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Asset Building: Research Evidence, Policy Issues & Program Design
Margaret Lombe, Ph.D. Assistant ProfessorGSSW, Boston College
Michelle Putnam, Ph.D. Assistant ProfessorSimmons College
Megan O’NeilSouthern New Hampshire University
Presentation Overview
The Asset-based perspective of welfare
Effects of IDA participation: Some evidence
Overview of Policy Issues
Policy Implications
Implications for program design
Asset-based Perspective of Welfare
Conceptual definitionPerspective was benchmarked by Sherraden (1991)
Sherraden proposed asset-ownership as an intervention that might mediate the negative effects of deprivation
The premises of the perspective discussed here is that having an asset will lead to positive effects beyond effects of income and consumption (refer to Table 1)
Table 1: Asset Effects
The Asset Experience
Accumulating an asset· Saving· Receipt of a subsidy
(match)· Financial education· Advice
Possessing an asset· Value of the asset· Type of asset· Asset goal
Welfare Outcomes
Psychological effects· Risk taking; Long term planning; Personal efficacy
Social effects· Household stability; marital stability intergenerational effects, etc.
Political/civic effects· Civic engagement, political
participation, social influence.
Economic effects· Human capital development; occupational status; Further asset acc. .
Asset-based Perspective of Welfare
In practice however a number of questions beg tobe addressed:
- Why and how does asset-ownership create the proposed effects?- What does this mean for vulnerable individuals/households?- Can they save enough to accumulate assets?
Attempting to answer these and similar questions, Sherraden proposed an intervention called Individual Development Accounts (IDAs)
Asset-based Perspective of Welfare
What is an IDA?
- IDAs are a special savings account
- IDAs provide a ‘program bundle’ to participants: access, incentives, information,
and facilitation
- IDAs are a three-fold intervention:
- Create an opportunity for participation
- Enhance saving and asset accumulation
- Participation may have positive outcomes
Perceived Effects of IDA Program Participation
Empirical evidence suggests a positive effect of IDA participation on welfare:
Sherraden, et al., (2000) indicate the poor can save in the context of an IDA; In fact, low-income households save more on average
Schreiner et al., (2001) suggest institutional characteristics of an IDA program are positively related to program outcomes;
McBride et al., (2003) report that IDA participation is associated with feeling confident about the future,
feelings of economic security, and a sense of control over ones life
Asset Building Program and People with Disabilities
Asset building programs targeting people with disabilities are fairly recentEvidence is growing suggestion some positive effects
Lombe & associates (in press) noted the following: Participants with disabilities saved significantly less on
average, per month, than those without disabilities Only one institutional characteristic (out of three) –
participation in asset specific financial education was significantly related saving performance
Demographic characteristics such as age, education, race, and household income were positively related to saving performance
household size had a negative effect on saving performance
Asset Building Program and People with Disabilities
Lombe, Putnam & Huang (2008) in a study of a consumer directed-care program found the following:
Participant demographic characteristics including employment and marital status were significantly related to program savings
Two characteristics of the Cash and Counseling program were related to participants’ program savings:
- Use of a consultant in negotiating facets of the program
- Hiring a friend/neighbor as personal assistance provider
Asset Building Program and People with Disabilities
In another study, exploring patterns of service utilization among persons with disabilities in a Consumer Directed Care Program Lombe, Mahoney & Bekteshi (2009) Noted that:
Respondents with disabilities can save within context of credit union for purchase of services for assets with potential to enhance their independence and social functioning
Goods and services saved for varied considerably:- Back-up for respite- Emergency service- Computer/technological services- Home modifications- Assistive devices - Exercise equipment
Asset Building Program and People with Disabilities
Study results continued…
Participants also indicated the following barriers to service utilization:
- Lack of banking experience
- Lack of knowledge of basic operations of
financial institutions
- General financial illiteracy
- Distance from banking center
- Limited access to technology/internet
Creating Pathways
Multiple barriers exist for people with disabilities to participate in asset building opportunities:
Policy barriers that preclude saving, restrict earnings, & complicate even low levels of employment
Programmatic barriers include design structures & lack of accommodations
Psychosocial barriers of stigma, discrimination, & individual’s misconceptions about their own abilities to work, earn, & save
Back to Basics: Accessing the Financial Mainstream
Many take for granted having a safe & affordable place to deposit checks, pay bills, & save for a rainy day
Participation in the financial mainstream is important to economic self-sufficiency & an essential foundation to building assets
Research has shown that individuals who own accounts were more likely to own other assets
Back to Basics: Accessing the Financial Mainstream
68% of SSDI recipients & 51% of SSI use direct deposit
39% of SSI recipients reported never having a bank account
68% of SSI recipients are unbanked
SSI recipients represent the largest percentage of federal benefit recipients that receive their payment via check
To Bank or Not to Bank
The Role of an Account at an Institution in the Mainstream Financial Sector (MFS) for People with Spinal Cord Injuries Receiving Public Benefits in Chicago, IL
Achieving a Better Life Experience (ABLE) Act of 2009
H.R. 1205 & S. 493 (February 26, 2009) Introduced by Sen Robert Casey (D-PA) and Rep. Ander
Crenshaw (R-FL)
Purpose: to encourage & assist individuals & families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life
To provide secure funding for disability- related expenses on behalf of designated beneficiaries with disabilities that supplement, not supplant, public benefits
ABLE Act of 2009
1 Tax Exempt Account per SSI beneficiary up to $500,000 Allowable expenses include:
preschool & postsecondary education; tutoring; special education services; training; employment supports; personal assistance & community-based supports; respite care; clothing; assistive technology; home modifications; out-of-pocket medical, vision, or dental expenses; transportation vehicle purchases or modifications; insurance premiums; habilitation and rehabilitation services; funeral and burial expenses; and other services or products allowed by regulation
ABLE Accounts vs. Special Needs Trust Funds
Contributions can be made by anyone- including the beneficiary (does not count as ‘earned income’ by SSI)
Contributions up to $2,000 per year per individual are tax deductible (similar to 529 College Savings Accounts- not refundable)
No contributions can be made after beneficiary turns 65
Beneficiary can be trustee (also family members, financial institutions, and other qualified 3rd parties)
Can pay for Housing- including rent & mortgage
ABLE Act Resources
For full text of the bill, type “ABLE Act of 2009” under Search Bill Summary & Status at: http://www.thomas.gov/
Take Action! http://www.autismvotes.org/c.frKNI3PCImE/b.3978771/k.11F3/Take_Action_on_the_ABLE_Accounts_Act_of_2009/siteapps/advocacy/ActionItem.aspx
Additional References
Lombe, M., Huang, J., Putnam, M. & Cooney, K. (in press). Exploring Saving Performance in an IDA for People with Disabilities: Some Preliminary Findings. Social Work Research.
