Savings

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include inequality, the safety net, and self-sufficiency.

Editor's Note: This blog post was authored by Bob Annibale, Global Director of Citi Community Development and Microfinance. 

Earlier this week, President Obama was sworn in for a second term, and his inaugural address drove home the notion that “prosperity must rest upon the broad shoulders of a rising middle class.” Yet the U.S. Census Bureau reports that in 2011, 46.2 million people — or nearly one in six Americans —lived below the official poverty line of $23,201 a year for a family of four. Millions more households live just above this level, and even more lack almost any savings. Prosperity, however, will only really be achieved when it is a shared and inclusive prosperity, recognizing the contributions made by all communities.

Income inequality has been widening over the last 40 years, but new analysis of the U.S. Census Supplemental Poverty Measure by the Brookings Institution provides some hope. It underscores the idea that two tax credits for working families — the Earned Income Tax Credit (EITC) and its companion Child Tax Credit (CTC) — have been crucial tools for many low- and moderate-income families to raise their standards of living, build assets and educate their children.

Two reports released last week take a look at the issue of access to credit and preserving homeownership as a cornerstone of asset building in the wake of the recession. The foreclosure crisis had a particularly devastating impact on low-income families and communities of color, resulting in a significant widening of the racial wealth gap. These new reports seek to outline some key considerations for ensuring that homeownership remains a feasible goal for all families—and in particular for those that were hit hardest by the housing collapse.

With tax filing time just around the corner, this Friday is National EITC Awareness Day. In an effort to raise awareness, particularly among Members of Congress and their staff of this important tax credit, we're pleased to be co-sponsoring a briefing on Capitol Hill this Thursday along with the National Community Tax Coalition and a robust cohort of partner organizations. RSVP and event details are here.

Originally posted on youthsave.org.

Editor’s Note: Rebecca Shafer is a program associate with New America’s Bernard Schwartz Fellows Program. Previously, she taught at a public charter school in Washington, D.C. and a public school in Maryland. 

For two years, I taught eighth grade at a high-needs middle school in Prince George’s County, Maryland, just a few miles from Washington, D.C. The student body was nearly 90% African American, and over half of students qualified for free and reduced price lunch. (That didn’t include the cafeteria food one principal often bought out-of-pocket for other hungry kids.) Math scores hovered around 33% proficiency, and reading around 65%. The statewide average is about 69% proficiency in math and 80% in reading.  Especially at the start of my teaching career, I struggled to motivate my classes in the face of classroom disruptions, lagging reading levels, and pressures on students with unstable home situations.

Unfortunately, these issues aren’t unique to Maryland. There is an active conversation about how to reduce the disparities in education quality between K-12 schools in high- and low- income neighborhoods. Programs like Teach For America, which placed me (and some 38,000 other young college graduates over the past twenty years) in low-performing schools, and Obama’s Race to the Top program, which provided funding to my school, aim to fix this problem. If change is going to come, we need to set high goals for students.

My mentors and supervisors at my teaching jobs urged me to link my students’ academic growth with success in life. I pushed the idea to my students that college would reward them for their hard work, bringing opportunities and, further down the line, potentially lucrative careers. However, as Jason DeParle, a Bernard L. Schwartz Fellow, articulates in a recent New York Times piece, the path both to and through college to economic stability is often fraught with challenges particularly for lower-income students. For example, we see a widening socioeconomic gap in college attendance levels, graduation rates, and student loan burdens.

Historically, owning a home has been part of achieving the “American Dream.” This long-standing narrative posits that with enough hard work anyone in the U.S. can rise from modest beginnings to true economic stability often seen in the form of a stable job, a secure retirement, a comfortable place to live, and perhaps a nest egg to pass along to one's children. There are as many different versions of the "American Dream" as there are Americans, but it's fair to say financial stability in the form of homeownership is central to that vision for many people.

I wrote earlier this week about Mayor Michael Bloomberg's philanthropic effort to spread NYC's promising model of personal, one-on-one financial advice for ordinary citizens. Mayors in five other cities (Lansing, MI; Denver, CO; Nashville, TN; Philadelphia, PA; and San Antonio, TX) will get a shot at using a total of $16 million in seed money to leverage some additional private investment and provide unbiased, reliable, one-on-one financial counseling to folks in need.

Editor’s Note: This post is the final part of a series of four exploring research on the relationship between assets and children’s educational outcomes. Read parts one, two, and three. Senior Research Fellow Willie Elliott is an Assistant Professor at the University of Kansas and Director of the Assets and Education Initiative (AEDI) at the School of Social Welfare.

The Kansas Investments Developing Scholars (K.I.D.S.) program, part of Kansas’ 529 plan, provides matching deposits (up to $600 annually) for households below 200 percent of the federal poverty level who are saving for their children’s higher education. Since the program began in 2006, just over $1.2 million has been contributed to accounts for 1412 students. Importantly, K.I.D.S. appears to encourage low-income families to save even beyond the amounts eligible for the matching grant, demonstrating how saving can become a habit and how modest public investments can lead to larger benefits. K.I.D.S. families have accumulated $3,300,393 in accounts not eligible for the matching grant.

Editor’s Note: This post is part three in a series of four exploring research on the relationship between assets and children’s educational outcomes. Read parts one and two here. Senior Research Fellow Willie Elliott is an Assistant Professor at the University of Kansas and Director of the Assets and Education Initiative (AEDI) at the School of Social Welfare.

The recent Great Recession has been particularly brutal for low-income families. Erosion of income and shocks to net worth have undermined many families’ ability to financially prepare for their children’s education. Unless policies help low-income families to secure assets and protect them during future economic crises, large numbers of children will continue to pay a high price—in compromised academic achievement, reduced likelihood of college attendance and graduation, and subsequent depression of earning potential—for the economic instability wrought by the Great Recession.