright future to their goals and dreams.
Nevada Assets and Opportunity Summit February 28th
By Veronica Weis on 02/14/2013 @ 10:30 AM
The Financial Stability Partnership of Northern Nevada will host an event beginning with a day of speakers and workshops that will focus on how to improve the financial stability of Nevadans. Topics covered include the increased use of savings, financial education for youth, innovative financial products, credit repair, consumer protection and financial counseling. The event will kick off with a keynote address from the Nevada State Treasurer, Kate Marshall. During the event, CFED will release the new Assets and Opportunity Scorecard for Nevada and offer recommendations for policy changes to improve financial stability. The summit will conclude at the State Capitol on March 1 with presentations on public policy options that will support increased financial stability for Nevadans. It expected that over two hundred nonprofit practitioners, experts, policy makers, and industry leaders from across the state will attend.
About the Financial Stability Partnership of Northern Nevada (FSPNN): The FSPNN has been raising public awareness and supporting the work of community groups who are providing financial education and asset building. The FSPNN is a community collaborative that has, since 2008, steadily gained structure, funding and capacity to provide access to financial education to individuals in northern Nevada. The FSPNN consists of several distinct elements: Free Tax Preparation and VITA sites (Volunteer Income Tax Assistance), Youth Financial Education, Adult Financial Education and Bank on Nevada. This program helps maximize income, asset building and preservation, savings, establishing credit, debt reduction, public awareness, workforce development, home ownership, access to public and private benefits and entrepreneurship. The FSPNN is administrated by the United Way of Northern Nevada and the Sierra.
Recommended Resource: DATA.gov
By Sean Luechtefeld on 02/13/2013 @ 10:00 AM
Back in 2009, the federal government launched DATA.gov, a website aimed at providing easy access to quality data generated by the Executive Branch. Their goal, according to the site, “is to improve access to Federal data and expand creative use of those data beyond the walls of government by encouraging innovative ideas.” I’ve been consulting DATA.gov a lot lately, so I wanted to share it with our readers.
For starters, DATA.gov has datasets on topics you could only imagine, and often, it’s fun to just peruse the most recent additions. For example, did you know that in 2008, the United States harvested fewer tomatoes than ever before? These and literally millions of other fun facts are available for your browsing.
More importantly, however, DATA.gov contains a wealth of information useful to the asset-building field. While we already have a vast array of data, the datasets provided by the government offer two benefits. First, they tend to be more historically robust, so you can compare metrics year-on-year and identify longer-term trends. Second, these datasets allow you to make comparisons between the data that is already available.
As one example, let’s look to Nevada. In the 2013 Assets & Opportunity Scorecard, we revealed that Nevada performed 51st in the nation overall, reflecting the dire need for programs to expand economic opportunity in the state. If you compare their asset poverty numbers with the annual income data on DATA.gov’s Small Area Income and Poverty Estimates (SAIPE), you see that Nevada actually performs better than a lot of states when it comes to what their residents earn. Meanwhile, West Virginia, which has the lowest median income, ranks 23rd overall in the 2013 Scorecard. Taken together, these comparisons point to the critical importance of examining asset poverty (and liquid asset poverty) to assess the financial health of residents in a given state. Whereas income data alone paint a small picture of financial security, a more comprehensive picture is painted when you draw from the multiple datasets available.
In short, take a minute to browse around DATA.gov. You might just find some good supplements to products like the Scorecard that can help justify your argument for a more aggressive approach to building assets for low- and moderate-income families.
Live Blog: 2013 State of the Union
By Sean Luechtefeld on 02/12/2013 @ 09:00 PM
Below is the play-by-play from tonight's address. How do you think the President did? What do you think about his new proposals? What do you expect from Senator Rubio's response? Use the comments below to keep the conversation going.
Sean Luechtefeld (10:17 PM): "It is up to us to be the authors of the next great chapter in United States history." What a great way to conclude the address!
Sean Luechtefeld (10:07 PM): How we vote, when it comes to the actual process, is often overlooked in favor of how we vote when it comes to partisanship. But, the first step to empowering others is to deploy the constitutional rights that empower you. Election reform couldn't come at a more appropriate time.
