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Building Assets, Building Financial Security


Building Assets, Building Financial Security Ida Rademacher Vice President, Policy & Research, CFED Presentation to State CSBG Directors August 11, 2011 – PowerPoint PPT presentation

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Title: Building Assets, Building Financial Security

Building Assets, Building Financial Security
  • Ida Rademacher
  • Vice President, Policy Research, CFED

Presentation to State CSBG Directors August
11, 2011
About CFED
  • CFED (Corporation for Enterprise Development) has
    worked for over 30 years to expand economic
    opportunity by helping people save and invest,
    own homes, succeed as entrepreneurs, contribute
    to and benefit from the economy
  • CFEDs special expertise is to connect public
    policy, private markets and community practice to
    bring effective approaches for building wealth
    and financial security to scale at the local,
    state and national levels

  • Why Assets?
  • Asset ownership distribution trends
  • Assets Financial Security New Research
  • Evidence-Based Strategies What Works?

Why Assets?
  • Income alone is insufficient to create financial
  • Over half (56) of black children whose parents
    were solidly middle income fall into the bottom
    third of the income distribution as adults,
    compared to 30 of whites (DeLeire, 2010, Pew
    Economic Mobility Project).
  • Building assets in addition to income is
    essential to achieving long-term economic
    stability mobility
  • Assets change thinking and behavior
  • Improve economic household stability
  • Create long-term thinking and planning
  • Are linked to reduced marital dissolution and
    domestic violence
  • Enhance the well-being and life chances of

Asset distribution trends Upside-down subsidies
Source CFED. 2010. Upside Down The 400 Billion
Federal Asset Budget
Asset Distribution Trends
Median Income Median Net Worth by Race, 2007
Source American Community Survey (Income),
Survey of Consumer Finances (Net Worth)
Asset Distribution Trends
Median Wealth by Race, Household Structure
Source Chang, M. and Lui, M. 2010. Lifting as We
Climb Women of Color, Wealth and Americas
Asset Distribution Trends
  • Asset Poverty of households that lack a
    financial buffer to allow for 3 months
    consumption at poverty threshold in absence of
  • 22 of households are asset poor.
  • 27 of households with children.
  • 37 of minority households
  • 49 of minority households with children
  • Source CFED 2009-2010 Assets Opportunity

Assets Financial Security
  • Assets create a financial buffer to weather
  • Savings and assets correlate with low-income
    families ability to weather unexpected
    employment gaps and hardships with health care,
    housing payments, food security, utility and
    phone bills, and basic consumptions. (McKernan
    and Caroline Ratcliffe. 2008. The Urban
  • Households with 2,000 or more in liquid assets
    are better able to avoid subsequent hardships
    such as forgone doctor visits and missed utility
    payments, compared to those with smaller (or no)
    asset holdings. (Mills and Zhang. 2011. The Urban
  • A familys ability to borrow 500 in the event of
    an emergency (i.e., having good credit), may do
    as much to reduce hardship as tripling family
    income. (Mayer and Jencks. 1989. Poverty and the
    Distribution of Material Hardship. The Journal
    of Human Resources).

Assets Financial Security
  • Family structure improves chances for economic
    mobility for children of all races.
  • 50 of low-income kids growing up in married
    households move up income ladder, compared to
  • 42 of low-income kids growing up single-parent
  • 26 of low-income kids growing up in
  • Source DeLiere 2010, Pew Economic Mobility
  • Wealth plays an important role in predicting
    first marriage, especially for men but also for
  • Vehicle ownership increases odds of first
    marriage by 57.
  • Financial assets increase odds of first marriage
    by 36
  • Asset ownership reduced race differential in
    rates of first marriage by 13, a larger than
    was explained by other factors like income or
  • Source Schneider, 2010 (Doctoral thesis,
    Princeton University)
  • Financial assets are also positively associated
    with the economic well-being of women one year
    after marital disruption. (Cho.1999. Center for
    Social Development)

(No Transcript)
What Works IDAs
  • American Dream Demonstrationthe first
    large-scale test of individual development
  • Participants saved an average of 19 per month.
  • Average annual accumulation of approximately
  • Median household income of these participants was
    16,296. (Mills, et al.. 2004. Abt Associates).
  • 10 year findings on Tulsa experimental site now
    being published (Grunstein-Weis et. al)
  • Key Findings from recent study on homeownership
  • IDAs disproportionately helped minorities and
    women purchase homes
  • IDA homebuyers overwhelmingly accessed prime, FHA
    fixed rate lending
  • IDA homebuyers 3 times less likely to experience
    foreclosure (Rademacher , McKernan et. al. 2010.
    CFED/Urban Institute)

What Works aveNYC
  • Pilot _at_ tax prep sites to increase savings among
    low-income individuals.
  • Open account _at_ VITA w/ 200.
  • 50 match if participants save for 1 year (up to
    500 over 2 years)
  • Key Findings
  • Avg. income of savers 16,200
  • 78 women, 82 w/ children, 9 married
  • 80 saved full year, and 59 continued
  • Average savings of 627
  • Source NYC Office of Financial Empowerment
  • Tax time unique opportunity
  • Matched Savings can induce very low income to

What Works CSAs
  • SEED Initiativethe first large-scale test of
    matched childrens savings accounts
  • Participants saved 30 per quarter (avg),
    resulting in an average accumulation of 1,500
    over three years, including incentives. About
    half of SEED participants were from families with
    incomes below the federal poverty line.
  • Children in families with as little as 3,000 in
    savings have been found to have greater odds of
    graduating from high school than children in
    families without savings. (Zhan Sherraden.
    2003. Social Service Review)
  • Children with savings dedicated for college
    education are four times more likely to attend
    college. Among youth who expect to attend
    college, those with a savings account in their
    names are about seven times more likely to
    actually attend. (Elliott Beverly. 2010. Center
    for Social Development)
  • Savings and other financial assets are a
    consistent predictor of college graduation, even
    after controlling for variables such as income.
    (Zhan Sherraden. 2009. Center for Social

Local policy and program strategies
  • Ida Rademacher
  • Vice President, Policy Research
  • CFED
  • 202.408.9788

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