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.”
In Case You Missed It - August 8 Edition
By Sean Luechtefeld on 08/08/2011 @ 11:00 AM
In case you missed it, here’s your recap of last week’s top posts from in and around the assets & opportunity blogosphere.
A Deep Sigh of Relief…
…mostly because breathing will now be possible. The Green for All blog notes that the White House and 16 key agencies, EPA included, have signaled significant increases in support for those communities most affected by pollution. Read about the new measures here.
Glad That’s Over. Wait...What? It’s Not?
Seems like we’ve heard all we want to hear about the debt ceiling and deficit reduction measures. Unfortunately, we haven’t heard all we will hear. David Bradley, Executive Director of the National Community Action Foundation, notes on his blog that these talks are nowhere near over and that we should expect to hear more throughout the rest of 2011. What’s worse – the possibility for cuts to CSBG. Read more here, if you can tolerate it.
With Just the Right Amount of Snark…
…the bloggers at AFL/CIO note that amidst the hubbub of debt talks, attention is straying from jobs. Yet, a slowing of progress on the jobs front is clear, evidenced by rising unemployment rates in 90 percent of America’s cities. For a slew of interesting data, check out the AFL/CIO Now blog.
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Levere to Speak on Net Impact Call
By Sean Luechtefeld on 08/04/2011 @ 11:15 AM
Today, August 4, 12:00 Noon – 1:00 PM EDT / 9:00 AM – 10:00 AM PDT
Today, CFED President Andrea Levere will be the featured speaker on Net Impact’s Issues in Depth call. The topic of the discussion, Building the Inclusive Economy, will explore how the asset-building field is working to merge community practice, public policy and private markets in innovative ways to bring all Americans into the mainstream economy.
Issues in Depth calls “provide Net Impact members with the chance to interact with industry and thought leaders, and stay up-to-date on the latest hot topics and career trends in environmentally and socially responsible business.” The call will allow participants the opportunity to ask questions and will feature interactive discussions about the issues that matter most in our field.
For more information or to join today’s call, visit the Net Impact website. The call is only open to Net Impact members, but we hope you’ll be able to join Andrea later today!
Financial Education for Preschoolers: Findings and Resources
By Johanna Barrero on 08/04/2011 @ 11:00 AM
CFED is currently involved in a number of Children’s Savings Account initiatives serving young children, several of which are targeted toward children age five and younger or children in Head Start and Early Childhood Development programs. We know from experience that children’s savings initiatives that incorporate both a savings account and financial education combine two powerful opportunities for families: a chance to save and a chance to learn. Since we are working with such young children, we had to ask: what is appropriate financial education for preschoolers? What can we teach children at this early stage about money? Karen Holden from the University of Wisconsin-Madison addressed this question in her study, Financial literacy programs targeted on pre-school children: development and evaluation.
The study discusses childhood cognitive development and highlights some important aspects that many of us already intuitively know. Perhaps most important is that habits children learn when they are young form the basis for their future behavior; in this case, their financial behavior. Since most of the habits children acquire during the early years depend greatly on what they see and learn from their parents, financial education for preschoolers must rely on parents reinforcing these concepts at home. This means that teaching financial literacy to preschoolers can be most effective when the whole family is involved.
So how do we know what money concepts to teach to preschoolers themselves? The study points out that money as an abstract, isolated concept is almost impossible for children to grasp. Preschool-aged children have not yet developed the ability to add or subtract, and they have no direct experience earning money, spending it or using a financial institution to save it. But, they do have a pretty good understanding of the concept of exchange and value and people’s willingness to make deals and trade things. They learn this from an early age through constant negotiations with their parents and caregivers and through conditional transfers (rewards for desired behavior). They also learn these concepts through playing and socializing with other children. Children form their own ideas and understanding about money based on their experience and their engagement in social practices involving money. Therefore, an effective way to teach children about the value of money and money management skills is to incorporate these concepts into their daily social interactions and familiar environments.
The notion of time is another important cognitive developmental factor to consider when delivering financial education to preschool children. Children this age do not fully understand the difference between past, present and future, all of which are essential concepts for understanding the principles of saving and investing (i.e., delayed gratification in the present for future gains). According to the study, children first understand the difference between present and future around important life events such as their birthdays. Creating special events around saving, like setting a savings goal for an important date, may be an effective way of delivering financial education that takes into account children’s concept of time.