Kristin Lawton (10:01 PM via Twitter): The #assetbuilding twitter list just lit up with the #poverty discussion. Follow them here: bit.ly/YVPqrZ #SOTU
Kim Pate (9:58 PM): As we draw down troops in Afghanistan, we need to think about what's next for the women and men who have given their lives so we can live ours more securely. Our returning troops need access to asset-building strategies given the breadth of studies that show that our armed forces are often subject to some of the most pernicious predatory lending around. Furthermore, financial coaching and appropriate financial products can significantly improve the financial stability of this essential sector of our society.
Kasey Wiedrich (9:56 PM): We've got no shortage of data. Here's some info on low-wage jobs, and here's some on the minimum wage. Have questions? I'm happy to answer them below!
David Rothstein, Policy Matters Ohio (9:53 PM via Facebook): Universal Pre-K is the no-brainer of the decade!
Jeremie Greer (9:51 PM): No one who works full time should have to exist in poverty. Let's tie the minimum wage to the cost of living so it can actually be a wage you can live on." Well said, if not obvious. Raising the minimum wage would free income to save more and climb the economic ladder.
Kim Pate (9:50 PM): Part of establishing a pathway to citizenship through real immigration reform is making citizenship loans affordable and available like those that have been piloted by Casa de Maryland in partnership with the Citi Foundation. More excellent examples of innovative thinking.
Kasey Wiedrich (9:48 PM): Looking for data on early childhood education? Check out measures from the 2013 Assets & Opportunity Scorecard here and here.
Sean Luechtefeld (9:46 PM): A scorecard? We've already got you covered, Mr. President!
Jeremie Greer (9:44 PM): While these proposals are essential, they're not comprehensive. A critical piece to the financial security puzzle is affordable housing. Where is the funding and infrastructure for manufactured housing, which is often the most affordable option for many?
Sean Luechtefeld (9:43 PM): Universal pre-school? Great. Universal kids accounts that help benefit children from pre-school through college? Even better. More here.
Kristin Lawton (9:41 PM): Kim's right; innovations like turning energy savings into assets are exactly the innovations President Obama is talking about. Of course, these projects are already underway. As one example, Henry Red Cloud on the Pine Ridge Reservation in South Dakota is harnessing clean solar energy while helping people start their own businesses and move out of poverty.
Kim Pate (9:38 PM): Speaking of energy, let's not forget that energy efficiency can lead important savings that translate into asset building when people are given concrete steps for how to convert those savings into paying for a downpayment on a home, going to college or Starting a business.
Sean Luechtefeld (9:34 PM): And we're back! Sorry for the little hiccup; our website seems to be a little under the weather.
Kim Pate (9:26 PM): So glad the President mentioned progress. One area of progress CFED would like to see would be much more support from our government for the self-employed owners small business who make up the backbone of our economy.
Sean Luechtefeld (9:13 PM): Google Analytics is a fun tool for live blogging, since it allows you to see how many people are on the site and where they're logged in from. Special welcome to our one Canadian reader who joins us from north of the border!
Sean Luechtefeld (9:11 PM): Who wants to take the over/under on how long it takes President Obama to shake all those hands?
Kristin Lawton (9:09 PM via Twitter): What are you hoping Obama mentions in #SOTU? Our list: #householdfinancialsecurity, #CSAs, #Microbiz, #homeownership #healthcare
Jeremie Greer (9:05 PM): I'm a big fan of Arne Duncan's leadership of the Department of Education. He has pledged to open 10,000 child savings accounts through the federal GEAR UP program. Read more about it here.
Kim Pate (9:02 PM): Not surprisingly, First Lady Michelle Obama is greeted with a warm, bipartisan welcome. Her guest of honor tonight is Apple CEO Tim Cook. Fun Fact: 1 in 3 CFEDers uses either an Apple iPhone or iPad.
Sean Luechtefeld (8:59 PM): Team CFED is signing online. So far, we're joined by Kim Pate (Chief External Relations Officer), Jeremie Greer (Director of Government Affairs) and Kristin Lawton (Director of Communications). Have a question for one of them? Use the comments below and we'll do our best to respond.
Kristin Lawton (8:55 PM): Sen. Marco Rubio (R-FL) will deliver the official response to tonight's address. Sen. Rubio has been a champion of Children's Savings Accounts.
Sean Luechtefeld (8:52 PM): It's always fun to watch the pomp and circumstance of members' entrances into the chamber. Gabrielle Giffords is there...always such an inspiration!
