ASSET BUILDING

Pulling yourself up by your bootstraps and a “hard work” ethic are the hallmarks of America’s definition of success. To achieve success and the economic mobility of the American Dream, however, requires not only the ability to generate income, but also the ability to translate such income into assets. While income may measure whether or not a person has enough to get by, assets measure whether or not a person has enough to get ahead.

An Assets Agenda for the States

New America Foundation

Asset-Building

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

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

Theory and Research UnderlyingAsset Building Strategy

• Assets not only help households sustain themselves during difficult economic times, they also orient people to the future and provide a stake in society.

• As more low-income households have a stake in society, families and neighborhoods stabilize and economic opportunity and the economy expand.

• Low-income households want to and can save and, while saving generally rises with income, they may actually save at a higher rate (as a percentage of income) than higher-income households.

• Evidence suggests that, while providing household stability and expanding educational and entrepreneurial opportunity, asset building also can:• Decrease economic strain, marital dissolution, and risk of intergenerational

poverty;• Increase property values, property maintenance, health and satisfaction, and

local civic involvement.

The Asset Gap

Asset poverty rates and wealth gaps are worse than income poverty and distribution

• Racial disparities in asset ownership are widest• 14% of all households and 24% of minority households live in

extreme asset poverty – meaning that they have zero or negative net worth

• Helping people build assets has been a long-standing policy of the U.S. government. Many opportunities to build assets exist, such as the Homestead Act, the GI Bill, and the home mortgage interest deduction. Unfortunately, low-income families do not benefit as much from these policies because many of these incentives are delivered through the tax code.

Individual Development Accounts

• Individual Development Accounts(IDAs) are special savings accounts that match the deposits of low- and moderate-income people.

• For every dollar saved in an IDA, savers receive a corresponding match which serves as both a reward and an incentive to further the saving habit.

• Savers agree to use their savings for an asset-building purpose – typically for post-secondary education or job training, home purchase, or to capitalize a small business.

and more...

IDA programs also include case management, asset-specific training, and financial education.

Assets for Independence (AFI)Federal program authorized in 1998 that provides five-year AFI grants that enable participants to use IDAs to acquire a first home, capitalize a small business, and pursue postsecondary education and training.

• AFI projects open nearly 1,000 new accounts each month

• Through FY 2010, participants in regular AFI projects had opened a total of 68,421 IDAs.

• In the 68,421 IDAs opened in regular projects through FY 2010, account holders deposited a total of $64,665,564 in earned income, or an average of $945 per account holder.

• 12,167 purchased a home; 8,738 financed a business; 10,986 financed education and/or training

• Participants had used $136.4 million to purchase long-term economic assets, which includes the value of their own IDA savings ($41.3 million) and matching funds ($95.1 million)

11th Annual report to Congress (2010)

Assets for Independence Program

Income Eligibility

• TANF-eligible in their state

OR• Meet both of the

following two criteria• Income: twice the poverty

guidelines OR EITC eligible

AND• Net worth: maximum

$10,000 (less one residence/one vehicle)

Persons in Family*

SingleAdult

Married Couple

1$22,980 --

2$37,870 $31,020

3$43,038 $43,210

4$47,100 $48,378

5$55,140 $55,140

6$63,180 $63,180

For a family with more than 6 members, add $8,040 for each

additional person.

* Depends on number of qualifying children based on IRS guidelines

The Funding Challenge• Must have firm commitments of cash support from nonfederal

sources. • The commitments must be equal to or greater than the Federal

grant amount requested.

Employer IDA Initiatives• Employer IDA initiatives hold tremendous potential for reaching

millions of working poor individuals.• Employers are attractive delivery channels for a number of reasons

including their:• Access to low-income workers;• Existing benefits systems;• Effective outreach and communications venues; and• Ability to provide matching funds.

• Benefits to employers include:• Lowered absenteeism and improved employee retention;• Increased recruitment of lower-income employees;• Improved workplace productivity;• Additional skills and improved career opportunities, particularly if the IDAs are

used for educational purposes; and • Psychological benefits, such as improved expectations about the future and a

more positive outlook of the workplace.

Case Study 1

• Encourages low-wage employees to take advantage of existing programs by increasing benefit available:• Employer Assisted Housing Program ($5,000 + $2,000 Federal

match + $500 personal savings = $7,500)• Scholars and Career Assistance Program ($3,000 + $2,000

Federal match + $500 personal savings = $5,500)

• Corresponds with company’s goal of growing its own employees, encouraging frontline staff to retrain for new fields that often come with better pay and more advancement opportunities.

Case Study 2

• Doubles investment of company foundation in carrying out its efforts to provide educational opportunities, including scholarships and education resources, for employees ($2,000 scholarship + $2,000 Federal match + $500 personal savings = $4,500)

• Adds a new tool to a suite of employee programs focused on asset-building, including free tax preparation services.

What’s Unique?

• Approached by employers

• 100 estimated participants per employer

• Multiple sites, multiple shifts

• Geographic spread (One employer has 79 facilities in 5 states)