Four Principles to Guide the Future of Low-Income Savings Initiatives
The financial lives of low- to-moderate income (LMI) families are complicated and often unstable. Too many families lack an emergency savings cushion, face severe month-to-month fluctuations in income and expenses, and are unable to preserve stability. All of this makes building wealth over a lifetime increasingly difficult, and we see families struggling to maintain homeownership, save for retirement or invest in ways that ensure long-term financial security.
This complexity requires a nuanced response from savings program and product designers. The set of four guiding principles detailed below seeks to answer the following question: What do future large-scale savings programs and products need to look like to meet the needs of low- to-moderate income consumers?
1. Tackle “Now, Soon and Later” Savings Needs Flexibly
We need a full range of products and services that address short-, medium- and long-term savings needs. If designed flexibly, customers should be able to use their savings to meet immediate expenses and have easy opportunities to get back on track for their larger goals when ready. Only by addressing “now, soon and later” needs can we help savers get by and get ahead.
2. Incorporate the Voices of LMI Consumers—Particularly Those of Color—Into Design and Delivery
Over the past five years, we have worked with more than 250 financial capability service providers to design and deliver high-quality services to clients. We found that success was only possible when consumer voices actively shape delivery and point out the barriers to savings they need help overcoming. And yet, despite the array of savings products and services available to LMI families, too few have been designed, developed and delivered with input from those families they’re seeking to serve. Input from communities of color is particularly important to ensure inclusive products and savings solutions that do not perpetuate existing racial disparities, overcome barriers and are responsive to communities’ needs.
3. Use Modern Technology for Management and Consumer Interface
Any savings product solution that will address the challenges of modern consumers will need modern technology, both for administration and consumer interaction. For too many years, nonprofit savings product providers have struggled with clunky databases, outmoded bank statements and no easy way for clients or administrators to view program progress electronically.
Thankfully, this is finally starting to change. New fintech savings solutions, such as Even for income smoothing and EARN’s SaverLife for building savings, provide consumers with an aesthetically pleasing and streamlined electronic interface. Responsive savings solutions will combine these design elements to improve both the client and practitioner experience.
4. Efficiently Integrate Products and Services into Trusted Sectors and Networks
Future savings products and initiatives need to efficiently match families with the right savings products at the moments when they need them. Embedding savings services into diverse networks and sectors, such as social service systems and workplaces that are already reaching LMI families, increases their reach and likelihood of success. Products can reach more families when tailored to match the goals they’re working towards, such as a homeownership individual development accounts (IDA) within homebuyer counseling.
Critically, by embedding savings programs within complementary services, we can increase the efficiency and reach of savings services without losing what makes many programs effective in the first place: the trusted, human element. Nonprofits, particularly social service networks and financial capability providers, offer a direct customer service channel specifically dedicated to serving LMI families and communities. Savings product designers need to consider how to engage LMI families, and how they will work with trusted partners to do so directly.
Prosperity Now will work alongside the dynamic fields of nonprofit service providers, large and small financial institutions and financial product developers as they continue to innovate solutions to address these entrenched financial challenges. We will work to bring our consumer insights to all our partners as they design and deliver relevant savings products. We will also look for creative delivery channel options that help low-income people access products at scale. From financial institutions to nonprofit practitioners, our partners play a key role in expanding access to a quality savings experience.
Through 2019, we will also be conducting consumer insights research to better understand the product features and user interfaces that LMI families desire in “now, soon and later” savings solutions. We will use this research to further drive program and product development by engaging our community of asset building and financial capability providers, researchers, financial institutions, technology partners, policymakers and funders around the challenges and viability of potential solutions.