Is the Value of a College Degree Worth the Cost?
By Dominique Derbigny on 12/11/2013 @ 02:00 PM
Lately we’ve been hearing a lot of folks proclaim that college has gotten so expensive that it is no longer a worthwhile investment. They say that with rising tuition costs and student loan debt surpassing the trillion-dollar mark nationwide, maybe college isn’t for everyone. Yet we know that a college education is the linchpin to upward mobility for many people, particularly for students from low- and moderate-income (LMI) families. Rather than abandoning higher education altogether, we should figure out how to reform the way we finance higher education to make it attainable for students from LMI families. I recently attended two events that explored innovative strategies to address the challenge of paying for college.
At a Hamilton Project event on October 21, 2013, Sandy Baum and Judith Scott-Clayton–authors of Redesigning the Pell Grant for the Twenty-First Century–proposed making major reforms to the Pell Grant program including:
- Simplifying the eligibility and application process
- Providing financial guidance and coaching services to incoming college students
- Providing visible incentives to reward college completion and not just enrollment
The suggested reforms help to promote both college enrollment and completion among LMI students, addressing the current challenges of low graduation rates and a missed opportunity to encourage college going under the existing program.
During the same event, Susan Dynarski, Professor of Education at the University of Michigan, discussed developing an income-contingent student loan repayment plan that would:
- Create a debt repayment system that automatically raises or decreases monthly payment amounts based on earnings
- Forgive any remaining debts after 25 years of payments
- Include an interest rate that adjusts annually over the life of the loan and is not nominally capped
While I’m not convinced about extending the standard repayment period by 15 years, I believe that the automatic nature of this proposed system eliminates the arduous and often daunting process of making changes to student-loan repayment plans each time a borrower has fluctuations in income.
I also virtually attended a Kansas University Assets and Education Initiative event on November 7, 2013, entitled, “Rethinking the American Dream: Education, Student Debt and Asset Building.” William Elliott noted that shifting more of the costs of college to loans has a negative impact on college enrollment, completion and financial health after college particularly for LMI students. Instead, he suggested that asset-based financial aid strategies, like Children’s Savings Accounts, can increase college enrollment and completion rates, as well as lower student debt for LMI students. Not only do savings accounts promote college attendance, but they make it easier for individuals to cover costs and complete their education once they get there.
With persistent differences in the earnings potential of college graduates as compared to high school graduates, it’s clear that college degrees are not going out of style anytime soon. We need to continue to explore ideas for changing the way we finance higher education to ensure that all Americans have an equal chance of attaining this valuable asset.
Results of 2013 IDA Program Survey Show Programs See Overall Funding Decline
By Alicia Atkinson on 11/20/2013 @ 11:00 AM
This summer, as an Intern for CFED’s Savings and Financial Security team, I had the opportunity to develop, disseminate and analyze the 2013 IDA Program Survey. The annual survey provides key information regarding the IDA landscape, which CFED then shares with the field. It has also informed the way our organization provides services and supports IDA programs around the country. (Click here to see significant findings from the 2010-2011 IDA Program Survey.) As I expressed in my previous blog post, I believe whole-heartedly in IDAs and have enjoyed the opportunity to help strengthen and support the field. IDAs have great potential to help low-income families build assets and increase their financial stability.
The 2013 survey was fielded online from July 29 to August 16 to the IDA community via direct email messages to IDA programs, email communication to the IDA Network listserv, and promotion on CFED’s website and social media outlets. To incentivize completion, CFED entered practitioners who completed the survey into a drawing for a $100 Amazon gift card. (Congratulations to our winner from the Minneapolis IDA Program!) After outreach and data cleaning was complete, 188 IDA programs were represented in the survey.
The survey results paint a picture of IDA programs that are providing a wealth of services to IDA participants and trying new, innovative ways to engage participants and help them save, while managing the impact of an overall decrease in funding. Here is a summary of the key findings for the 2013 IDA Program Survey:
- Roughly one in three IDA programs has seen an overall dip in revenue in the past year (see figure below). This has increased from last year’s survey in which one in four IDA programs experienced an overall revenue decrease.
- Federal funding (66%) remains the most common revenue stream for IDA programs. Private/Philanthropic (50%) is the second most common revenue stream for IDA programs.
- IDA programs provide a rich variety of wraparound services to participants both in-house or through referrals to other local and community resources. The most common services offered in-house by IDA programs were: credit counseling (58%), tax preparation assistance (51%), homeownership counseling (51%) and rental assistance (42%).
- Programs use innovative approaches to keep participants engaged. This includes assistance with other services, peer support groups, social media such as Facebook and Twitter, and text messages.
- Higher education has become a more frequent savings goal in the past year. Over a third (37%) of programs who allow savings for higher education report that it has become a more common goal for accountholders in the past 12 months. This change in asset focus may be indicative of the difficulty faced by low- and moderate-income participants in finding affordable homes and obtaining mortgages.
Thank you to all the IDA practitioners who participated in the survey! Your thoughtful responses will allow us to serve the IDA field more comprehensively and effectively. Please comment below if there is information about the IDA field that you are interested in learning more about, and we will do our best to include it into next year’s survey.
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SF Savers: College is Part of “How to Have a Fun Life” for Barry and His Son Jaray
By Claire Sorrenson, 1:1 Fund on 10/21/2013 @ 01:30 PM
EDITOR'S NOTE: This story originally appeared on the 1:1 Fund blog, which you can read here.
Jaray Perkins, an energetic kindergartener at Sherman Elementary School, loves riding his bike and doing sports as diverse as martial arts and rock climbing. When it comes to school, “you have to drag him away,” according to father Barry Perkins.
The landscape of education has changed a lot since Barry’s youth. “College is way more expensive than when I went.” In fact, Barry calculates that his son’s preschool cost more per semester than his college undergraduate degree. But, says Barry, “I believe in planning” now for Jaray’s future education.
