What’s Next for Matched and Incentivized Savings: Where We Are Now
The first post in our “What’s Next?” series, which explores the future of matched and incentivized savings, discussed how the dynamic, diverse field of savings practitioners is primed to continue providing innovative services to support savings across the country. And despite the federal Assets for Independence (AFI) program being defunded, there are more reasons to be optimistic.
New innovations in financial technology (fintech) and integrated service delivery show promise for providing matched savings products to clients efficiently and at scale. And while the challenges facing practitioners and low-income families are vast, we have a stronger understanding of their nature than ever before. Moreover, there are many opportunities to advance creative state policies to encourage savings. In this post, we take stock of where we are with matched and incentivized savings and begin to explore the opportunities for the future.
We Have a Much Deeper Understanding of the Savings Field Than Before
As the field has grown and innovated to find new ways to reach targeted clients, our understanding of the problem has changed as well. Compared to 25 years ago, we know so much more about the diverse needs of families. There are those who are trying to reach the level of financial stability of the average Individual Development Account (IDA) participant who can save for an asset, those who need to build emergency savings, and/or those that want to save up for smaller, but no less critical assets, such as naturalization expenses.
We are facing the reality that the first half of the asset-building adage, “income gets you by, assets gets you ahead,” may not fully hold up, as wages have stagnated and emergencies have become more frequent. The Financial Diaries shows us how so many face income volatility and how families are saving, not just for bigger assets but to weather shocks in income and expenses. We also know that new solutions must take into account the stark realities of racial discrimination and how they manifest in the growing racial wealth divide. While the scope of the challenges is daunting, this deeper understanding places us in a better position to address them than ever before.
While the defunding of AFI is a huge blow to our field, there are reasons for hope.
Earn to Learn, the four-year-old AFI IDA program that helps Arizona university students pay for and stay in school, has laid a blueprint for scaling IDA products within large social service sectors. In which sectors (housing? healthcare? employment) will the next Earn to Learn emerge?
EARN, once a pioneering IDA program itself, has been delivering a direct-to-consumer, internet-based, incentivized savings program, SaverLife, to help families build an emergency cushion and withstand shocks. Its online delivery platform can connect virtually any consumer with a bank account to this opportunity. How can we utilize direct-to-consumer and fintech strategies to reach families that are saving for other purposes as well?
What we know for sure is that, as families seek to navigate volatility, move towards stability, and achieve prosperity, solutions need to be flexible and address both short and long-term savings needs.
New Policies to Fill the Void
In the absence of a federal program, advocates and practitioners are looking to states to ramp up support for matched and incentivized savings. Many state policies tie funding to AFI federal funds, and advocates in those states are beginning to explore ways to update these policies and become independent of the now defunct AFI. Many hope to expand the uses of matched funds beyond what is currently available (e.g., homeownership, education expenses, etc.). How can we work creatively with states to foster programmatic innovation and expand the reach of existing savings programs?
In addition to changes in the programmatic structures of state programs, many practitioners are trying to work within their states to find innovative funding structures. The most prominent state funding program, the Oregon IDA Initiative, manages tax credits that provide at least $10.7 million dollars a year for IDAs across the state. Tax credits are incredible tools to raise funds for these crucial programs. What other financial instruments, such as bonds, can be used to finance matched savings?
Prosperity Now is excited to continue working alongside practitioners as they seek to change policies at the state and local levels. We are also continuing to explore what is possible at the federal level to bring back support for matched savings.
You Tell Us—What’s Next?
We want to hear from you: where do you see the opportunities? With whom do we need to work to bring these services to more people? Which sectors (employers, healthcare providers, housing providers, etc.) do we need to engage to do so? What is already happening in your communities that the field should know about? How are you working with your state governments? Please join the Adult Matched Savings Network Listserv and let us know where you see the future of matched savings!