Saving Across America

Last week I had the privilege of discussing asset building for lower income Americans in three very different settings: the annual Opportunity Economics Colloquium of the Hope Street Group, held at the Lansdowne Resort outside of Washington; an Assets Forum sponsored by the New America Foundation in the State Capitol in Sacramento, California; and with a group of financial services, social service and foundation representatives brought together by the City of Seattle. While the settings and audiences varied, the theme was the same: how to empower and encourage all Americans, particularly those who do not have funds either to cushion an economic setback or to invest to achieve economic security, to take sustainable first steps toward saving. Given the current financial crisis, one wishes these discussions had started ten years ago, but that same crisis makes it all the more important that they're happening now.

Our group at Hope Street, which included policy types and investment bankers and other private sector players, young and less young, from both coasts, was assigned the task of recommending policies that would be effective to increase to 50% the percentage of Americans who had savings to cover six months of operating expenses. In other words, unlike the usual Washington policy debate, this was not about pension and retirement savings, important as those are. We settled on a goal of about $10,000-recognizing that it was low, but to give us a target to shoot for-and focused on liquid assets, while recognizing that bankable non-liquid assets, such as a home, can sometimes serve the same purposes. While we didn't stick entirely to the task, in that at least one of our policy recommendations is a bet on the longer term, the policies we chose would all constitute effective steps toward the goal.

After four hours of robust discussion and debate, we settled on five top policy recommendations. These are: build a new generation of savers by seeding a savings account for every child-to become available at age 18-with $500 and, as in the United Kingdom, use the new account to enhance the financial literacy of the entire family; encourage greater competition in the consumer financial services sector-while recognizing the need for effective consumer protection-to increase innovation in products and services that serve the bottom half of the wealth distribution; encourage greater efforts in the workplace to provide easy, automatic paths to saving beyond retirement saving, and financial education about how to manage and grow those savings; revitalize the US Savings Bond program, which provides a totally safe, small denomination, non-account-based, modestly liquid vehicle for saving in small amounts; and stop punishing savings by substantially modifying the asset limits that discourage everyone from TANF recipients to applicants for Pell grants for higher education from saving. The Hope Street colloquium ended with presentation of these ideas to representatives of the three Presidential candidates.

In Sacramento, the focus was on financial literacy, both to build on and to build up momentum for the California Financial Literacy Initiative (AB 2123), introduced by Rules Committee Chair Ted Lieu and sponsored by California Controller John Chiang. We discussed the increased need for financial literacy in a world of enhanced individual responsibility for financial health, a younger and older population, and ever more complex financial products from a widening array of providers. The Financial Literacy Initiative is a platform on which the state and its partners can build both financial literacy resources and outreach. Already the California Library Literacy Services has indicated interest in adding financial literacy to its broader literacy initiative, potentially bringing this type of education into a trusted resource for adults in over 600 communities. A particularly innovative element of AB 2123 would start the process of establishing a Financial Literacy Corps to mobilize financial professionals and others to provide unbiased financial advice to low- and middle-income families who are now without this resource. New America Foundation is working on this concept on a national scale and it is exciting to see it begin to take shape in California.

Seattle and King County have been working on a series of asset-building initiatives, including a Bank on Seattle program. The participants in the asset-building coalition-city and county officials; social service agencies; banks, thrifts and credit unions; and the philanthropic sector-are focused on building pathways to enable people to better meet their financial needs. We spent our time discussing what was needed, the roles of all parties, examples of success and best practices, and what the literature tells us. Specific areas of concern were bringing people into bank accounts and linking those accounts to saving; effectively coordinating financial education with the opportunity to use what was being taught; small dollar loans; and the challenges of banking immigrants in both urban and rural settings. Participants were very interested in the Federal Deposit Insurance Corporation's small dollar loan pilot program, both for what the 30 bank participants in that program (none of them, unfortunately, in Washington State) will be trying and demonstrating and because the FDIC will be disseminating the learnings widely.

It is enormously exciting that the importance of building savings and assets-of establishing the underpinnings of financial stability-has gained such interest in such a variety of venues. It is even more exciting that people across the country, from all sectors, are working together to develop and implement long-term, sustainable strategies to make financial stability attainable for everyone.