Barry highlights the importance of setting early expectations for his son. “We talk about your choices as an adult and how you can have a fun life.” A fun life means having the freedom to make choices, which means having a job that allows you that freedom. Says Barry, “we talk about how you have more options” with a college degree. Barry definitely sees college in Jaray’s future. For Barry, it goes beyond surviving in today’s economy: “college is a good place to figure out what you do and don’t like.”
Saver Success Story: Meet the Rojos
By Jimmy Crowell on 09/11/2013 @ 03:30 PM
Now with expanded geographic eligibility: Accepting submissions from nearly 230 counties in 19 states!
CFED and Bank of the West have partnered to bring IDA practitioners a unique opportunity to support their homeownership savers. To advance homeownership and encourage the work of IDA practitioners, CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers in eligible counties within the 19 states Bank of the West serves. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted. This will be the last opportunity to receive programmatic support in exchange for saver stories in 2013, so act fast!
IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.
Need some inspiration? CFED and Bank of the West are pleased to share the story of one family’s participation in an IDA program and their subsequent journey to financial stability through homeownership:
In May 2012, Ruben and Jennifer decided to take the first steps toward homeownership. Saving money had always seemed hard, but they were determined to provide a better home and a safer environment for their children. The Rojos believed that if they wanted to make a change in their lives, it would be up to them to make it happen.
Ruben found out about Catholic Community Services’ Individual Development Account (IDA) Program through Habitat for Humanity and immediately enrolled. Unfortunately, his weak credit made it difficult to secure a mortgage. Through the financial education classes required by the IDA program, Ruben began working diligently to repair his credit score. He also learned how to budget for his family, and plug “spending leaks” so that the family could build their savings. Suddenly saving felt much easier – and Ruben was pleasantly surprised that the family only had to make a few small lifestyle changes to reach their savings goal.
In May 2013, one short year after enrolling in the IDA program, Ruben and Jennifer accomplished their goal of homeownership. They had always lived in apartments and had never owned a home before. The difference, Ruben says, is “like night and day.” For the first time, the family feels truly at home, and has enjoyed a sense of community and stability that had previously been lacking – and the children have quickly made friends in their new neighborhood.
Looking back on the experience, Ruben is astounded by all the unforeseen benefits homeownership has brought them. “My family and I started to have a healthier life. Our lives became more stable,” he explains. Now, the Rojos have adopted a new mindset when it comes to their finances, and plan to continue using the skills they learned through the IDA program. “We think differently now and feel, if we really want to, we can do almost anything,” says Ruben. And he’s passing on his learning to the next generation: “I plan to teach my kids good habits like saving,” he says with pride.
San Francisco Saver Story: Teaching Cole to Save
By Blanche Brown on 08/27/2013 @ 01:00 PM
EDITOR'S NOTE: This post originally appeared on the 1:1 Fund blog, which you should check out here.
Lauren Sigurdson is the mother of Kindergarten to College (K2C) Saver, Cole Basowski. The family received the K2C Steady Saver Award, which is given to families that save at least $10 for 6 months in a row. A San Francisco resident for twenty-five years, Lauren lives in the Inner/Outer Sunset neighborhood.
Please tell us about your Kindergarten to College student.
Cole just turned six. He is a special needs child and has a sensory processing disorder. He attends Lakeshore Elementary, which has a great special education program. He is very happy there and just a happy kid in general. He loves taekwondo and is very friendly. We live a block away from the Golden Gate Park. We love to go on the trails together. I am a single parent but have yet to receive any child support. So, this program really helps me.
Could you describe a typical weekday, from when you wake up to when you go to sleep?
In the morning, Cole plays with his cat. And then I walk him to school and I go to work. I work as a sales and marketing coordinator for a software company that sells to HR managers. I do a lot of planning and graphic design. We are a smaller company of about fifty people. Then, when I get off work, we go home. On the weekends, we try to ride our bikes and we go to the zoo a lot. Cole likes to make things so we do a lot of crafts.
How did you first hear about the K2C program?
I first learned about the program from a flyer that was sent home in Cole’s backpack. It was very comprehensive. I scanned it and emailed it out to my family almost immediately. They try to help us out when they can and I thought this account would be a great [way] for my family to consolidate the money they had been putting aside to help us. The matching program was a huge incentive. I don’t want to give away free money, especially when we don’t have a lot to go around. Kindergarten to College is really clear and easy to understand, which helps me and my family take action.
Are you an active saver? If so, why?
Yes, I’m an active saver through the automatic direct deposit I set up. I give ten dollars from every pay check. I wish I could do more. I only make ten dollars over the limit for what you need to be in the free lunch program, which is frustrating but it is good to see that you all give more money to those in the program. It is difficult for me to afford to stay in the city and rent a place. We just moved to a smaller place, but things are close. We don’t do things like go to the movies. But, I really want to stay in San Francisco so Cole can stay in this great school and so we can continue to be in this program.
What were your initial reactions to the program? What drew you to start participating in K2C?
My initial reaction was, ‘Oh, I have to share this with my family.’ I acted pretty much immediately after reading the flyer. I knew I had to take advantage of what’s being offered. It is a really good and important thing that is being done.
Were you nervous about any aspect of the K2C account?
I don’t think so. I just wanted to know more about how the program will develop in his other years in school. I didn’t have any trepidation though. It seemed clear to me.
These days, saving is difficult for many families. How do you make savings a priority?
It is hard being a single mom without any child support. I have to rely on my family. I don’t think ten dollars a month is the difference between food and not food. So, I contribute that. At one point, I was worried I would have to take Cole out of Taekwondo because of the costs. But my family always comes through. It is the same with the K2C account. When it is something important like this, we find a way to make it happen.
How do you think K2C will make a difference in your child’s education?
It will definitely give him the possibility of going if he decides he wants to go to higher education. He may be a special needs student but he is very smart and creative. He could design a new vacuum cleaner or something. I want this option to be available to him. This is an opportunity that I just couldn’t provide on my own.