In addition to the fascinating information on children’s cognitive development, the study provides a very comprehensive review of financial literacy curricula for school aged children and youth. Some of the programs reviewed were developed abroad, while others were developed in the United States; however, only a few of these curricula target children in the preschool years.
Here are a few of the most compelling preschool financial education resources from that list:
- Thrive by Five (Credit Union National Association): Teaching your preschooler about spending and saving (http://www.creditunion.coop/pre_k/index.html).
- University of Nevada Cooperative Extension has two resources: Money Sense for your Children (http://www.unce.unr.edu/programs/sites/moneysense/ and Money on the Bookshelf: A Family Financial Literacy Program (http://www.unce.unr.edu/programs/sites/moneybookshelf/).
In addition to these resources, it is worth mentioning the recent release from Sesame Workshop, in partnership with PNC bank’s Grow Up Great initiative, For Me, for You, for Later: First Steps to Spending, Sharing and Saving. This free kit includes an activity book, a parent guide, saving jar labels and a DVD featuring Elmo and other Sesame Street characters discussing the basics of spending, sharing and saving.
With many new studies and materials coming out each month, expect another blog post covering more financial education resources for children!
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The Critical Nature of Human Capital
By Steve Crawford, Senior Fellow on 08/03/2011 @ 11:00 AM
Of the three component of the competitiveness triangle – innovation, entrepreneurship and human capital – the most important is human capital – the knowledge, skills and capabilities of the workforce. Indeed, it is a vital ingredient of the other two. Since this will be my last blog post in this series (I have taken a new position as a Research Professor at the George Washington University Institute of Public Policy), I want to make several points about the growing gap between the demand for and supply of workers with post-secondary education and skills, the opportunities this gaps offers for upward mobility but also the obstacles (affordability and more) the poor face in trying to seize such opportunities, and the role of public policy in facilitating post-secondary access and success. These thoughts draw in part on my experience as a college professor and administrator, elected school board member, special advisor to a state higher education commission, and executive director of a state workforce investment board.
Most simply put, the key issues are quality, equality, quantity, and productivity. Quality refers to the depth and significance of the knowledge and skills acquired. For years we have lamented the mediocre performance of American K-12 students on international tests, but comforted ourselves with the belief that our higher education system is the world’s best. Yet, a growing body of evidence suggests otherwise.
The latest contribution to this critique is the book, Academically Adrift, by Richard Arum and Josipa Roksa. Based on a study of 2,322 students in 24 four-year institutions, it finds no statistically significant gains during the first two years of college in the critical thinking, complex reasoning, and writing skills of at least 45 percent of the sample, as measured by the Collegiate Learning Assessment. The authors argue that these troubling findings are the result of a student body distracted by socializing or employment and an institutional culture that places a low priority on undergraduate learning. Yet, by quality I also mean the economic relevance of the applied learning that does take place. On this, see the recent publication by the National Governors Association: Degrees for What Jobs? Raising Expectations for Universities and Colleges in a Global Economy.
Equality refers to the enormous variations in educational attainment by socioeconomic status, especially race and class. The high school graduation rates (not counting GED) of African-American and Hispanic ninth graders hover around 60 percent, vs. 81 percent for whites and 90 percent for Asians. Differences by income group are even greater: 82 percent of young people from the highest income quartile in America have attained a bachelor’s degree by age 24, compared to only 8 percent of those from the lowest income quartile.
We like to think that education is the door to opportunity for poor children to achieve upward mobility, but in fact it may simply serve to reproduce or even amplify existing inequalities. Although the degree-attainment rates of minorities and low-income students have improved, the gaps that separate Latino and African-American students from their white peers actually are wider today than in 1975, and the gap between low-income and high-income students has doubled.
Quantity has become an issue for two reasons. First, the U.S. has fallen from first among countries in the proportion of young adults who attain a post-secondary credential to 10th, thus perhaps weakening our competitiveness in the global economy. Second, most new jobs require at least some post-secondary education, and even at this time of high unemployment, many good jobs are going begging because employers cannot find workers with the needed skills. This is partly a function of the distribution of specialties among those with post-secondary credentials but not entirely by any means.
President Obama and other national leaders have called for dramatically increasing the proportion of youth obtaining a post-secondary credential, but this vision will be very difficult to realize because of issues of readiness and affordability. The insufficient numbers of young adults who are college-ready reflects the quality and equality problems discussed earlier. Yet, it also reflects the “wilt” among low-income and minority teenagers in their determination to pursue higher education.
