Timothy Flacke Doorways to Dreams (D2D) Fund New America Foundation, Capitol Hill Event April 21,...
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Transcript of Timothy Flacke Doorways to Dreams (D2D) Fund New America Foundation, Capitol Hill Event April 21,...
Timothy FlackeDoorways to Dreams (D2D) Fund
New America Foundation, Capitol Hill EventApril 21, 2009
Capturing Refunds as Savings
The Role of US Savings Bonds
Agenda
D2D Fund & the Refunds to Assets Pilot Pilot Test Findings Lessons & Policy Implications
D2D (Doorways to Dreams) Fund, Inc.Mission:
expand access to financial services,especially asset building opportunities,
for lower-income families by creating, testing and deploying innovative financial products and services
Boston (Roxbury) based, not-for-profit Organize national field tests of promising ideas Link private sector capabilities to public ideals Founded in 2000 by Harvard Business School professor
& senior associate dean, Peter Tufano
Essential Saving Ingredients? Money to save
Tax time: $115B (households w/ income < 40k) average ~ $1,680 per family
Saving mechanism IRS “split refunds”: link refunds to savings Universal, permanent, free, recurring
Saving product 40MM+ families un- or under-banked Millions unsure where to save Most have little money to start saving
Where can we find a suitable saving product?
A Built-to-Order Product?
Barrier Small balances Imperfect credit Risk averse Wary of banks Value sensitive No bank account Long-term aspirations,
short-term needs
Bond Feature Low $50 minimum No credit screen Risk free principal Government backing No fees, solid return (5.6%) Bank acct not required Earn interest for 30 years,
access after 1 year
Barriers to saving for lower-income peopleRelevant features of Series I US Savings Bonds
Test of US Savings BondsTax Season “Refunds to Assets” pilots
TS09 – 80 Volunteer Income Tax Assistance (VITA) sites TS08 – 32 VITA sites TS07 – 4 VITA sites, 27 H&R Block offices
Agenda
D2D Fund & the Refunds to Assets Pilot Pilot Test Findings Lessons & Policy Implications
Findings Strong demand (TS07-09)
3,300 buyers / 5,300 registrants $680k saved take up (VITA): 9.0% (vs. 1.2% for CD)
Buyer: lower-income parent (TS08) 74% parents, 15% grandparents 81% female average income: $19.9k / year
Extraordinary awareness (TS08) 74% “familiar” w/ bonds vs. 26% for IRAs, 34% for CDs
More Findings First time savings (TS08 & TS09)
no prior money saved (64%) Less than $1k saved (84%)
bond was first time saving part of refund (50%) “would’ve saved less if hadn’t bought bond” (51%)
Long-term saving bought for children (59%), grandkids (8%) saving for long-term, defined goal (74%)
e.g., education, retirement plan to hold bond 5 yrs+ (58%), 10 yrs+ (40%)
redemptions after 1 year: 11% vs. 10% for general pop
Agenda
D2D Fund & the Refunds to Assets Pilot Pilot Test Findings Lessons & Policy Implications
Observations & Policy Implications Observations
Tax time: huge saving opportunity not fully realized Working families want to, will save if we make it easy
US Savings Bonds fill a hole in saving landscape trusted, appealing, unique, long history but this national asset is withering
Bonds may attract first time savers Parents will save for kids before themselves
Policy Implications Tax time should encourage, facilitate saving
Return option to buy bonds with tax refunds US Savings Bonds must be marketed (again) Policy should allow saving for children, grandchildren
But How?
Proposed Future IRS Form 8888