Last year, the Federal Reserve System began a two-year series of conferences on increasing asset building by low- and moderate-income (LMI) households. Our partner is CFED, a national nonprofit dedicated to economic opportunity. As the regional conferences have unfolded, we have learned that there is a lot more to this subject than meets the eye. Saving and building assets is not just a matter of discipline but also one of opportunity.
The CEO of Staples realized that many of his employees were low income and needed help getting their earned income tax credit refunds. So he made space available for volunteer tax preparers at company facilities. He also arranged for more presentations on the company’s 401(k) program. LMI employees often have lower levels of participation and may need extra help understanding the company match. The CEO learned that the ease with which employees can save affects their asset building and that, as their employer, Staples could provide information they trusted.
Low- and moderate-income families have always struggled to build a future for their children and plan for retirement, but there are new efforts to help. This issue of Cascade helps to identify a variety of ways that employers, financial service companies, government, educators, and community development entities are supporting asset building. The most frequent asset-building tool for LMI households is the individual development account (IDA). Typically funded by federal or state government, IDAs provide a match to savers’ funds. Some of the primary authorized goals of IDA savers are owning a home, paying for education expenses, or starting a business. Some IDAs are geared to adults and others are designed for children.
But there are other techniques for building assets. Some organizations have created home-buying incentives through employer-assisted homeownership programs. D2D Fund, H&R Block, and Solutions for Progress Inc. are using technology to help LMI families save their earned income tax credit refunds and increase their income by getting all the public benefits for which they are eligible (such as food stamps and children’s health care). With more income, it is hoped these families will have extra funds to start building assets.
As you read this issue, I suggest that you look around your company, community, or school and see if people you know need this extra help. The information you connect them to can possibly make a big difference in their ability to build a more secure future.