Join us Tomorrow as we Live Blog the 2013 #SOTU
By Sean Luechtefeld on 02/11/2013 @ 03:00 PM
Tomorrow night, join CFED’s staff of experts as we live blog President Obama’s 2013 State of the Union address. With the economy remaining a central focus in the American mind, there are sure to be a number of important implications from tomorrow’s address for the work we all do to create pathways to financial security for low- and moderate-income American families. The address is scheduled for 9 pm EST/6 pm PST, so be sure to grab your laptop or tablet and jump in on the conversation.
To join us, simply visit The Inclusive Economy. Before the event begins, you’ll see a post telling you to standby as we wait for President Obama to begin his address. If you click on the title of that post, you’ll be taken to the permalink, which you can refresh often to see the latest additions to the conversation. From there, you can use the comments function to add your thoughts or pose questions to our staff of experts. You can also join the conversation using Twitter; just make sure you’re following @cfednews. If we like your Tweet, we’ll include it in the conversation!
We hope you’ll be able to join us, and that you’ll tell your colleagues to do the same. If you have any questions, don’t hesitate to send me an email. See you tomorrow!
Is Your 401(k) Obsolete?
By Anne Kim on 02/11/2013 @ 11:45 AM
EDITOR'S NOTE: This post originally appeared on Washington Monthly's Ten Miles Square blog. Read it here.
New research by the firm HelloWallet finds that more than a quarter of Americans who have an employer-sponsored retirement plan are raiding these accounts for other uses.
According to HelloWallet’s report, Americans are withdrawing more than $70 billion a year from their retirement savings—and often paying big penalties to do so. On top of regular income taxes, early withdrawals are subject to a 10 percent additional tax penalty, which depending on the bracket, could eat up nearly half of a person’s withdrawal.
For many people, employer-sponsored retirement plans are the only mechanism “forcing” them to save. Yet the retirement-only focus of the current system isn’t versatile enough to meet people’s real needs—especially to cope with emergencies such as a job loss or a horrifically expensive car repair.
The depth and breadth of this ”leakage” from Americans’ retirement accounts means it’s time to rethink the kinds of savings accounts that all Americans should own. In particular, new ways to encourage emergency savings could help ensure that 401(k)s don’t continue to be an expensive, last-resort piggybank for so many Americans.
According to new data from CFED, 44 percent of American households don’t have the cash to survive three months at the federal poverty level if they suffer a loss of income. Among 401(k) accountholders who lack this cash cushion, HelloWallet found that nearly 1 in 3 have “breached” their retirement savings, versus just 3 percent of accountholders who have enough emergency savings put away.
While it’s easy to dismiss emergency savings as something every American “should” do—the same way people “should” get more exercise and skip the buffalo wings on Super Bowl Sunday—the reality is that too many Americans either don’t make enough money to save or lack the tools and capability to manage their resources optimally.
According to the FDIC, nearly 30 percent of Americans don’t own a savings account, while nearly a quarter of households rely on check cashers, pawn shops or other high-cost financial services that eat up people’s money and provide no avenues to save.
These issues are part of a much larger failure of our economic system to encourage savings, especially among those with lower incomes who need it most. Indeed, the predatory nature of so much of the financial marketplace in recent years—from payday loans to subprime mortgages to hidden credit card and 401(k) fees—has had the effect of stripping many Americans of much of the modest financial assets they’ve managed to accumulate.
Reversing these predatory practices is the mandate of the new Consumer Financial Protection Bureau (CFPB), created by the Dodd Frank financial reform law. The CFPB should be allowed to do its job, despite the efforts of some lawmakers who are fighting hard to weaken the agency. We also should be having a national conversation about big reforms, such as “stakeholder accounts” that can help all Americans become better lifetime savers.
But in the absence of political and budgetary appetite for large-scale solutions, policymakers should at least consider some incremental solutions in the short term. For example, here are a few small ideas to help stem the use (and abuse) of retirement savings and to tackle the emergency savings problem:
Encourage employer-linked emergency savings. Especially now that automatic enrollment in employer-sponsored retirement accounts is increasingly the norm, the workplace is one place where employees can count on being encouraged to save.
One idea, championed by David John of the Heritage Foundation, is to follow the lead of the United Kingdom, where “corporate platforms” allow employer-provided contributions to be used for both retirement and non-retirement purposes and where employees can have one-stop-shop access to all of their accounts.
The possibilities under this approach could include “auto-saving” into an emergency savings account or even an employer-sponsored plan to encourage investments in U.S. savings bonds (which are surprisingly liquid and even ideal for workers without traditional savings accounts).