What can your child learn from being part of K2C?
He can do a little bit of math now but I don’t know if he would fully comprehend what the program is or means. Cole can seem very creative but he wouldn’t understand what a lot of his peers do. Although I don’t know if the other kids in his grade know about the program either. He does understand getting his allowance of one dollar a week and saving that; he kind of hoards it. He always wants me to pay for things so he doesn’t have to touch it. He likes that his wallet is filled up with dollar bills.
Any advice for other K2C parents?
I would say take full advantage of every aspect of the program. They shouldn’t be missed. I can’t afford not to and I think it is kind of crazy for anyone to pass up this kind of opportunity.
When you were growing up, did you have any experiences with saving?
I had a bank account I was not allowed to touch. I knew not to ask for things or ask about the account. We didn’t have that much money. My mom showed me how to write a check and taught me about how banks worked. I didn’t have a lot of experience but I did know that if I wanted something I would have to save up my allowance and get it myself. It takes time. There isn’t that instant gratification that I think a lot of kids these days are used to. They don’t know how to save and work towards something. For Christmas, my parents bought Cole an iPad mini. And one of the first words he learned to read was “free” because he knew those were the games he was allowed to get.
CFED & Bank of the West Announce the Final Round of the 2013 Saver to Homeowner Story Fund
By Jimmy Crowell on 08/22/2013 @ 11:00 AM
Making investments in homeownership within Bank of the West’s 19-state footprint
CFED and Bank of the West have partnered to bring IDA practitioners a unique opportunity to support their homeownership savers. To advance homeownership and encourage the work of IDA practitioners, CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers in eligible counties within the 19 states Bank of the West serves. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted. This is the final round of funding for the Saver to Homeowner Story Fund in 2013.
IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.
Need some inspiration? CFED and Bank of the West are pleased to share the story of one family’s participation in an IDA program and their subsequent journey to financial stability through homeownership:
In December 2012, William Lo and his wife Len achieved the dream of homeownership– a dream that at first seemed impossible to reach. With the help from the Alliance for African Assistance’s IDA program, the Lo family achieved tangible change in their lives.
William Lo and his wife Len are originally from Myanmar, formerly known as Burma, where they had virtually no access to financial institutions. Due to unstable political and social conditions, William had trouble making ends meet as a pastor and was forced to flee to Thailand and Malaysia. While a refugee, William never dreamed of coming to the U.S., let alone owning a home. However, in 2003 the UNHRC discovered his case and referred him and his family for refugee status. They arrived in San Diego in June 2009.
William and Len didn’t even imagine owning a house until discovering the IDA program at the Alliance for African Assistance. William explains that the IDA program helps clients outline a goal for which they are saving, such as education, a business, a car, or buying a home. William was the organization’s only IDA saver in 2012 to identify homeownership as his IDA goal, “just to be different from the other Burmese who need only cars for work,” he jokes. He didn’t quite expect that it would actually happen, nor did he anticipate the enthusiasm, success and independence it would bring him.
Slowly but surely, the Los were able to save money every month until they accrued enough to start the home buying process. William attests that while saving money was difficult, it was nothing in comparison to the complexities of buying a home. He recalls that, as the purchasing process was in escrow, he sat down with his wife one evening and talked about what kind of feelings they should be having about the prospects of owning their own home. They both found it hard to label just how exactly they were feeling: “Should we be happy? But we are not yet, because the process is too complicated. Should we be sad? No, we cannot because a house is a big blessing. So what should we feel?”
Today – now that they have successfully closed on their home – William and Len Lo are able to report exactly how they feel: “extremely blessed.” Although the experience was daunting at times, they had worked hard to prepare, and with the support of the Alliance for African Assistance, the Los were up to the challenge.
But the story doesn’t end here. Now that they’ve seen their own dream come to fruition, the Lo family hopes to “pay it forward” – and help usher other members of the Burmese community through this process in the future.
15 Innovations for Municipal Leaders
By Sean Luechtefeld on 07/05/2013 @ 01:00 PM
Last month, NYU’s Wagner Graduate School of Public Service released Innovation and the City, an in-depth exploration of 15 municipal-level innovations to help city residents live better. From London to San Francisco and places in between, cities everywhere are doing great work to improve the lives of their citizens. The innovations documented by NYUWagner include:
- Boston & Chicago’s Updating 311
- San Francisco’s Kindergarten to College (K2C)
- Chicago’s Innovation Loan Fund
- Denver’s Peak Academy
- London’s Project Oracle
- London’s Spacehive
- San Francisco’s Zero Waste
- Philadelphia, Providence & Chicago’s Digital Badging
- Chicago’s Budget Savings Commission
- Seattle & San Francisco’s Open Data
- Oakland’s City ID Prepaid Mastercard
- Seattle & Santa Cruz’s Accessory Dwelling Units and Basement Conversions
- Michigan’s Prize-Linked Savings (PLS)*
- Los Angeles & Chicago’s Immigrant Export Initiative
- San Francisco’s Commuter Tax Benefit
Two of these innovations—numbers 2 and 13 above—identify asset-building innovations that have the potential to serve millions of low- and moderate-income families. San Francisco’s K2C program, for example, is a pioneer of the Children’s Savings Account movement and is working to create a college-going culture among families with children who face rising tuition costs against already-tight family budgets. Further, K2C’s visibility has helped pique interest around other initiatives, such as CFED’s very own 1:1 Fund.
Likewise, Michigan’s PLS initiative is a scalable means of giving families a hand up. Piloted in a number of cities across the country based on the exciting work of the Doorways to Dreams (D2D) Fund, PLS is the next generation of savings strategies. In essence, PLS offers incentives—like raffles and cash—for individuals who open savings accounts and make regular deposits into them. Not only does this increase the amount an individual or family saves, but it also brings un- and underbanked residents into the financial mainstream by connecting them with safe financial products.
