Research Report Building Savings for Success
Early Impacts from the Assets for Independence Program Randomized Evaluation
Gregory B. Mills, Signe-Mary McKernan, Caroline Ratcliffe, Sara Edelstein, Michael Pergamit, Breno Braga, Heather Hahn, Sam Elkin
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Individual development accounts (IDAs) help low-income families save by matching their personal savings for specific investments, such as a first home, business capitalization, or higher education and training. The Assets for Independence (AFI) program is a federally supported IDA grant program authorized under the Assets for Independence Act of 1998. Our evaluation at two sites—Albuquerque and Los Angeles—shows that AFI is increasing low-income participants’ savings one year into the program.

This is the first evaluation of the AFI program to use a randomized controlled trial, the gold standard for measuring program effectiveness. We assess the program’s early (first-year) effects on participants’ savings, asset ownership, and economic well-being. Results show two beneficial primary effects:

  • A 7 percentage point (9 percent) increase in the share of participants with liquid assets.
  • A $657 median increase and $799 mean increase in liquid assets. Because we look at all liquid assets—including savings, checking, money market, and retirement accounts plus stocks and bonds—our results indicate that participants are not simply shifting savings from other types of accounts into their IDAs, but instead are creating new savings.

We also find evidence that AFI affects several secondary outcomes:

  • A 34 percent reduction in hardships related to utilities, housing, or health, equivalent to one less hardship experienced.
  • A 39 percent (4 percentage point) decline in the use of alternative (nonbank) check-cashing services, suggesting that AFI participation helps people enter the financial mainstream.
  • A 10 percent increase in participants’ confidence in their ability to meet normal monthly living expenses.

These major first-year impact findings—that AFI participation results in more savings, less material hardship, and improved perceptions of one’s financial situation—provide empirical evidence that AFI promotes economic well-being.

While the vast majority of federal asset-building subsidies (such as the mortgage interest deduction) disproportionately benefit high-income earners, the AFI program is one of few federal efforts that actively encourages saving among low-income families. By encouraging low-income families to save, AFI can improve their short-term stability while providing a foundation for longer-term upward mobility.

Online Appendix Means of Outcome Variables by Group and Site

Research Areas Wealth and financial well-being Families Social safety net
Tags Asset and debts Welfare and safety net programs Economic well-being Financial stability Family savings
Policy Centers Center on Labor, Human Services, and Population
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