Asset-Building: A Asset-Building: A Framework & Framework &

Survey of IssuesSurvey of IssuesPrepared by Prepared by

Denise DeVaan, Denise DeVaan,

DeVaan & Associates, LLC DeVaan & Associates, LLC

“ “Lack of Income means you don’t Lack of Income means you don’t get by. Lack of assets means you get by. Lack of assets means you don’t get ahead.”don’t get ahead.”

Ray Boshara, Ray Boshara,

New American FoundationNew American Foundation

Key Players in Asset-Key Players in Asset-Building FieldBuilding Field

Dr. Michael Sherraden, Director, Center for Dr. Michael Sherraden, Director, Center for Social Policy, Washington University, St. LouisSocial Policy, Washington University, St. Louis

Bob Freidman, Corporation for Enterprise Bob Freidman, Corporation for Enterprise Development (CFED)Development (CFED)

Ray Boshara, VP & Director, Asset-Building, Ray Boshara, VP & Director, Asset-Building, New America FoundationNew America Foundation

Assets for Independence (AFI) Jim Gatz, Assets for Independence (AFI) Jim Gatz, HHS/OCSHHS/OCS

The Assets Alliance (Trainers, Technical The Assets Alliance (Trainers, Technical Assistance)Assistance)

Additional Key PlayersAdditional Key Players

United Way of America; Local United United Way of America; Local United Way AgenciesWay Agencies

Federal Reserve BanksFederal Reserve Banks Community Action AgenciesCommunity Action Agencies Community Development CorporationsCommunity Development Corporations Credit UnionsCredit Unions National, Regional, Independent BanksNational, Regional, Independent Banks Community Development Financial Community Development Financial

InstitutionsInstitutions

Tools to Help Save #1Tools to Help Save #1 Mainstream banking products (savings/checking accounts)

prevent the use of costly check-cashing and payday anticipation loan services and facilitate savings and asset accumulation.

The Earned Income Tax Credit (EITC) reduces low-income working families’ tax burden, supplements their wages, and assists in the welfare-to-work transition.

The advanced provision of the EITC allows individuals with at least one child to apply to receive a 40% advance on their refund in regular installments through their paycheck.

Individual Development Accounts (IDA) are dedicated matched savings accounts that are used for asset purchases such as a home, education or job training expenses, or starting or expanding a small business.

Tools to Help Save #2Tools to Help Save #2

Financial Education Classes IRS allowed split refunds Automatic enrollment into 401K’s

and similar products (new Department of Labor Rules)

Saver’s Credit (permanent, expanded and refundable)

Asset-BuildingAsset-Building

– Asset building refers to engaging in Asset building refers to engaging in long-term saving and investment long-term saving and investment behavior as a means to building behavior as a means to building household wealth and increasing household wealth and increasing economic independence. economic independence.

– Asset building strategies empower Asset building strategies empower individuals to make economic choices individuals to make economic choices that provide long-term benefits for that provide long-term benefits for themselves, their families and their themselves, their families and their communities. communities.

Asset-BuildingAsset-Building The disparity in the distribution of assets is even

greater than the disparity of income.

There are tremendous economic, psychological, and social benefits to asset ownership, which ascribe not only to the individual asset owner, but also to the household and community in which the asset owner resides.

There is historical precedence for government supported asset ownership (eg.GI Bill; 401K’s); these incentives in recent years have not reached people with low incomes (40% of the population).

Asset-Building StrategiesAsset-Building Strategies

Home OwnershipHome Ownership Small Business DevelopmentSmall Business Development Education and Career CounsellingEducation and Career Counselling Tax Preparation; EITC; federal and Tax Preparation; EITC; federal and

state tax credits for state tax credits for individuals/familiesindividuals/families

Individual Development AccountsIndividual Development Accounts

FAIM Example IDA FAIM Example IDA MatchMatch

$3match $3match for for $1saved$1saved

Year OneYear One Year TwoYear Two TotalTotal

Saver Saver DepositsDeposits

$480$480 $480$480 $960$960

MatchMatch½ AFI½ AFI

½ State½ State

$1440$1440 $1440$1440 $2880$2880

TotalTotal $1920$1920 $1920$1920 $3840$3840

National & Minnesota National & Minnesota ResultsResults

ADDADD Demonstration Demonstration ResultsResults

Match rate: 2:1Match rate: 2:1 Average monthly net Average monthly net

deposits: $19.07deposits: $19.07 Savings 6 out of every 12 Savings 6 out of every 12

monthsmonths Uses: home, Uses: home, home repairhome repair, ,

microenterprise, post-microenterprise, post-secondary education.secondary education.