These innovations and the other 13 listed above are chronicled in detail in NYUWagner’s report, which you should download here.
Supercharging the Effects of Children’s Savings Accounts
By Sean Luechtefeld on 06/26/2013 @ 04:00 PM
This afternoon, I had the pleasure of joining The Hamilton Project at Brookings for a panel discussion on higher education and social mobility at the National Press Club, just around the corner from CFED’s offices. Titled “The Economic Imperative of Expanding College Opportunity,” the event brought together some of the nation’s foremost experts in empowering students for college success.
The first panel, moderated by Michael Greenstone, Director of The Hamilton Project, started with a discussion of new research, led by Caroline Hoxby of Stanford University. Hoxby and her colleagues—recognizing that low-income, high-achieving students provide a unique entry point to improving college success—did an experiment with nearly 30,000 students to test what interventions increase the likelihood of higher-education enrollment. Their experiment disseminated customized information about university applications and application fee waivers to students who fall in the top 10% performance-wise and in the bottom quartile income-wise.
The result? Students with the information packets were 78% more likely to enroll in higher education. The cost? Six dollars per student.
That’s not a typo. For less than the cost of a sandwich in DC, a student could receive information that made them almost twice as likely to enroll in a community college or university than if they had not received that information.
This remarkable finding got me thinking: what if this information dissemination was embedded into a Children's Savings Account (CSA) program? We already know that students with a savings account in their own name are six times more likely to attend college than students without an account. We also know that co-locating services can amplify the effectiveness of those services, and that behavioral interventions often involve little more than ensuring the right populations receive the right information.
These observations, taken together, suggest that a combination of approaches to empowering students for college success—rather than a single, monolithic approach—offer no less than transformative potential. The key, of course, is strategic partnerships between multiple sectors, including local, state and federal governments; state and federal boards of education; nonprofits; for-profit education service providers; researchers and more. The speakers at today’s event are exemplars of this evolution in thinking; the ways that organizations like Brookings, The College Board, public universities, ACT and others have come together indicates promising next steps for the future of college access.
These strategic partnerships are also the type that will make for a viable, scalable CSAs strategy. Evidence abounds that there is growing support for CSAs, but much work remains to be done. One important step is continuing to bring the voices of CSA advocacy together, and CFED remains dedicated to participating in that critical conversation.
Did you attend The Hamilton Project event today? Share your thoughts using the comments below, or tag @CFEDNews on Twitter using hashtag #CollegeOpp.
Millennials Will Reinvent Charity
By John Bare, Guest Contributor on 06/13/2013 @ 02:30 PM
EDITOR'S NOTE: The following story originally appeared on CNNOpinion and is well worth the read for our friends in the micro and IDA fields. You can read the original post here.
My niece Sarah is one of the do-gooders with an entrepreneurial bent who's blurring nonprofit and for-profit activities.
Through micro-lending, Individual Development Accounts, creative marketing and a novel kind of stock offering, these disruptors are re-imagining charitable giving and re-purposing investment tools.
Now we need policies and financial instruments to catch up to the movement.
Sarah is one of more than 900,000 Kiva lenders who have made more than $440 million in loans to entrepreneurs in 68 countries. Kiva is a nonprofit organization that facilitates micro-loans. Amounts as small as $25 can help someone -- usually a woman -- start or expand a business. The effects can be life changing.
Starting with the $1,000 Kiva fund I gave her as a high school graduation gift, Sarah found time during college to make 30 loans totaling $1,700 to entrepreneurs in 17 countries, from Bolivia to Uganda.
As folks repay the loans, Sarah keeps making new loans and helping more people change their lives. A funding pool that replenishes itself gives Kiva an edge over typical charities. With most cash donations, when the receiving organization spends the money, it's gone for good.
There's a catch: Sarah can loan money to a grocer in Ghana, a farmer in Uganda and a weaver in India -- but she has not been able to loan money to entrepreneurs in the United States.
Because of technical and policy issues with the U.S. Securities and Exchange Commission, it's easier to help entrepreneurs in another country than in our own backyard.
The bright folks at Kiva are creating a work-around. Kiva Zip is an experiment in "person-to-person lending."
Using Kiva Zip, Tommy in West Helena, Arkansas, sought a loan to expand his barbecue and catfish restaurant. Tracy in Pittsburgh is seeking a loan to move her home hair salon into a commercial space. She expects expansion to create three or four jobs.
Kiva Zip comes along as Grameen America is bringing its micro-lending model to more U.S. cities.
Thirty years after Nobel Laureate Muhammad Yunus created Grameen Bank, which has extended micro-finance to 8 million people in Bangladesh, Grameen America now has branches in New York, Los Angeles, Oakland, Omaha, Indianapolis and Charlotte.
Some of the business-charity hybrids are counterintuitive. While many nonprofit groups ask local businesses for donations, the reverse is uncommon. Yet Ross Baird emerged from the University of Oxford in 2009 with just that notion. He created a nonprofit organization, Village Capital, that raises rounds of capital to invest in startup companies.
One foundation invented a new kind of stock offering to turn neighborhood stakeholders into real stockholders.
Fulfilling its commitment to "resident ownership," the Jacobs Family Foundation wanted to transfer a chunk of the equity in a commercial development project to residents living nearby. It took attorneys six years and 40 drafts to invent a way, and in 2005 Jacobs issued the first-ever Community Development IPO.
Residents purchased all 50,000 units of stock, priced at $10 per share.
In Philadelphia, Dr. Mariana Chilton began working with mothers who didn't have enough food. Through Witnesses to Hunger, she put the mothers in front of elected officials to advocate for federal nutrition programs.
Chilton discovered that women from Witnesses to Hunger were also entrepreneurs. Hustling to put food on the table for their kids, literally, these mothers were earning $50 here and there doing hair and nails or babysitting.