Broaden access to disability and accident insurance. According to the Employee Benefits Research Institute, barely half of workers in medium and large businesses have accident or sickness insurance, while only a quarter of workers in small businesses have any form of short-term disability insurance at all.
While insurance isn’t a perfect substitute for savings, it can be a critical means of income “support” for someone who is sick or has an accident and is consequently unable to work. More employers should be encouraged to offer it, and more workers should be encouraged to participate.
Tweak the tax code. The tax code currently takes an all-or-nothing view toward savings, with retirement savings being the only savings to enjoy tax benefits. Why not, as the Urban Institute’s Gene Steuerle suggests, “scale” the benefit so that people get bigger breaks (or smaller penalties) the longer the money stays in a savings account? For example, someone who left their money untouched for 20 years would pay fewer penalties than someone who raided their savings after a few years.
Another idea, proposed by the New America Foundation, would be to build on the current Saver’s Credit, which currently provides a small federal tax credit for retirement savings by low-income workers. This proposal would dramatically expand the benefit by providing a refundable “match” and allowing it to apply to savings in shorter-term vehicles such as one-year certificates of deposit or U.S. savings bonds. This match would both beef up the emergency savings available for the workers who need it most and incentivize more savings as well.
A potential upcoming debate on tax reform might be the best chance for Congress to rethink how to encourage more savings and help Americans become more secure. If Congress can’t get the federal budget in order, it should at least help American households get on sounder footing.
CFED Awarded $125,000 Grant from Capital One for Innovative Asset-Building and Microenterprise Services Initiative
By Kristin Lawton on 02/08/2013 @ 11:16 AM
Funding will be used to advance the financial security and upward mobility of low-income entrepreneurs.
CFED announced a $125,000 grant today from Capital One Financial Corporation to support work to identify new scalable opportunities to help disadvantaged entrepreneurs achieve upward economic mobility. The grant will facilitate a partnership between CFED and several microenterprise organizations, including Accion Texas, Inc., the California Association for Micro Enterprise Opportunity (CAMEO), the Enterprise Development Group (EDG) in the Washington, DC metro area, and others. Through these partnerships, CFED will promote emerging practices that service providers can implement to ensure that their clients have access to the financial products and skills they need, and are actively using them to make their businesses stable and sustainable.
“Accion Texas, CAMEO, and EDG, all high-performing, innovative leaders in serving low-income entrepreneurs, will be able to elevate their promising practices and cross-pollinate ideas that can help clients achieve financial security and upward economic mobility,” said Andrea Levere, CFED president. “Capital One’s leadership and support is making it possible to extend the project’s impact beyond our four active partners and reach the wider field of microenterprise practitioners, policymakers and financial institutions.”
The Capital One grant will fund a number of the project’s core activities and products in 2013 including:
- In-depth interviews with key staff at the four partner organizations to learn about their clients’ specific financial capability and product needs, and the operational opportunities and obstacles that affect capacity to deliver new solutions.
- Small group convenings to share our findings and identify ways to replicate effective innovations.
- The development of public education materials, such as an Emerging Practices Guide, a Policy Analysis Report, and several Field Innovation Briefs to be disseminated to policymakers, practitioners, financial institutions and other key stakeholders to make them aware of field developments and opportunities to support promising approaches.
“CFED is a leading national intermediary with decades of experience that combines expertise in both microenterprise and asset building to create synergies in support of microenterprises and the self-employed,” said Daniel Delehanty, senior director, Community Development Banking at Capital One. “Through Capital One’s Investing for Good program, we continue to work with organizations like CFED to help microentrepreneurs grow their businesses through capacity building and integration of innovative financial capability training and support that ultimately helps to create more jobs and stimulate local economies.”
About Capital One
Capital One Financial Corporation, headquartered in McLean, Virginia, is a Fortune 500 company with more than 900 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and the District of Columbia. Its subsidiaries, Capital One, N.A. and Capital One Bank (USA), N. A., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. We apply the same principles of innovation, collaboration and empowerment in our commitment to our communities across the country that we do in our business. We recognize that helping to build strong and healthy communities - good places to work, good places to do business and good places to raise families - benefits us all and we are proud to support this and other community initiatives.
"One Misstep Away from Financial Disaster"
By Hannah Emple on 02/07/2013 @ 09:00 AM
EDITOR'S NOTE: This post originally appeared on The Ladder and can be read here.