Fortunately, several studies and pilots show that matched educational savings accounts not only help young students save money for college; they also “make hope concrete” and motivate students to buck their peer cultures and study hard in high school. On this, see especially the publications of the Center for Social Development at Washington University in St. Louis and the work of CFED, especially its Partnership for College Completion, a partnership with the United Negro College Fund, KIPP schools, and Citibank.
Affordability, on the other hand speaks to productivity. The traditional way to make higher education more affordable has been to expand the financing for it, usually through public financing of institutions and student loans and grants. The problem is that costs have continued to rise far faster than the general inflation rate. Moreover, the states and the federal government face daunting fiscal constraints, student educational debts are generating a backlash, and the public is beginning to question higher education’s value proposition. According to a recent Pew Research Center poll: “A majority of Americans (57%) say the higher education system in the United States fails to provide students with good value for the money they and their families spend.” All this is creating a growing pressure to increase the productivity of higher education.
There are many ways to increase productivity – from three-year degrees to more online education – but most are controversial. The most interesting work in this area comes from Harvard Business School professor, Clayton Christensen and his colleagues. They have produced two important books, Disrupting Class (2008) and The Innovative University (2011) and a report co-published with the Center for American Progress, Disrupting College (2011). All these do a superb job of applying Christensen’s theory of “disruptive innovation”, first presented in his classic, The Innovator’s Dilemma (1997), to education.
I cannot close without saying a word about K-12 education. It’s a good thing that the country is debating ways to increase teacher effectiveness, from improving teacher education to linking salaries to student performance. But we are neglecting two other promising paths forward: public school choice and work-based learning. There is not room here even to summarize key points, but on the former, see Richard Kahlenberg’s excellent book, All Together Now: Creating Middle Class Schools through Public School Choice, which shows how to counter the terrible effects of concentrated poverty –in part by combining choice with the requirement that every school take its fair share of free-and-reduced-meal students. On the latter, see the recent report from the Harvard Graduate School of Education, Pathways to Prosperity: Meeting the Challenge of Preparing young Americans for the 21st Century, a report on work-based learning programs that hold great promise for improving high school graduation rates, especially of low-income males.
EDITORS’S NOTE: Good luck in your new position at George Washington, Steve!
In Case You Missed It - August 2 Edition
By Sean Luechtefeld on 08/02/2011 @ 02:30 PM
In case you missed it, here’s your recap of last week’s top posts from in and around the assets & opportunity blogosphere.
Since You Haven’t Heard Enough Already
Unless this is your first visit to the interwebs in weeks, you’ve noticed that Congress has reached an agreement on the debt ceiling debate, Congress has approved the plan and it is on its way to President Obama’s desk as I write this blog post. Kathryn Baer’s Poverty & Policy blog provides an insightful analysis of the deal, arguing that while not ideal, much worse outcomes could have happened. Check it out here.
More on the Racial Wealth Gap
Last week, CFED President Andrea Levere spoke to the National Urban League Convention about some of the chilling findings released in a recent Pew Research Center report about the growing racial wealth gap. This week, the Oklahoma Policy blog reports that one factor compounding the problem is disparity between African-Americans and their white counterparts in unemployment levels. In Oklahoma, for example, the unemployment rate for whites is 7.2% (lower than the national average), but is almost twice that amount (13.1%) for African-American Oklahomans. Read all about it here.
Strong Cities Initiative Launches
The Harvard Kennedy School’s Government Innovators blog posted news about the White House “Strong Cities, Strong Communities” Initiative. The post explains the initiative, whose goal is to expand economic development within American cities across a variety of sectors. The program will include a six-city pilot, with Fresno, Memphis, Detroit, New Orleans, Cleveland, and Chester, PA, participating. Read the full press release here.
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Federal Policy Update: Debt Ceiling Deal and Economic Development
By Carol Wayman on 08/02/2011 @ 02:00 PM
Moments ago, the Senate voted to approve a plan that would increase the debt ceiling and decrease the federal deficit by roughly $1 trillion over the next ten years. The plan, which earned approval from the House yesterday, will go to President Obama to sign into law by the end of the day today.
While a much-needed step in ensuring the U.S. government avoids defaulting on debts, the plan does not go far enough given the needs of low- and moderate-income Americans. In order for a deficit reduction plan to truly do what is needed for these disadvantaged communities, a reduction in spending is needed alongside increases in revenue. Those revenue increases, however, are missing from the bill.
