asset ownership in illinois
DESCRIPTION
TRANSCRIPT
1
Asset Ownership in Illinois
2
Illinois Asset Building Group
IABG Goals: Build Assets, Increase Savings Opportunities, Protect Existing Assets, and Promote Financial Literacy
A diverse coalition working to build the strength and stability of families and communities. IABG began in 2004 to promote asset building as an innovative approach to eliminating poverty and creating opportunities for Illinois residents.
3
Savings, Education, Homeownership, Small Business• Assets strengthen communities by creating financial
stability• When individuals and communities are stable, the entire
state benefits – job growth, tax revenue
What Are Assets?
Assets help individuals and families live securely, plan for the future, and pass wealth on to the next generation
4
How is asset poverty different from income poverty?Measuring net worth by considering assets and liabilities, as opposed to income alone, provides a more long-term and encompassing view of economic security and mobility. In Illinois 26.9% of households are asset poor vs. 10.9% that are defined under income poverty.
What is Assets Poverty?Households experiencing asset poverty do not have enough cash reserves (savings, stocks, retirement accounts, equity in a home or business) to get by at the federal poverty level for three months when their primary source of income is eliminated through job loss or other disruption.
5
The Illinois Asset Poverty Index (IAPI) provides data on asset poverty for counties and county groupings across Illinois. Developed with help from our partner organization in California, the IAPI enables Illinois residents to ascertain asset poverty rates for the communities in which they live.
Illinois Asset Poverty Index
6
IAPI County ClustersAsset Poverty in Cook County
Category Demographics Income Poverty Asset Poverty
Total 1,160,152 9.6% 29.2%
Housing Tenure
Homeowners 58.0% 3.5% 3.6%
Renters 42.0% 18.0% 64.4%
Race
White 63.6% 5.3% 19.4%
Black 15.9% 20.5% 48.9%
Latino 14.8% 15.8% 49.5%
Asian 5.6% 9.3% 27.6%
Native 0.2% 15.4% 39.7%
To view IAPI data for all of Illinois go to: http://www.illinoisassetbuilding.org/data/assetpoverty/
7
Asset Poverty in Cook County
IAPI County Clusters
Category Demographics
Income Poverty
Asset Poverty
Age
Under 35 30.0% 12.8% 44.8%
35-44 28.4% 9.0% 27.7%
45-54 25.0% 7.2% 20.8%
Over 55 16.7% 8.4% 16.2%
Family Composition
Married, no children at home 15.1% 2.9% 15.7%
Married, children at home 34.6% 5.0% 18.2%
Single, no children at home 35.8% 12.0% 36.6%
Single, children at home 14.5% 21.5% 50.9%
To view IAPI data for all of Illinois go to: http://www.illinoisassetbuilding.org/data/assetpoverty/
8
IL Household Net Worth
15.4% of all Illinois households have zero or negative net worth, meaning they may owe more than they own.
Median Net Worth of Illinois Households by Race in 2004
White – $128,444 Minority – $12,100
Illinois asset poverty has increased 6.4% since 2004
9
As an asset, education has a cumulative life-long impact in the form of higher annual incomes and more money to put away into savings or investments such as a home.
Highest Educational Level Attained
Percent of Adults age 25 and Over
Illinois Median Annual Earnings
Less than a high school diploma 15.0% $20,019
High school diploma 28.9% $27,048
Some college or associate’s degree 27.3% $33,383
Bachelor’s degree 18.1% $47,484
Graduate or professional degree 10.8% $60,695
Illinois Educational Attainment, 2006
Education as an Asset
10
Ways to Help Build Assets
Earned Income Tax Credit
Children’s Savings Accounts
Payday Loan Reform
11
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable income tax credit for low-income working individuals and families.
• Because it is refundable the EITC is given as a tax refund payment when the credit exceeds the amount of taxes owed
• EITC is available on both federal and Illinois state income taxes
• In 2007 the maximum federal EITC for a individuals with two or more qualifying children was $4,716
12
EITC in Illinois
• Last year nearly 777,000 low-income, working families benefited from the Illinois EITC with an average credit of about $100
• Most state EITCs are based on a percentage of the federal EITC
• Set at only 5% of the federal EITC, the Illinois EITC is among the smallest of all state EITCs
• Legislation, SB12, has been proposed to double the Illinois EITC
13
• Payday lending fees costs Americans approximately $3.2 billion annually
• There are almost 3 times as many payday licenses in Illinois than there are McDonald’s restaurants
Payday Loan Reform
How Payday lenders profit:• Astronomical APR rates• Loan roll over• Balloon payments• Prepayment penalties• Multiple loans to the same borrower
Payday loans are small loans with high interest rates that are most often provided by companies with no ties to banks and are not regulated by the FDIC.
14
In the past payday loans normally had terms of approximately two weeks. After an Illinois law was initiated to regulate payday loans most lenders extended terms past 120 days as a loop hole to avoid this law. By doing so lenders can continue to provide loans with no consumer protections.
Payday Loan Reform
How to Reform Payday Loans:• In order to eliminate loop holes, and reform payday
lending once and for all, amendments must be made to the Consumer Installment Loan Act
• Amendments should include limits on charges & fees, cap interest rates, restrict prepayment penalty and amortize all loans
• Legislation is being discussed in this session and will continue until the problem has been solved
15
What Are Children’s Savings Accounts?
• Opened at birth for all children• Seeded with an initial deposit • Children & families can contribute
over the years• Used for designated purchases –
educational expenses, homeownership, entrepreneurship– when the child reaches least 18 years old
16
Why Build Assets for Children?
Saving for the future helps bring back the idea that education (and money) create new opportunities
Children’s savings accounts promote life-long financial literacy and savings behaviors.
Holding assets raises aspirations of children and parents for a better future.
17
• Creates opportunities for career advancement, skills development through increased education
• Provides family, individual stability through homeownership, small business ownership
• Increases lending eligibilities, helps steer clear of predatory lending, such as payday loans
.. and When the Children Become Adults
18
IABG Principles for a CSA Plan:
• Inclusive so that all children can participate
• Seeded with an initial deposit so it creates a concrete asset at the onset
• Progressive in structure, providing higher initial deposits and/or matching funds for savings deposited by lower-income families
• Simple so that investment decisions are limited and easily understood
• Linked to age-appropriate financial education to build savings and investment skills
• Nondiscriminatory to families receiving public benefits
• Protected from use until the child is at least 18
19
…But Will This Really Fly?
Several factors make children’s savings accounts marketable:• Corporate, business leaders supportive of
investment and savings• Financial institutions see opportunities for
new customers• Children are particularly compelling
beneficiaries for social programs
Asset policy is a new approach to eliminating poverty and creating economic security for all.
20
How will CSAs become a reality in Illinois?
• The goal of the Task Force is to form a strategic implementation plan to create a savings account at birth for every child born in Illinois to Illinois residents.
• The Task Force’s plan will be the basis of advocacy led by IABG & Task Force members in the future to create an Illinois CSA program
In 2007 legislation was passed that created the Children’s Savings Account Task Force
21
What Can You Do to Help?
• Add your organization to the CSA list of supporters at www.illinoisassetbuilding.org/csa
• Talk with your community about asset building and CSAs• Contact elected officials and let them know you support
CSAs