Today is a big day for the asset building community. Our friends at CFED have released their newly updated 2013 Assets and Opportunity Scorecard which evaluates household financial security across the U.S. and grades states on how well or poorly they support asset development and promote opportunity.
As has been true in recent years, the key finding is that huge swaths of the population are living in a precarious state of "asset poverty." As our Justin King told the Huffington Post: “These are households and individuals that are living paycheck-to-paycheck. And without savings, you’re one misstep away from financial disaster.” As Jillian Berman for HuffPo explains, people are "coping with stagnating wages and rising prices. This group is also navigating a banking system that subsidizes wealth-building programs -- like homeownership and retirement accounts -- that are geared towards the wealthy but don't offer the same boost to poor and middle-class savers." That gap exacerbates disparities in financial security over time - people with assets are able to leverage what they already have to support long term goals, while the rest are left scrambling to meet basic needs, unable to effectively plan and save for the future.
NPR also produced a strong piece using the Scorecard as a launching point, click here to read or listen, then navigate over to the Scorecard to explore the data yourself. CFED is also hosting a webinar today at 1pm to introduce the Scorecard findings. Use the scorecard to get information about how people in your state are faring and be sure to check out the action on Twitter with the hashtag #CFEDScorecard.
Recordkeeping Fundamentals: NEW! Online Module for Self-Employed Taxpayers
By Lauren Williams on 02/05/2013 @ 02:30 PM
EDITOR'S NOTE: This post originally appeared on the National Community Tax Coalition's blog and can be read here.
Few entrepreneurs go into business because they love keeping detailed records of their business finances. Many, instead, launch a business in pursuit of self-fulfillment, independence, personal satisfaction and even necessity. Still, sound recordkeeping is essential for tracking business performance, making critical adjustments to improve performance and for tax purposes. Even the most talented entrepreneurial makers and doers often need some guidance when it comes to keeping accurate, timely and organized records.
The tax filing season is a built-in, structured opportunity for self-employed individuals to get organized and learn good recordkeeping habits. Preparing for tax time, though a hassle in the short-term, can reward entrepreneurs over the long-term in ways that eclipse the brief stress and complexity brought on by getting and staying organized. Not only does early and thorough preparation for tax filing help entrepreneurs acquire and maintain better control of their business finances, a study on the behavioral triggers that incent business owners to keep better records showed a significant correlation between preparedness and clients’ tax refunds: the more prepared a client was, the higher their tax refund.
CFED and the NCTC have partnered to develop “The Fundamentals of Recordkeeping,” a brief online NCTC University course that takes self-employed individuals from start to finish through the recordkeeping process. The material guides the client from the basics of determining their self-employed classification, to the rationale behind keeping good records, the types of necessary supporting documents, the details of tracking expenses, depreciation, business use of home and more, testing their comprehension through quick quizzes along the way.
VITA programs and other community-based tax assistance programs are powerful intermediaries that can help microbusinesses get a handle on their finances at tax time and introduce them to a host of products and services that support small business development and asset building. We encourage programs to inform their volunteers and clients that this course is available and to keep an eye out for flyers and handouts they can provide to their clients.
Upcoming Event: Can America Save Itself?
By Anne Kim on 02/04/2013 @ 04:00 PM
Can America Save Itself?
Tax Reform, Savings and Financial Security
A Breakfast Policy Forum Sponsored by CFED
February 26, 2013, 8:30 - 10 am
121 Cannon House Office Building
Breakfast available at 8:15 am
- Rep. Richard Neal (D-MA)
- Rep. Jim Gerlach (R-PA)
- Jonathan Mintz, Commissioner, New York City Department of Consumer Affairs
- Andrea Levere, President, CFED (Moderator)
- Reid Cramer, Director, Asset Building Program, New America Foundation
- Pamela Everhart, Senior Vice President, Benefit Policy Development & Thought Leadership, Fidelity Investments
- David John, Senior Research Fellow in Retirement Security & Financial Institutions, The Heritage Foundation
- Lisa Mensah, Executive Director, Aspen Institute Initiative on Financial Security
- Bob Friedman, Founder, CFED (Moderator)
A potential push on tax reform offers Congress a chance to solve one of the biggest threats to Americans’ financial security: the lack of household savings. Nearly half of American households lack the cash savings to weather a sudden financial crisis, such as an accident or a job loss.
At this breakfast event, some of the nation’s top experts on savings and financial security offer their ideas on the current critical role of tax policy in savings and what tax policy can do to help all Americans build bigger nest eggs for their futures. Click here to RSVP via email.
