Beyond Barriers

Every cloud has a silver lining. In the case of the Great Recession, that silver lining is an increased awareness that Americans—especially those in lower-income households—are better off when they have access to a stock of liquid savings to weather unexpected events.  Without these precautionary savings, families are economically insecure. The process of building up these savings largely depends on access to an array of financial products and services, such as low-cost and high-quality savings accounts. Traditionally offered by banks and credit unions, these accounts are designed to allow the consumer to save a portion of their liquid assets. Unfortunately, there are barriers which prevent many families from opening and maintaining savings accounts, such as high minimum-opening deposit, minimum balance, or direct deposit requirements. 

In recent years, lower-cost savings products have emerged in response to the growing recognition of the barriers low-income families face when trying to build precautionary savings. Three pilot programs are especially notable in this effort. The first is the FDIC’s Model Safe Accounts pilot which created a template of account terms for banks to follow. The second is the SaveUSA demonstration (a pilot based upon a similar program in New York City) which works with banks to create savings accounts at free tax preparations sites so that lower-income households can deposit a portion of their refunds into savings with an additional match to reward the savings. The third is the AutoSave pilot, a workplace savings pilot conducted by the New America Foundation and MDRC, that partner with banks and employers to provide savings accounts and an automatic savings program to employees. Through a range of approaches, these “small-dollar savings account” pilots are identifying promising ways to overcome the barriers to savings account ownership for lower-income consumers. They are also helping to sharpen focus on the range of savings account product characteristics that make them more attractive for this targeted market to acquire and maintain. Building on lessons learned from these pilot efforts, this paper presents an analysis of product features to be considered in designing attractive saving accounts for lower-income consumers.

The full paper is available here as a pdf or under Related Files to the right. An addendum with technical appendices is available here as well.

Pamela Chan is a Senior Policy Analyst with the Asset Building Program at the New America Foundation. Previously, she was a consumer research and marketing strategy analyst at the Nielsen Company.