Lombe, M., Putnam, M. & Huang, J. (2008). Exploring Effects of Institutional Characteristics on Saving Outcome: The Case of the Cash and Counseling Program. Journal of Policy Practice, 7(4), 260-279.
Lombe, M. and Sherraden, M. (2008). Impact of Asset Ownership on Social Inclusion. Journal of Poverty, 12(3), 284-305.
Additional References
Lombe, M., Mahoney, K., & Bekteshi, V. (2009). Exploring Patterns of Service Utilization among Persons with Disabilities in a Consumer Directed Care Program. Journal of Social Work in Disability and Rehabilitation, 8(1), 21-36.
McBride, A., Lombe, M., & Beverly, S. (2003). Effects of individual development account programs: Perception of participants. Social Development Issues, 23(1/2), 59-73.
References
Schreiner, M., Sherraden, M., Clancy, M., Johnson, L., Curley, J., Grinstein-Weiss, M. et al., (2001). Savings and asset accumulation in individual development accounts: Down-payments on the American Dream Policy Demonstration, a national demonstration of Individual Development Accounts. St. Louis: Center for Social Development, Washington University.
Sherraden, M.; Johnson, L.; Clancy, M.; Beverly, S.; Schreiner, M.; Zhan, M; and Curley, J. (2000). Saving patterns in IDA Programs. Research report. Washington University, Center for Social Development, St. Louis, Mo.
Sherraden, M. (1991). Assets and the poor: A new American welfare policy. Armonk, New York: M. E. Sharpe, Inc.
References
Aizcorbe, A. M., Kennickell, A.B. and Moore, K.B. (2003). Recent Changes in U.S. Family Finances: Evidence from the 1998 and 2001 Survey of Consumer Finances. Federal Reserve Bulletin. Washington, DC: The Federal Reserve Board.
Bachelder, E. and Ditzion, S. (2000). Survey of Non-Bank Financial Institutions. Washington, DC: Dove Consulting for the U.S. Department of the Treasury. April 4, 2000.
Booz-Allen & Hamilton/Shugoll Research, (1997). Mandatory EFT Demographic Study. Washington, DC: U.S. Department of the Treasury, Financial Management Service. OMB #1510-00-68. September 15, 1997.
References
Hogarth, J.M., and O’Donnell, K.H. (2000). If You Build It, Will They Come? A Simulation of Financial Product Holdings Among Low-to-Moderate Income Households. Journal of Consumer Policy. Netherlands: Kluwer Academic Publishers.
Kennickell, A.B., Stsrr-McCluer, M., and Sunden, A. E. (1997). Family Finances in the U.S.: Recent Evidence from the Survey of Consumer Finances. Federal Reserve Bulletin, Vol. 83, January 1997, pp.1-24.
Schmeling, J., Schartz, H., Morris, M., Blanck, P. (2006). Tax Credits and Asset Accumulation: Findings from the 2004 N.O.D./Harris Survey of Americans with Disabilities. Disability Studies Quarterly, Winter 2006, 26 (1).
References
Stuhldreher, A. and Tescher, J. (2005). Breaking the Savings Barrier: How the Federal Government Can Build an Inclusive Financial System. Chicago, IL: The Center for Financial Services Innovation. February 2005.
U.S. General Accounting Office (2002). Electronic Transfers: Use by Federal Payment Recipients Has Increased but Obstacles to Greater Participation Remain. Washington, DC: United States General Accounting Office.
U.S. Department of the Treasury Financial Management Service (2004). Understanding the Dependence on Paper Checks: A Study of Federal Benefit Check Recipients and the Barriers to Boosting Direct Deposit. Washington, DC: Sponsored by the U.S. Treasury FMS, conducted by Federal Reserve Bank of St. Louis. August 2004.
References
Costa-Font, J. (2007). Housing Assets and the Socio-economic Determinants of Health and Disability in Old Age. Health & Place. 14 (3) p. 478-491. September 2007.
Dove Associates, Inc. (1999). ETA Conjoint Research: Final Report and Market Model, Unbanked Federal Check Recipients. OMB #1510-00-71, Washington: U.S. Department of the Treasury, May 26, 1999.
Fellowes, M., and Mabanta, M. (2008). Banking on Wealth: America’s New Retail Banking Infrastructure and Its Wealth-Building Potential. Washington, DC: The Brookings Institution. January 2008.