Three Considerations for Children's Savings Accounts (Policy Briefs/Opportunity and Ownership Project) Barbara Butrica A primary goal of children's savings accounts (CSAs) is to provide children, especially in low-income families, a strong economic footing. The ability to do that, however, depends on how CSAs are designed and how much families contribute. This study uses projections from the Urban Institute's DYNASIM model to estimate the wealth building impact of CSAs under alternative scenarios that vary the design features. The results highlight three points relevant for any asset-building proposal or program: incentives make a difference, targeting can be difficult, and nontaxability matters for all subsidies.
What Can We Expect from Children's Savings Accounts? (Policy Briefs/Opportunity and Ownership Project) Barbara Butrica Children's savings accounts (CSAs) are being promoted to improve financial literacy, increase the number of low- to moderate-income households that are banked, and encourage saving for education, homeownership, or retirement. This study uses projections from the Urban Institute's DYNASIM model to estimate the wealth building impact of CSAs. The results suggest that most CSAs will have small balances after accounting for inflation. Still, such accounts could help get children, particularly those in low-income families, into financial instruments that demonstrate the value of saving and of compound interest.
Enabling Families to Weather Emergencies and Develop (Series/New Safety Net) Signe-Mary McKernan, Caroline Ratcliffe Low-wage jobs can be unstable, leaving families struggling to cope with employment gaps and financial emergencies that can strike without warning. About four in five low-income families are "asset poor," lacking enough liquid savings to live for three months at the federal poverty level without earnings. In this essay, McKernan and Ratcliffe suggest a cluster of policies that would improve financial markets and savings opportunities for low-income families across the life cycle.
Do Welfare and IDA Program Policies Affect Asset Holdings? (Policy Briefs/Opportunity and Ownership Project) Signe-Mary McKernan, Caroline Ratcliffe, Yunju Nam This brief presents an empirical analysis of how asset tests affect families’ asset holdings. The findings suggest that more lenient asset tests and more generous IDA program rules can lead families to increase their asset holdings. Relaxed vehicle asset limits, for example, are associated with increased vehicle ownership. Since people often need a reliable car to get to work, this finding suggests that exempting at least one vehicle in all states may increase employment and job stability among low-income families. The findings also suggest that restrictions on withdrawals and incentives built into restricted asset accounts and IDA programs may provide families with motivation to build assets.
Savings in America (Research Report) Suzanne Nora Johnson, Lisa Mensah, C. Eugene Steuerle Assets are like ladders that can place low- and moderate-income (LMI) families in reach of opportunity. Moreover, increased saving benefits not just households but the economy overall. If every household with less than the median net worth saved an additional $1,000, it would add $56 billion to the economy. However, current U.S. savings policy directs the lion's share of $300 billion in annual subsidies for saving to households earning $50,000 and above who would likely save in any case--and still, the national saving rate fell to zero in 2005. This paper addresses barriers to saving among LMI households, such as asset tests in welfare and education policies and the targeting of subsidies to those households in the highest tax brackets.
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