Ineligible to Save?

For families making the difficult transition from welfare to work, developing assets is critical to achieving true economic independence.  In order to prevent a complete backslide to public assistance, low income working families must begin to develop their own safety net through personal saving for use in the event of an unexpected income shock due to illness or temporary unemployment.  As personal saving is essential to achieving self-sufficiency – the stated goal of our national welfare program – one would expect saving to be emphasized and encouraged by social service agencies. This, however, is decidedly not the case.  In reality welfare recipients perceive social service policies as being hostile to saving; a perception that negatively influences the savings behavior of these individuals.

This paper focuses specifically on the how asset limits used in determining eligibility for the Temporary Assistance for Needy Families (TANF) program influences the saving behavior of program participants.  Employing data collected from conversations with current TANF recipients, I refute the conclusion of recent economists that asset limits are currently set too high to have any meaningful impact on economic behavior.  From these conversations it is clear that the existence of asset limits – or, just as importantly, the perception that these limits exist – negatively impacts the savings behavior of TANF recipients.