Opportunity and Ownership: Briefs

Publications : Briefs

A primary goal of children's savings accounts (CSAs) is to provide children, especially in low-income families, a strong economic footing. The ability to do that, however, depends on how CSAs are designed and how much families contribute. This study uses projections from the Urban Institute's DYNASIM model to estimate the wealth building impact of CSAs under alternative scenarios that vary the design features. The results highlight three points relevant for any asset-building proposal or program: incentives make a difference, targeting can be difficult, and nontaxability matters for all subsidies.

Children's savings accounts (CSAs) are being promoted to improve financial literacy, increase the number of low- to moderate-income households that are banked, and encourage saving for education, homeownership, or retirement. This study uses projections from the Urban Institute's DYNASIM model to estimate the wealth building impact of CSAs. The results suggest that most CSAs will have small balances after accounting for inflation. Still, such accounts could help get children, particularly those in low-income families, into financial instruments that demonstrate the value of saving and of compound interest.

Nearly one quarter of low-income families do not have a checking or savings account, more than one-third do not own cars, 60 percent do not own a home, and 90 percent have no retirement account. In contrast, the typical middle-income family has checking or savings accounts, retirement accounts, owns a car and a home. This brief synthesizes current research on the assets and liabilities of low-income families into a variety of portraits and provides suggestions for future research and policy.

This brief presents an empirical analysis of how asset tests affect families’ asset holdings. The findings suggest that more lenient asset tests and more generous IDA program rules can lead families to increase their asset holdings. Relaxed vehicle asset limits, for example, are associated with increased vehicle ownership. Since people often need a reliable car to get to work, this finding suggests that exempting at least one vehicle in all states may increase employment and job stability among low-income families. The findings also suggest that restrictions on withdrawals and incentives built into restricted asset accounts and IDA programs may provide families with motivation to build assets.

The District of Columbia Housing Monitor provides a quarterly look at the Washington, D.C., housing market, tracking home prices, real estate listings, new construction, and affordable housing. This issue's special section examines mortgage lending trends through 2005 and highlights the declining share of low income home buyers in neighborhoods throughout the city.