Problem is, no one treated these mothers as entrepreneurs. Their business activities were discouraged or penalized, either because of overly enthusiastic local government regulations or upside-down rules of federal assistance programs. The reporting requirements, intended to deter fraud, were not calibrated to accommodate modest income fluctuations associated with their entrepreneurial activities.
Chilton is chipping away at change. Her team is giving mothers technical assistance to bring their micro-businesses into the mainstream. She is connecting the women to bank accounts, and Chilton's nonprofit will match deposits the mothers make into savings accounts and Individual Development Accounts.
Policy changes could help. The federal nutrition benefits should diminish gradually over time, as folks get on their feet. At a moment when we need innovative thinking, the old rules still use a bright-line test to force mothers to choose between food and work.
Further, we need more technical and policy advancements that make social investing easy. Few organizations have the time and resources to chase legal solutions for six years. The next generation of leaders must generate breakthrough solutions that can operate at scale.
A good place to start is MCON13, which is hashtag-speak for a conference devoted to engaging the 80 million U.S. millennials in giving and volunteerism. Next month hundreds of professionals will gather in Indianapolis at MCON13 to crack the code on millennials.
Expect millennials to keep blurring the lines. If Sarah can loan $50 to a farmer in Paraguay, why not a hair dresser in Philadelphia?
Inspire Us for a Chance at $3,000
By Jimmy Crowell on 06/03/2013 @ 03:30 PM
CFED & Bank of the West Announce the Saver to Homeowner Story Fund in Support of National Homeownership Month
Submit a success story that inspires savers to achieve their homeownership goals!
National Homeownership Month is here and CFED and Bank of the West have partnered to bring IDA practitioners an opportunity to support their homeownership savers. Each June, Americans have the chance to celebrate homeownership and reflect on the improvements homeownership has brought to their individual lives and communities. CFED, with support from Bank of the West, is reaching out to IDA programs to gather stories and photos of recent homebuyers in California and Tucson, Arizona that advance homeownership. For each story that is accepted, CFED and Bank of the West will provide the submitting IDA program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000). IDA programs interested in applying must submit a homeowner’s story, a photo and a signed waiver for each eligible saver by July 15, 2013, and must comply with the terms on the Saver to Homeowner Story Fund website.
Here is the inspiring story of one family’s participation in an IDA program and their subsequent journey to financial stability through homeownership:
The Saeeds – Oakland, CA
Immigrants from a war-torn region of Yemen, the Saeed family of Oakland, California, closed on a four-bedroom, single-family home in October 2012.
Since their arrival in Oakland, Ali Saeed, a taxi driver, and his family of eight have been driven to explore all opportunities that could help them achieve the stability they wanted for themselves. They made many sacrifices and worked diligently to build savings. The family has overcome many obstacles along their journey to homeownership – all the while caring for one child with special needs and another who recently underwent surgery. Now the Saeed family is gearing up to welcome a new baby to their household.
Eventually, their path led them to the City of Oakland’s Families Building Wealth IDA Program. When Terry Rabb, IDA program coordinator for the City of Oakland, remembers her interactions with the Saeed family, what stands out to her was the strength of their perseverance and determination to achieve financial stability through homeownership. “The vision of the Families Building Wealth IDA Program is to assure all citizens of Oakland equal and fair access to resources, which will produce a financially literate and economically sound community,” she explains. “The Saeed family is the living embodiment of this vision. They never missed a monthly deposit!”
Month by month, Mr. Saeed and his wife, Noor, gradually built their savings, eventually reaching their savings goal of $4,000. The Families Building Wealth program then matched their savings with an additional $12,000. The Saeeds also received a first-time homebuyer loan via the City, which provided them with a $60,000 silent second mortgage that helped make their home even more affordable. Now happily residing in his new home with his family, Mr. Saeed expresses “deep gratitude” for the programs that the City of Oakland and community partner Oakland Housing Authority offers.
A Powerful Moment in the Children's Savings Story
By Michael Chasnow on 05/14/2013 @ 11:00 AM
EDITOR'S NOTE: This post originally appeared on the 1:1 Fund blog, which you can read here.
A couple of weeks ago, WNET’s Need to Know feature on the Mississippi College Savings Account Program, one of two 1:1 Fund pilot sites, aired nationally on PBS. Recently, we spoke with Ernestine Bilbrew, VP of Program Development for the Mississippi Community Financial Access Coalition (MCFAC), to hear how the Need to Know segment impacted her and the MS College Savings Account Program.
How was it having the ‘Need to Know’ film crew in Jackson, MS?
I think it was a really good experience for all of us that are part of the Mississippi College Savings Account Program – MCFAC, our partners, the children, our parents. With the early childhood development centers, the way they got involved and made each of the activities work – visits to the bank, parent workshops, the grocery store a field trip to Jackson State – it was amazing. We were able to capture the whole essence of the program. It highlighted the early childhood development centers and parents, who are central to the program. It was very educational for all of us, but a really positive experience for the centers and parents, as it captured their great participation and they were the key focus of the segment.
What was the most powerful part of the few days of filming for you?
Wow, several parts of those few days really moved me. First of all, when the kids went to the bank. Many of the students stood up on the stool, and would say they wanted to make a deposit. Then, the children would sign their name to show what they were doing, and make the deposit official. For me, this was very telling – these kids had taken ownership of their savings account.
Also, on the tour of Jackson State, the kids had so many questions – they wanted to know everything that was going on at the college, from the different subjects taught in buildings to where students would go to eat.
Then, with the parent session one evening at Jones Early Childhood Development Center, all of it really hit home. I did not realize the type of effect the program was having on parents, who were really proud that they were taking steps to help their children build a better future. That had to be one of the most powerful moments when parents were talking about how much the program had helped and motivated them.
What did you learn from the filming and overall experience?
