Promoting Asset Building
The expert testimony, research, scholarship, and lived experience collected by the Commission revealed the following:
- Research shows that increasing income for low-income families does not always increase generational wealth or reduce poverty (Shapiro et al., 2013). Income is often used as a measure of poverty; however, it does not provide as adequate a measure of an individual, family, or community’s economic mobility and long-term development. While income supports consumption or “getting by,” asset-building is a form of social investment that promotes development and “getting ahead” (Blank & Barr, 2009).
- Saving and investing in education, skills, experience, a house, land, an enterprise, financial securities, or other assets improve families’ capabilities, earnings, and life circumstances over time and across generations (Sherraden, 2008).
- There exist deep racial divides in asset building. In 2009, approximately 15 percent of Whites had zero or negative net worth, while up to 35 percent of people of color had zero or negative net worth (Kochhar et al., 2011). Whites’ median net worth is far greater—in the range of 1000 percent (ten times) greater—than that of Blacks and Latinos (Sherraden, 2008). In 2009, a representative survey of American households found that the median wealth (assets minus debts) of white families was $113,149 compared with $6,325 for Latino families and $5,677 for black families (Kochhar et al., 2011). Another study of the same set of households over a 25-year period (1984-2009) found that the total wealth gap between White and Black families nearly tripled, from $85,000 in 1984 to $236,500 in 2002 (Shapiro et al., 2013).
- According to the Corporation for Enterprise Development, many lower-income families do not benefit from existing federal wealth-building policies (Woo et al., 2010). “The wealthiest Americans (those earning over $1 million annually) receive more than $95,000 in tax benefits while middle-income families receive a few hundred dollars and poor families relying on public benefits actually face penalties for saving” (Woo et al., 2010).
- As defined by the Corporation for Enterprise Development, Children’s Development Accounts (CDAs) are accounts established for children as early as birth and are seeded with an initial deposit (Corporation for Enterprise Development, 2008). Through CDAs, youth can participate in early asset accumulation and long-term development of financial security towards higher education, future homeownership, and entrepreneurship (Corporation for Enterprise Development, 2008).
- Building assets for education in the long term correlates with improvements in school retention, better social/emotional development for children, and enhanced financial literacy (Sherraden, 2008; Corporation for Enterprise Development, 2008; Mason et al., 2009). Studies have also shown that the benefits of CDAs for children and families reverberate in communities and the larger economy because they affect communities that are often left out of economic development (Corporation for Enterprise Development, 2008; Mason et al., 2009).
- Similar accounts, called family development accounts and individual development accounts, seek to further increase asset building. Although these programs vary in design, they all provide matching funds to low-income recipients to promote savings that can be spent later on eligible uses such as higher education, microenterprise, and homeownership (Department of Housing and Urban Development, 2012).
- Expanding access to mainstream financial literacy services and counseling provides additional infrastructure to promote asset-building for low-income families (Department of Housing and Urban Development, 2012).
These findings prompted the Commission to draft several recommendations that facilitate generational economic mobility in low-income families by promoting asset building.
To that end, the Commission issues the calls to action found below.
Suggested Reading List
Kochhar, R., Fry, R., & Taylor, P. (2011). Wealth gaps rise to record highs between Whites, Blacks, Hispanics, twenty-to-one. Pew Research Center. Retrieved from:http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs-between-whites-blacks-hispanics/
Woo, B., Rademacher I., & Meier, J. (2010). Federal Asset Budget:Rewarding the Rich; Missing the Middle; and Penalizing the Poor. Corporation for Enterprise Development. Retrieved from:http://cfed.org/knowledge_center/research/federal_asset_budget/
- Blank, R. M. & Barr, M. S. (Eds.). (2009). Insufficient funds:Savings, assets, credit, and banking among low-income households. Russell Sage Foundation.
- Corporation for Enterprise Development. (2008). Why Children’s Development Accounts? Retrieved from:http://cfed.org/assets/pdfs/caseforCDAs_webversion.pdf
- Department of Housing and Urban Development. (2012). Individual Development Accounts:A Vehicle for Low-Income Asset Building and Homeownership. Evidence Matters. Retrieved from:http://www.huduser.org/portal/periodicals/em/fall12/highlight2.html
- GMA Foundations. (2009). Asset Building Strategies for Low Income Families. Retrieved from:http://www.gmafoundations.com/?p=936#sthash.yB3IRmaK.dpuf
- Kochhar, R., Fry, R., & Taylor, P. (2011). Wealth gaps rise to record highs between Whites, Blacks, Hispanics, twenty-to-one. Pew Research Center. Retrieved from:http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs-between-whites-blacks-hispanics/
- Mason, L., Nam, Y., Clancy, M., Kim, Y., and Loke, V. (2009). Child Development Accounts and Saving For Children’s Future:Do Financial Incentives Matter? Center for Social Development Working Papers. No. 09-54. Retrieved from:http://csd.wustl.edu/Publications/Documents/WP09-54.pdf
- Organisation for Economic Co-Operation and Development. (2003). Asset Building and the Escape from Poverty:A New Welfare Policy Debate. Retrieved from: http://www.ecosocdoc.be/static/module/bibliographyDocument/document/003/2398.pdf
- Shapiro, T., Meschede, T., & Osoro, S. (2013). The Roots of the Widening Racial Wealth Gap:Explaining the Black-White Economic Divide. Institute on Assets and Social Policy. Retrieved from: http://iasp.brandeis.edu/pdfs/Author/shapiro-thomas-m/racialwealthgapbrief.pdf
- Sherraden, M. (2008). IDAs and Asset-Building Policy. Center for Social Development Working Papers. No. 08-12.
- Woo, B., Rademacher I., & Meier, J. (2010). Federal Asset Budget:Rewarding the Rich; Missing the Middle; and Penalizing the Poor. Corporation for Enterprise Development. Retrieved from: http://cfed.org/knowledge_center/research/federal_asset_budget/