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Strategies to Build Individual Assets: IDAs, EITC, and CSAs

Strategies to Build Individual Assets: IDAs, EITC, and CSAs. Building Financial Assets Conference Sponsored by the Jessie Ball duPont Fund Airlie Conference Center □ October 25-27, 2006 Carl Rist, Director, SEED Initiative CFED.

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Strategies to Build Individual Assets: IDAs, EITC, and CSAs

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  1. Strategies to Build Individual Assets: IDAs, EITC, and CSAs Building Financial Assets Conference Sponsored by the Jessie Ball duPont Fund Airlie Conference Center □ October 25-27, 2006 Carl Rist, Director, SEED Initiative CFED

  2. Establishing the need for asset building:The 2005 Assets and Opportunity Scorecard • Most comprehensive tool yet to measure ownership and financial security at the state level. • Provides comparable, state-by-state data on asset accumulation and protection.

  3. A look at Florida Overall grade on asset performance: C Overall policy rating: Standard

  4. Noteworthy data on asset building for Florida • 29th in net worth of households • 28th in asset poverty • 35th in homeownership rate • No state-funded IDA program • No state EITC • TANF asset limit = $2,000 (average)

  5. A look at Delaware Overall grade on asset performance: A Overall policy rating: Favorable

  6. Noteworthy data on asset building for Delaware • 12th in net worth of households • 4th in asset poverty • 2nd in homeownership rate • No state-funded IDA program • No state EITC • TANF asset limit = $1,000 (below avg.)

  7. A look at Virginia Overall grade on asset performance: C Overall policy rating: Substandard

  8. Noteworthy data on asset building for Virginia • 21st in net worth of households • 26th in asset poverty • 6th in homeownership rate • State-funded IDA program • No state EITC • TANF asset limit = no limit (one of only two states)

  9. A Proven Asset-Building Tool: Individual Development Accounts • Individual Development Accounts (IDAs) are: • Centerpiece of a new asset-building strategy • Restricted savings account, used for: • Homeownership • Business start-up • Post-secondary education and training • Designed to increase savings of poor, working poor and welfare recipients. • Incentive? Match from public or private sources, PLUS economic literacy training.

  10. How IDAs Work

  11. IDAs: Precedents and models • Over 300 programs and 15,000 savers across the U.S. • Delaware: • Delawareans Save • Florida (Jacksonville area): • NE FL CAA, Real Sense Prosperity Campaign/IDA Partnership • Virginia (Richmond area): • New Visions, New Ventures, Inc.

  12. IDAs: Impact • ADD evaluation (large-scale IDA demonstration with over 2,000 participants). On average, ADD participants: • Had family income at 116% of the family-size-adjusted poverty line, • Saved $19.07 per month in average net deposits (1.6% of monthly income), • Made a deposit in about 6 of every 12 months, • With an average match rate of 2:1, accumulated $700 per year in IDAs.

  13. A New Idea: Children’s Savings Accounts • What difference would it make if every child started with an account at birth? • What are CSAs? A vision: • $1,000 at birth for every child, • Accounts used for asset building, • Universal system (“opt-out” model) • Progressive matches • Appropriate financial education delivered at scale

  14. CSAs: Precedents and Models • International precedents: • U.K. Child Trust Fund • Canada Learning Bond • Singapore (Child Development Accounts) • SEED Demonstration in U.S. • Multi-year, multi-site experiment with SEED (children’s savings) accounts • 1,250 accounts with children in 12 sites, including 500 in Michigan.

  15. CSAs: Precedents and Models (more) • Y.E.S. (Youth Experiencing Savings) at Boys and Girls Clubs of DE • 71 middle-school aged children • Models delivery of SEED accounts via Boys and Girls Clubs. • Accounts held at Artisans Bank and Smith, Barney.

  16. CSAs: Impact SEED Progress • SEED Initiative, as of December 2005: • 1,089 accounts open • Avg. accumulation varies across sites and age cohorts

  17. Resources: • IDAs: • www.cfed.org - clearinghouse • www.assetsalliance.org - training • http://gwbweb.wustl.edu (Center for Social Development) – research • CSAs: • www.cfed.org (SEED Initiative) – clearinghouse • www.assetbuilding.org (New America Foundation) – federal policy • http://gwbweb.wustl.edu - research

  18. Contact: Carl Rist CFED 123 W. Main St., Suite 210 Durham, NC 27701 919.688.6444 919.688.6580 (fax) carl@cfed.org www.cfed.org www.cfed.org/go/scorecard

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