64% people of color64% people of color Income not related to Income not related to

savings…savings…

Minnesota ResultsMinnesota Results Match rate: 3:1Match rate: 3:1 Average monthly net deposits: Average monthly net deposits:

$28$28 Savings 9 out of every 12 Savings 9 out of every 12

monthsmonths Uses: home, microenterprise, Uses: home, microenterprise,

post secondary educationpost secondary education 36% people of color36% people of color 13% unbanked (first year)13% unbanked (first year) 718 savers; 616 financial 718 savers; 616 financial

education averaging 20 hours education averaging 20 hours (86% of total); $566,869 (86% of total); $566,869 deposited; 335 assets deposited; 335 assets purchased (35% homes;33% purchased (35% homes;33% businesses; 31% educations.)businesses; 31% educations.)

Unbanked became bankedUnbanked became banked Income not related to Income not related to

savings…savings…

Policies and Practices #1Policies and Practices #1 Individual Development Accounts (IDA’s)Individual Development Accounts (IDA’s) ADD Demonstration Project; Congressional ADD Demonstration Project; Congressional

Approval of Approval of Assets for Independence (AFI) Assets for Independence (AFI) Policy and FundingPolicy and Funding

Funded through federal AFI and a variety of Funded through federal AFI and a variety of mostly state and local funds. Some state tax mostly state and local funds. Some state tax credits. CDBG and TANF allow support. AFI credits. CDBG and TANF allow support. AFI (44,500 IDA’s; 400 AFI Projects; 1200 (44,500 IDA’s; 400 AFI Projects; 1200 Organizations)Organizations)

Require financial education and asset purchase Require financial education and asset purchase classesclasses

Debt reduction, credit repair, savings and income Debt reduction, credit repair, savings and income plansplans

Policies and Practices #2Policies and Practices #2

IDA’s for Farmers and Ranchers (pilot project)IDA’s for Farmers and Ranchers (pilot project) IDA’s for Refugees (renewed) Office of Refugee IDA’s for Refugees (renewed) Office of Refugee

& &

ResettlementResettlement IDA’s for Disabled (HHS One-Stop Family360 IDA’s for Disabled (HHS One-Stop Family360

Initiative)Initiative) 401 Kids (proposed initiative). Allows parents 401 Kids (proposed initiative). Allows parents

to establish Roth IRA’s for children at birth to to establish Roth IRA’s for children at birth to finance college, buy a home, save for finance college, buy a home, save for retirement. $2000 per child per year. No retirement. $2000 per child per year. No match for low-income.match for low-income.

Policies and Practices #3Policies and Practices #3

Savings for Education, Savings for Education, Entrepreneurship, Downpayment Entrepreneurship, Downpayment (SEED) Demonstration Project(SEED) Demonstration Project

ASPIRE Act (federal bill to fund kids ASPIRE Act (federal bill to fund kids accounts)accounts)

Savings for Working Families Tax Credit Savings for Working Families Tax Credit of 2007 (currently 160 co-sponsors; of 2007 (currently 160 co-sponsors; Minnesota-Oberstar/McCollum)Minnesota-Oberstar/McCollum)

529 College Savings Plans529 College Savings Plans

ResourcesResources Office of Community Services: Office of Community Services:

http://www.acf.hhs.gov/programs/ocshttp://www.acf.hhs.gov/programs/ocs Center for Social Development, Washington Center for Social Development, Washington

University: University: http://gwbweb.wustl.edu/csd/ Corporation for Enterprise Development: Corporation for Enterprise Development:

http://www.cfed.org http://www.cfed.org New American FoundationNew American Foundation http://www.newamerica.nethttp://www.newamerica.net IDA Network: http://idanetwork.cfed.org/IDA Network: http://idanetwork.cfed.org/ Institute for Social and Economic Institute for Social and Economic

Development: http://www.ised.org/Index.aspDevelopment: http://www.ised.org/Index.asp The Asset AllianceThe Asset Alliance http://www.assetsalliance.orghttp://www.assetsalliance.org