I did not realize the impact that the program had on parents. Even though it is a children’s savings program, and we were more or less focused on the kids, I did not realize that we were having such a large impact on parents. Hearing parents say they felt very good about helping their kid go to college and reach their dreams, it was very inspiring.
And, it highlighted some of the gaps of our program, specifically around the need to work with parents more. One takeaway for us was the need to really focus on supporting and engaging parents.
Will this film be helpful to the MS CSA Program? If so, how?
It is already having a positive effect – others in our community now want to be involved. Other early childhood development centers, Head Start programs and other partners want to help grow the Mississippi College Savings Account Program, or are using our program as a potential model to replicate. Also, we are going to use the segment as a way of telling our story, and how child savings programs can really energize kids and their parents.
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- Watch: Children's Savings Conversation Hits National Airwaves [Kristin Lawton]
- Opinion: Bipartisan Bill Invests in Next Generation [Mark Edwards & Andrea Levere]
- Why I'm Proud to Lead the 1:1 Fund [Carl Rist]
Opinion: Bipartisan Bill Invests in Next Generation
EDITOR'S NOTE: This story originally appeared on Politico and you can read it here.
Every 5-year-old wants a piggy bank to fill with the jangling pennies and nickels that hold the promise of dreams. But for children from low-income households, even filling a toy bank can be a challenge. That’s why both Democrats and Republicans on Capitol Hill have come together to develop a plan that would help the youngest students learn the benefits of depositing their money in a real bank and saving for a future that includes college.
This week, Sens. Chris Coons (D-Del.) and Marco Rubio (R-Fla.) will reintroduce the American Dream Accounts Act, which would create college savings accounts for low-income students and monitor higher education readiness through a personal online account. The proposal applies existing Department of Education dollars to encourage the development of online platforms that partner students with colleges, schools, nonprofits and businesses, and provide them with a savings account and college readiness tools.
If passed, the Coons-Rubio bill could be an important bipartisan catalyst for new children’s savings efforts nationwide, some of which are already taking shape at the state and local level. Last month, Cuyahoga County, Ohio, approved a measure that will provide all kindergarteners with $100 college savings accounts starting this fall. Similar initiatives are in the planning stages in Colorado and the Puget Sound area of Washington state. These efforts follow in the footsteps of San Francisco’s pioneering Kindergarten to College program, which provides a $50 deposit in a college savings account to every child entering kindergarten. Beyond the initial deposits, these programs seek to encourage families and friends to make regular contributions.
While the deposits may seem like mere pennies given the ballooning costs of a college education, more than a decade of research shows that even small amounts of savings can have a major impact on both college aspirations and attendance. Researchers at Washington University in St. Louis, for example, have found that children with college savings accounts in their own names are six times more likely to go to college than children who do not have an account.
As Cuyahoga County Executive Ed FitzGerald put it at his program’s launch, “Every child in our area will grow up knowing that college is a real and attainable goal.”
The increasing interest in college savings accounts is an acknowledgment of today’s reality: College is indisputably a ticket up the economic ladder, but the soaring cost makes it out of reach for more and more families. According to the Brookings Institution and the Pew Economic Mobility Project, barely one in three children from the poorest fifth of families enrolls in college, and only about one in 10 graduates. By comparison, among the wealthiest fifth of families, four in five children go to college, and more than half (53 percent) graduate.
Children’s savings programs, which have the potential to offer big returns on relatively small investments, are a response with bipartisan appeal. Cuyahoga County’s program, for example, is expected to reach 15,000 students at an estimated cost of $2 million to $3 million a year. Moreover, funding to “seed” and “match” the accounts can come from private and philanthropic sources. The Corporation for Enterprise Development, for instance, recently launched the 1:1 Fund, which raises private dollars for the purpose of matching college savings by lower-income kids through an online platform.
We believe all sectors have a role to play in building strong ladders of opportunity for our children and youth, and that good jobs in our 21st-century economy often require a degree or credential beyond high school. Higher education is one important piece of a comprehensive approach that ensures every young person, regardless of that person’s ZIP code, has a shot at the American dream. With growing state and local interest in college savings accounts, policymakers should seek every chance to encourage their availability nationwide.
They can start by exempting education savings accounts from asset limits that could result in families losing access to much-needed federal benefits programs — a potentially powerful disincentive to save for their children’s future. They can also push for the integration of college savings accounts into existing programs, such as Head Start, and include a financial education component that helps both children and their parents understand the importance of saving for the future.
Finally, they should encourage innovative efforts like the Coons-Rubio legislation. In introducing the original bill last year, Coons posed a simple question: “How can we get more Americans to think about, save for and prepare for education after high school so that they can go to trade school, community college or four-year colleges or universities?” One answer: Give children their own savings account — and then help them fill it with hard cash and hope for the future through personal efforts and policy support.
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Children’s Savings Conversation Hits National Airwaves
By Kristin Lawton on 04/22/2013 @ 01:00 PM
If you subscribe to our mailing list, you got word late last week that Friday’s episode of WNET’s Need to Know would feature the Mississippi College Savings Account Program, one of the 1:1 Fund’s two pilot programs and one of two innovative children's savings programs designed by CFED with support from the W.K. Kellogg Foundation.
Now, the reviews are in. Consensus: the 13-minute segment was a powerful testament to the power of Children’s Savings Accounts (CSAs) and the importance of starting children early on the path towards higher education and long-term financial well-being.
Need to Know traveled to Mississippi to showcase the Mississippi College Savings Program and its partners, W. K. Kellogg Foundation, Delta State University and Hope Credit Union, but momentum for wide-scale adoption of CSA programs is building across the country with many other organizations, cities, state houses and in federal agencies working to make aspirations to go to college a reality for all students, regardless of the ZIP code into which they were born.
Just how deep is the impact of CSAs? As the Need to Know segment indicates, children with savings accounts in their names are six times more likely to go to college than those without accounts. And, this finding controls for factors like race and household income, meaning that children are more likely to go to college if they have an account in their name even if other demographic measures would predict a low propensity for college enrollment. In other words, the power of having a savings account isn’t about how much money is in it, but rather, about how it informs a child’s aspirations.
