Research Report From Savings to Ownership: Third-Year Impacts from the Assets for Independence Program Randomized Evaluation
Caroline Ratcliffe, Signe-Mary McKernan, Gregory B. Mills, Michael Pergamit, Breno Braga
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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, last funded in fiscal year 2016, is a federally supported IDA demonstration grant program authorized under the Assets for Independence Act of 1998. This evaluation of the AFI program uses a randomized controlled trial, the gold standard for measuring program effectiveness.

This evaluation shows that among the full sample of study participants, AFI did not increase homeownership, business ownership, or postsecondary education or training three years after study enrollment. But exploratory subgroup analyses provide suggestive evidence that AFI participation had effects on certain subgroups. Specifically, AFI increased homeownership among renters at study enrollment and increased business ownership among non–business owners at study enrollment. Results from the subgroup analyses suggest the following:

  • A 4.7 percentage-point (52 percent) increase in the homeownership rate among participants who rented at study enrollment
  • A 5.1 percentage-point (53 percent) increase in the business ownership rate among participants who were not business owners at study enrollment

Beyond asset ownership, we assess the program’s medium-term effects on participants’ savings, material hardship, use of alternative financial services, and personal outlook, among other outcomes. We also find evidence that AFI affects several secondary outcomes:

  • A 25 percent reduction in the number of hardships (0.6 hardships) related to utilities, housing, or health, which suggests that AFI participation improves financial stability and thereby reduces material hardship.
  • Examining the specific types of hardship, AFI reduced the number of medical hardships experienced (i.e., could not afford to see a doctor, dentist, or purchase a prescription drug when needed) by 41 percent (0.5 hardships) and reduced the likelihood of experiencing a medical hardship by 29 percent (10 percentage points).
  • A 47 percent (3 percentage-point) decline in the use of alternative (nonbank) check-cashing services, which suggests that AFI participation helps people enter and remain in the financial mainstream.
  • AFI shifted people’s time preferences so they were more willing to pay a cost today rather than a higher cost later. Specifically, the share of people willing to accept an interest rate of 25 percent or more on a major purchase (e.g., refrigerator) declined 35 percent (5 percentage points). Because high-interest-rate products can cause financial difficulties later, shifting behavior to be more future oriented can lead to long-term improvements in financial well-being.

Although AFI did not result in greater asset ownership among the full sample, these third-year findings—that AFI participation results in greater asset ownership among renters and non–business owners, less material hardship, lower use of alternative (nonbank) check-cashing services, and more future-oriented time preferences— combined with the first-year findings that AFI increased savings, suggest that savings and wealth-building opportunities can promote economic well-being and personal responsibility. This evaluation provides results that can inform the next stage of incentivized savings programs that benefit low-income earners. Findings from this evaluation suggest that by encouraging low-income families to build assets, AFI eased economic hardship and increased asset ownership while providing a foundation for long-term upward mobility.

Research Areas Wealth and financial well-being
Tags Asset and debts Financial products and services Financial stability Family savings
Policy Centers Center on Labor, Human Services, and Population