Expanding the Savings Agenda RAISE Texas Summit

Federal Reserve Bank of Dallas—Houston Branch

October 30, 2012 Laura Rosen

OpportunityTexas

Tax-Time Saver Story

Bobby, a VITA client from Longview, decided to purchase a $500 Bond because he received a much larger return than he had anticipated. He plans to put this money aside for retirement and said this savings will be the beginning of his retirement savings.

Texas Tax-Time Efforts Increase Savings

2010 2011 2012

Filers that Saved on Tax Return

77 836 1,728

Tax Returns Prepared 93,206 104,116 114,019

Annual Percentage change

12% 10%

Percent of VITA Filers that Saved on Tax Return

0.08% 0.80% 1.52%

Percent of VITA Sites Where Clients Saved on Tax Return

15% 31% 36%

Annual Percentage change

107% 16%

Three Largest Tax-Time Savings Projects in Texas

OpportunityTexas Tax-Time

Savings Project (2011 & 2012

tax seasons)

San Antonio’s SaveUSA (2011

& 2012)

United Way of Greater

Houston’s Tax-Time Matched

Savings Program (2012)

This Year, Texas Tax-Time Efforts Doubled # of Savers from 2011

2010 2011 20120

200

400

600

800

1000

1200

1400

1600

1800

52%

33%

15%

3%

OtherTTSPSan AntonioHouston

Year

Num

ber

of

Save

rs

32%

55%

9%

2%

Other 75 %Houston 17%San Antonio 8%

77 total savers

(942)

(635)

(226)

(265)

(436)

1,728 total savers

836 total savers

OpportunityTexas Tax-Time Savings Project, 2011-12

Incentives: $25 grocery store card (used in 2012) more popular than $50 Savings Bond (2011)

Immediate incentive can have effect 2-3 times greater on motivating savings initiation.1

Return-on investment,” i.e. savings-to-incentives, increased from 3:1 to 10:1 from 2011 to 2012.

Jones, Damon and Aprajit Mahajan, “Time-Inconsistency and Savings:Experimental Evidence from Low-Income Tax Filers,” CFS Research Brief,

October 2011.

 OpportunityTexas Tax-Time Savings Project, 2011-12

Outcome 2011 2012

Number of Project VITA Filers who Saved

265 942

Total Value of TSP incentives

$9,695 $14,240

Total TSP savings $29,950 $143,300

Texas communities participating in the project

9 12

Texas VITA sites participating in the project

24 51

Future of Tax-Time Savings – 2013 Tax Season and Beyond

Tax-Time Savings Project Partnership with Texas Credit Union Foundation SaveUSA-like program with a few modifications

$25-50 upfront incentive for initial deposit of between $250-500 1:1 match up to $100 on additional deposits

2014 – Sites have a menu of savings product options Savings bonds Savings accounts Prepaid cards

Exploring prepaid card as emergency and college savings product for VITA sites to promote in 2014 tax season

Median % of filers direct depositing refund – 67%, range 25-100%

Is prepaid something network is interested in?

College and Children’s Savings in Texas

Smarter Texans Saves, Amarillo ISD

Child Support for College (CS4C)

Save & Match/Texas Match the Promise Foundation - Platform to accept private (and public) $ to be used for 529 college savings matching grants

Match the Promise Scholarships

•Up to $500 match on

tuition unit purchases

•Approximately150 awards

Matching

Scholarship

•$2,000 tuition grant

•5 awards

Promise

Scholarship

www.matchthepromise

.org

Scholarship Application Timeline

Sept.

1-

Decem

ber

31,

2012

•Scholarship Application Period

March

31,

2013

•Scholarship Award Notification

Augus

t 31,

2013

•Scholarship recipients have until this date to meet

contribution requirement

Scholarship Eligibility

Grades - Students in grades 6-9 Account Ownership – Must have a Texas Tuition

Promise Fund account or enroll by 12/31/12 Tx Residency – Must be a Texas resident and a

dependent for tax purposes of a Texas resident Family Income - $75,000 or less Savings Contribution - Minimum $100 contribution to

Promise Fund account during the current sales period – September 1, 2012 – August 31, 2013

Career Essay – Submit 200-300 word essay about the career in which the student is interested

Report Card or Transcript – Submit 2011-12 report card/transcript

Initial Pool – 797 account holders potentially eligible

College Savings Challenges & Next Steps

529 Plan Barriers

No retail presence Only broker-dealers

and certified investment advisors can provide enrollment assistance and advice

Explore Alternatives & Policy Changes

Pursue additional policy change to enable 529 enrollment assistance

Other product alternatives, including prepaid card

Resources

November 5, 2-3pm

Registration link on OpportunityTexas website

Dollar for Dollar Publication Webinar: Promoting Savings at

Tax-Time

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