Without a doubt, we stand on the brink of an important mindset shift. People who understand just how powerful CSAs are will inevitably support them; the question is how we promote that understanding among the public at large. Friday’s episode of Need to Know does exactly that.
Of course, you can help. Start by watching the video and share Friday’s episode of Need to Know on Twitter by clicking here. Want to help the College Savings Accounts of the Mississippi kids grow? Provide matching donations through the 1:1 Fund. Finally, use the comments section below to share your thoughts on CSAs. Thanks for keeping the conversation going!
Stories of Saver Success: The Holloways
By Michael Chasnow on 04/12/2013 @ 12:00 PM
Several weeks ago, I was fortunate to have a great conversation with Tricia Holloway, a proud parent of a first-grader in the San Francisco Unified School District. We spoke for half an hour about her and her daughter’s experience with Kindergarten to College (K2C), a program that gives every SFUSD kindergartner a college savings account, seeded with $50 by the City of San Francisco.
Below are some highlights from our conversation, which I found insightful practically, as I learned about the day-to-day decisions Tricia and her husband Don make to save and prepare their daughter for college, and inspiring, as I considered the impact that similar family commitments could have for families across San Francisco (and beyond!) on college attainment and economic opportunity.
How long has your family been in San Francisco?
My husband is a San Francisco native, and I have been here since 2004. I moved to California in 1984 for college and never left! We plan to raise our daughter and family here in SF.
How did you hear about the Kindergarten to College program?
I actually heard about the program when I was first registering my daughter for kindergarten at her new school. I thought it sounded too good to be true, a free college savings account with a $50 deposit and ability to earn matching funds, but I was so thrilled to learn that it was real.
What was your strategy for saving?
My husband I wanted to get in the habit of saving for college early, and we wanted to make it easy, something we did not need to think about all the time. So, we set up a direct deposit with my husband’s employer.
Times are tight, so we started small, saving $5 a month. When my husband got a small salary increase recently, we decided to bump up the amount we save, so we upped the monthly direct deposit to $11. We know it’s not a huge amount, but it feels good, and it will add up.
Do you talk about the college savings account with your daughter?
We actually don’t speak a lot about the college savings account, or the cost of college. My husband I do not want finances to be a constraint on our child’s dreams.
That said, we talk about college and the future all the time. Our daughter is a first-grader now, and recently she came home complaining about how hard multiplication tables are. We told her that it’s important to study and focus, because this is what she will need to do in college and in the future. Also, my husband often talks with our daughter about how college creates better opportunities in life.
Do you have any advice for other K2C parents?
College seems far off, but start saving now! Make it easy for yourself and your family to save—set up direct deposit so you do not need to think about making the deposit every week or month.
Also, talk often about college and getting prepared with your child. Saving for and talking about college help create that expectation for your child. For instance, if I am talking to my daughter about a friend of mine, I mention that we met in college, and that she will go to college one day too.
Levere: FY14 Budget a "Strong Starting Point" for Rebuilding American Opportunity
By Andrea Levere on 04/11/2013 @ 10:00 AM
President Obama’s budget lays out a strong starting point for rebuilding American opportunity. He preserves our historic commitment to protect the nation’s most vulnerable households, reverses some of the most harmful impacts of sequestration, and calls for a sensible, balanced approach to reducing the federal deficit.
In particular, the President should be applauded for his commitment to the success of the Consumer Financial Protection Bureau, which in the short period of its existence has already made huge strides in protecting consumers against predatory financial products and empowering them to build savings and financial security.
The President’s budget also calls for sustaining the nation’s investments in education by increasing access to high-quality early childhood education, improving the nation’s high schools and making college more affordable and attainable, especially for low-income students. The budget also maintains a commitment to fund programs that have been vital to the efforts of low- and moderate-income families who have been striving to save and build wealth. These vital programs include the Community Development Block Grant, the Community Development Financial Institutions Fund, the Earned Income Tax Credit, the Child Tax Credit and the Assets for Independence program, which has helped more than 70,000 low-income families open special matched savings accounts to help them buy a home, launch a business or pay for school.
But the President’s budget could also do more to ensure that low- and moderate-income households have full access to the tools they need to achieve financial security. While the budget includes a laudable commitment to simplify the tax code to make it more fair, it should include as part of that commitment an effort to broaden tax incentives for savings for the low- and moderate-income households who now get virtually no benefit.
In addition, the budget should contain an explicit commitment to help households save, build wealth and improve their financial capability. As CFED’s 2013 Assets & Opportunity Scorecard found, as many as 44% of households in America lack the cash savings to survive three months at the federal poverty line in the event of a loss of income.
For example, the President did not request funds for Bank On USA, an innovative effort in multiple cities across the nation to connect households without bank accounts to the financial mainstream, as he has in his past budgets.
CFED looks forward to working with the President and Congress to improve the financial security of America’s households and expand economic opportunity for all families.”
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.
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 & Bank of the West Announce Saver to Homeowner Story Fund
By Jimmy Crowell on 01/18/2013 @ 03:00 PM
Submit a success story that inspires savers to achieve their goals
Do you have an IDA saver who has recently purchased a home in California or Tucson, and who has a compelling story to share? CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers in California and Tucson, Arizona, to advance homeownership. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted.
IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.
How to Submit Your Success Stories
To submit an entry, please visit the Saver to Homeowner Story Fund website for the terms of the program and required documentation. IDA practitioners may submit multiple entries, though we cannot guarantee that all entries will be accepted.
DEADLINE: February 28, 2013
This opportunity expires on February 28, 2013 and all submissions must be received by this date. Stories must feature savers who reside within the targeted areas in California and Arizona. CFED and Bank of the West may, at their discretion, offer additional opportunities to submit entries at a later date. If you have any questions, please visit the Saver to Homeowner Story Fund website.