Follow the conversation during the event on Twitter using #CFEDforum!
Recording of 2013 Scorecard Release Webinar
By Ethan Geiling on 01/31/2013 @ 09:00 AM
Yesterday, CFED released the 2013 Assets & Opportunity Scorecard, revealing that despite strong signs of economic recovery, millions of Americans are still living on the brink of financial disaster. The percentage of households in liquid asset poverty edged slightly upwards this year to 43.9%.
During the national release webinar, experts from CFED and the Assets & Opportunity Network discussed the state of financial security and opportunity in America.
Andrea Levere, president of CFED, introduced the webinar by explaining how the Scorecard has helped to to broaden the perspective of policymakers and opinion leaders to focus on helping people improve their long-term chances of economic mobility through savings and building assets in ways that complement essential safety-net programs.
Jennifer Brooks, Director of State & Local Policy at CFED, discussed the main findings from the Scorecard. For the second year in a row, nearly half (44%) of households—equivalent to 132.1 million people—lack the savings to cover basic expenses for three months if unemployment, a medical emergency or other crisis leads to a loss of stable income.
Kasey Wiedrich, Senior Applied Research Program Manager at CFED, presented key data measures in the Scorecard, including liquid asset poverty, employers offering health insurance, affordability of homes, and student loan default rate.
Jennifer Brooks talked about strength of state policies across the country and variation in the extent to which states have adopted these policies. New York has the strongest policies, while Mississippi has the weakest.
Stephanie Bowman, Executive Director of the Washington Asset Building Coalition, discussed her Coalition’s efforts to build a constituency to influence state policy.
David Rothstein, a member of the Assets & Opportunity Network Steering Committee, also weighed in, explaining how the Network is building a constituency to support financial security and opportunity policies.
Finally, Jeremie Greer, Director of Government Affairs at CFED, gave a sense of the climate in Washington and what’s on the “to do” list for Congress and the Administration this year.
Join the #CFEDscorecard Conversation
By Veronica Weis on 01/29/2013 @ 10:30 AM
Tomorrow is the release of the 2013 Assets & Opportunity Scorecard and we couldn't be more excited! The updated Scorecard website will go live at midnight tonight with the latest data, reports and more. For those interested in a live summary of the findings from our CFED experts, it's not too late to register for the release webinar from 1:00-2:00 PM EST. Still want to follow the conversation but can't join us for the webinar? We'll be live tweeting all day, blogging the highlights and updating our Storify page.
Follow us on Twitter
Our organization's account, @CFEDNews, will be busy updating the Twitterverse with news of the Scorecard release. From 1:00-2:00 PM EST, we'll be live tweeting the webinar. If you have a question or comment to contribute, please send us a tweet and include the hashtags #CFEDscorecard and #assetpoverty.
Like us on Facebook
You can also follow along on our Facebook page. We plan to post graphics and other surprises. If you have any questions or comments, don't hesitate to post on our wall or send in a direct message.
Read our blog
The Inclusive Economy will also feature highlights from the report tomorrow so be sure to drop by here for more Scorecard news.
Discover our Storify
This year, we've created a Scorecard release Storify page to compile the best of social media. It's already up and running to capture buzz before the release tomorrow. Be sure to check it out and let us know what you think!
Infographic: How EITC Helps Working Families
By Katie Wright, Guest Contributor on 01/28/2013 @ 11:30 AM
EDITOR'S NOTE: This infographic originally appeared on the Center for American Progress (CAP) website. Katie Wright - a former CFED Fellow - is a Research Associate with CAP's Half in Ten Campaign.
Many low- and moderate-income families will claim the earned income tax credit this tax season—and all Americans will reap the benefits. In the recent fiscal showdown deal, Congress voted to continue the 2009 expansions of the earned income tax credit, which also acknowledged the increased costs to families raising three or more children and corrected the “marriage penalty,” by which some married couples risked losing a portion of their earned income tax credit for the five years following their union.
Not only does the earned income tax credit keep millions of working families from slipping into poverty each year, it also leads to positive outcomes for family health and student education. Earned income tax credit dollars benefit our economy, and most families who receive the credit end up paying billions of dollars more in net federal income tax than they receive in the earned income tax credit over time. With the 2012 tax season kicking off next week and today being Earned Income Tax Credit Awareness Day, now is the time to get the facts on one of the most important tax credits helping to ensure that work pays for working families.
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