In other federal policy news, my opinion piece calling for greater investment in economic development activities by the Federal Home Loan Bank system was published in the 36th anniversary edition of Shelterforce Magazine. Read the piece here, and then use the comments section below to weigh in on how the FHLB’s Affordable Housing Program can serve as a model for expanding the nation’s economic development system.
Financial Security: A Breakdown
By Rashmi Joshi on 07/29/2011 @ 05:00 PM
As CFED begins its 2012-2014 Strategic Planning process, CFED Communications Intern Rashmi Joshi takes a look back at what we’ve accomplished during the 2007-2011 Strategic Plan phase in a series of blog posts. You can read last week's post here.
Welcome back to our new series that analyzes the successes of our Strategic Plan for 2007-2011! This week’s post will discuss the successes of the objectives that CFED initially set for Financial Security. For all four years (2007-2011), CFED set out to provide opportunities to achieve financial security for the millions of Americans who face hardships that prevent them from building wealth. One goal that was set throughout the lifespan of the Strategic Plan was to positively impact 50 million individuals through policies that provided asset-building opportunities. The assumption here, of course, was that CFED was part of a movement behind the passage of these policies. CFED performed consistently for the past four years, positively affecting an estimated 43 million Americans through policy change. Therefore, we achieved 86% of our goal.
The statement of these findings brings to light an obvious question is: How did CFED measure the number of individuals who were positively affected? We defined an individual asset-building opportunity as an Individual Development Account (IDA), Children’s Savings Account (CSA), Matched 529 Account, employer matched retirement account, and any other matched savings account. In order to calculate the number of individuals who held one of these accounts, CFED tracked the AFI funding as proxy, multiplied this number by two to determine the total funding (including non-federal matches), and divided that amount total by a set per-account amount.
What kind of state and federal policies did CFED support that allowed for these asset-building opportunities? The answer lies in the other measure used to track CFED’s progress in achieving its goals within the category of Financial Security. Starting in 2009, CFED set a goal of achieving 100 state or federal policy changes that supported asset building each year. This goal was met by 96% until the third quarter of 2010, when CFED dramatically increased its effectiveness in policy change. From Q3 2010 onwards, CFED has met its goal of creating 100 policy changes towards asset building at the state or federal level per year by 115%. (2011 figures are in the process of accumulating, and are therefore excluded from this study.)
Achieving 115% or even 96% policy changes that support asset building seems like a difficult task. In order to calculate this figure, we asked ourselves the question: Did a positive legislative or regulatory change happen? The answer was yes, several of the policies that we supported went above and beyond in meeting this criterion.
Overall, CFED met its goals regarding the first measure – providing asset-building opportunities to 50 million Americans – with a 96% success rate. From 2009 until late 2010, CFED held a 96% success rate for its goal of obtaining 100 federal or state policy changes. This, combined with CFED’s 115% success rate with which the goal was met in the last quarter of 2010, creates an average 98% success rate with which CFED accomplished the second measure within the Financial Security category of the Strategic Plan – that is, the measure of state and federal policy changes that supported asset building. These successes demonstrate CFED’s unique ability to transform abstract issues of low-income communities into real-life solutions that can sustainably improve their quality of life. In this way, CFED continues to make strides in providing pragmatic, viable solutions to the financial crises faced by underprivileged communities.
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CFED’s Levere Discusses Racial Wealth Gap at NUL Conference
By Sean Luechtefeld on 07/29/2011 @ 04:00 PM
Earlier today, CFED President Andrea Levere gave a presentation to the National Urban League Convention stressing the critical need to build infrastructures that build assets. Andrea’s address highlighted the fact that rates of asset poverty exceed those of income poverty, especially among some of America’s most vulnerable populations, including communities of color.
There has been a lot of talk this week about the asset disparities for families of color. In her discussion of the burgeoning racial wealth gap, Andrea cited a report released earlier this week by the Pew Research Center, which found that racial disparities in asset ownership are at their highest levels since the mid-1980s.
A few of the key findings of this chilling research that Andrea discussed include:
- The median wealth of white households is 20 times higher than the median wealth of black households and 18 times higher than the median wealth of Hispanic households
- Four times as many Hispanic and black households had zero assets when compared with their white counterparts
- Thirty-five percent of black households and 31% of Hispanic households have zero or negative net worth, compared to 15% of white households
To download a PDF of Andrea’s presentation today in Boston, click here. Then, leave your comments by clicking the link below.
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