Saving with SaveNYC

SaveNYC is an asset-building program run by the City of NY that encourages low-wage tax payers to set aside a portion of their Earned Income Tax Credit refund and receive matching savings in return.  Initial results have been promising; 61% of participants saved $500 - the qualifying amount to receive the matching funds.  More than three-quarters of the accounts remained open after one year.

Asset building initiatives are anti-poverty programs that help low-income people save more to use towards purchases in homes, small businesses, or education - the big ticket items that may help households build equity or earn more income to eventually exit poverty.  What policymakers like about SaveNYC is its demonstration that local governments can play a leadership role in financial empowerment anti-poverty initiatives.

Asset-building programs vary, but they typically involve free banking accounts with matching funds to encourage savings, group financial training, and certain time periods in which the funds must be set aside and then used. The rationale behind these programs is two-fold: one, we've decided that cash assistance programs don't work, and that working - at all costs - is the most important and worthy path out of poverty. Second, given we shunt so many people (tens of millions) into endless cycles of low-wage work, we need to make it easier for them to keep more of these wages, so that they can build a household safety net like the middle-class does - mainly through tax breaks on mortgages, through 401k contributions, through affordable and accessible banking, etc. You know, first we create the poor and all that.

SaveNYC is no different from most asset building programs in that it relies on private sector contributions as well; the programs we run at my community development corporation use matching funds from the United Way and banks.  But what Mayor Bloomberg's Administration realized in launching SaveNYC that not a single city agency was focused on financial education and training for New Yorkers - this was work usually left up to non-profits, said the Commissioner of the Dept. of Consumer Affairs, who runs the program through its Office of Financial Empowerment, launched in 2007.

Cities are disproportionately home to low-income, foreign-born and racially and ethnically diverse households, which for a range of reasons have worse access to the banking and credit systems in the US.  Cities across the US, capitalizing on this responsibility, are using their position to convene community, government and private sector partners to launch financial empowerment initiatives like SaveNYC.  What's key for anti-poverty activists interested in supporting such public-private initiatives is to consider how to bring them to scale nationwide.  Senate legislation to expand similar savings programs based on tax savings went nowhere.

“It’s harder to get any direct expenditures through the budget process,” Dr. [Michael] Sherraden [of the Center for Social Development at Washington University in St. Louis] said. “Tax expenditures are much easier.”  New York’s program offers evidence of the role direct expenditures can have. “The goal is to make such a compelling case that — whether on a local, state or federal level — government says this is the right investment for our population’s need,” Mr. [Reid] Cramer [of the New America Foundation] said.

(Photo by aresauburnTM from Reno, NV)