Photo credit: New America Foundation via Flickr.com
On Tuesday, July 31, the Asset Building Program hosted an event which investigated innovative savings programs for low-income Americans. “Building Better Savings Products,” moderated by Senior Policy Analyst Pamela Chan, brought together a group of panelists who have all been trying to tackle the issue of access to financial services in various ways.
Sherrie Rhine, Senior Economist in the Division of Depositor and Consumer Protection at the FDIC, described the results of the Model Safe Accounts pilot program
. This program brought together a group of non-profit institutions, as well as banks, to offer a new type of account specifically geared towards low- and moderate-income consumers. These accounts were electronic and card-based, which translated to low maintenance costs. They also avoided non-sufficient fund and overdraft fees, and required a very low opening balance for both transaction and savings accounts. Participating banks reported that maintaining these accounts was feasible, and that they drew in a set of customers who had been previously unbanked, or who had been previously turned away from traditional banking services.
Caroline Schultz, a Research Associate at MDRC, discussed two program pilots which both involved direct deposit and unrestricted savings accounts with no penalties for withdrawal. AutoSave
operates within the workplace, allowing workers at eight participating employers to directly deposit a portion of their paycheck into a savings account with no monthly fee. SaveUSA
, originally SaveNYC, was initiated in participating voluntary income tax assistance sites. During tax season, these organizations encouraged consumers to deposit a portion of their tax refund into a savings account. If the initial deposit (a minimum deposit of $200 and maximum of $1000), stayed untouched for one year, SaveUSA would match 50% of that amount, thus incentivizing participants to continue to save.
Sarika Abbi, Director of Ideation at the Doorway to Dreams Fund, discussed two separate projects: the Save2Win
program and Rainy Day Reserve Fund. The first project, Save2Win, involves a lottery-like incentive for individuals to save: every $25 savings deposit earns the account holder a chance to win a monthly prize. After consumer research on games of chance, as well as successful deployment of similar lottery programs in other countries, Save2Win launched in 2009 with the goal of making savings less mundane and more gratifying. The second project attached a savings pocket onto a Plastyc prepaid card branded as the Rainy Day Reserve
. The savings pocket was designed to help consumers save for emergencies. With no minimum opening deposit, no minimum balance, and the option of automated saving, this program was of little risk to consumers and thus much more attractive as a savings option.
These speakers and the programs they represent offer valuable insight into the world of possibilities represented by low- and moderate- income consumers. We know that this population holds a significant demand for financial services, and the exciting new developments in this field are promising. Video of the event is accessible here
or on YouTube