CFED would like to thank Bank of the West for sponsoring the Saver to Homeowner Story Fund and for their continued support of IDA programs across the country.
Impressed by Child Savings in Jackson, MS
By Michael Chasnow on 01/16/2013 @ 10:00 AM
The 1:1 Fund promotes educational opportunity for low-income students by raising matched funds for children’s savings incentive programs that encourage saving and build assets. Last week, when I was in Jackson, Mississippi, visiting one of the 1:1 Fund’s local children’s savings partner programs, the power of these initiatives became overwhelmingly evident to me.
Last Wednesday, I spent the afternoon traveling to two of the three early childhood development centers in Jackson, where about 230 preschoolers have Children’s Savings Accounts (CSAs). At one of the centers, I spent about an hour in a classroom with 15 four-year-olds. We asked the kids if they had bank accounts, and over half excitedly raised their hands while exclaiming, “Yes I do!” Then we asked how many of the students wanted to go to college, and again, more than half enthusiastically shot up their hands. The field trips that these kids have taken to Hope Credit Union to deposit money into their accounts have made a significant difference, and now hundreds of kids are saving for their futures and thinking about college as a real, attainable goal.
Moreover, at a higher level, this program is increasing parent engagement and leading to real savings for college. In this opt-in college savings program, 100% of eligible Jackson, MS, preschoolers have their own CSA. Teachers and site directors know about the CSA program and encourage parent involvement, and it’s working: over 50% of families had put dollars into their child’s CSA accounts in 2012, with some families saving in the $200-300 range. One-hundred percent participation in an opt-in program with over 50% having made deposits is an incredible milestone for these types of programs.
Moreover, the Deputy Director for the City of Jackson, Mr. Louis Armstrong, had the following to say about the local child savings program:
“The child savings program has really helped our parents think about their kids’ future. Ever since it started here in Jackson, parent participation at our early childhood development center schools has really increased; parent involvement in their child’s education has never been higher."
Mr. Armstrong puts it better than I ever could – increased parent engagement in their child’s education and tangible savings for their child’s future is a powerful combination.
You can subscribe to updates about the 1:1 Fund by visiting www.1to1fund.org.
More From This Contributor
Closing the Divide
By Alan Cantor, Guest Contributor on 10/24/2012 @ 10:45 AM
EDITOR'S NOTE: This post originally appeared last week on the Stanford Social Innovation Review blog. Many thanks to Alan for writing this thoughtful article, and to SSIR for featuring it so prominently on their site.
In this election year we’ve heard plenty about the 47 percent, the 1 percent, and the 99 percent. The expanding wealth gap has become a major election issue, as it should be. Decisions in the coming years about taxes, access to education, jobs, and workers’ rights are intertwined with reversing the growing wealth imbalance.
Undoubtedly the most effective approach to narrowing the wealth gap is political. But is there a role that individual donors can play? There certainly is, but it requires a break from traditional philanthropy.
Let’s imagine a wealthy donor—we’ll call her Mary—who wants very much to help kids from low-income backgrounds have educational opportunities.
Mary remembers her own scholarship to a prestigious university and how that paved the way for her successful career. She wants to give back. And, rather naturally, she puts in a call to the development department at her alma mater. The major gifts officer urges Mary to establish a $1 million endowment in her name at the university. That will spill off about $45,000 a year in scholarship funds, which will underwrite the cost of one student to attend the school each year.
While Mary likes the idea of having her name immortalized at the university she cares so much about, she also decides to consider other, less-traditional options. A million dollars is a lot of money. And helping one student at a time isn’t exactly going to scale, she realizes. She looks for ways to direct those funds to provide real opportunity for more young people.
Mary decides to focus less on the end provider—the university—and focus more on the students and their families and communities.
One solution she comes up with: supporting early childhood programs. Instead of popping a million dollars into the endowment of her alma mater, Mary could give $100,000 a year for ten years to a high-quality nonprofit childcare center to provide scholarships for children from low-wealth families. Instead of the impact being deferred (as all endowment gifts are) and benefitting only one student at a time, as is the case at the university, her gift could enable dozens of children each year to get a quality learning experience at a critical point in their lives. And an annual gift of $100,000 would be a game-changer at nearly any childcare center. (By contrast, a million-dollar gift to a major university barely causes a ripple.)
Then Mary learns that there are now hundreds of organizations around the country providing matched savings accounts—as demonstrated by the more than 1,200 practitioners at last week’s biennial Assets Learning Conference in Washington, DC, sponsored by the Corporation for Enterprise Development (CFED). These programs encourage families with low incomes to save for education, or the purchase of a home, or a business—all assets that will help provide them with long-term economic traction. And each of these programs provides some sort of a match as an incentive to the families.
Mary learns that students with savings accounts are many times more likely to enter college—even if the total in the account is relatively small. Mary imagines the impact if, working through one of these organizations, she were use her million dollars to provide a $2,500 match to 400 students, thereby allowing a broad swath of kids from low-wealth families to attend college. (They may go to a community college, of course, and not an Ivy League school, so a little bit of investment will go a long way.)
And Mary finds out that there’s now there’s a new way for donors to contribute to matched savings programs through a project called the 1:1 Fund. Though still in its early stages, the 1:1 Fund plans to offer donors the chance to invest in the future of American kids in much the way Kiva has democratized investing in microfinance around the world.
Donors like Mary are drawn by nostalgia and convention to consider creating endowed funds at their universities and prep schools. But if they stop to think about it, they will realize that they can affect several hundred times more students from low-wealth families by giving to early childhood or matched savings programs. With the ever-widening wealth gap, we as a society need to break out of the traditional philanthropic mold. I’m hoping that in the coming years dozens, then hundreds, then tens of thousands of donors change course, jettison prestige, and opt for impact.
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