Title: Inclusion and College Savings Plans:
1 Inclusion and College Savings Plans IDA
Research and Results from Survey Center for
Social Development Washington University in St.
Louis Margaret Clancy May 5, 2003
2A Key Theoretical Perspective
Saving is shaped by institutions, not merely
individual preferences.
3Factors That Affect Saving
- Incentives
- Financial information and education
- Access to institutionalized saving mechanisms
- Facilitation
- Expectations
Sherraden, Schreiner, Beverly, 2003
4Individual Development Accounts
- Matched savings accounts
- For low-income individuals
- Intend to build assets
- With financial education
5American Dream Demonstration (ADD)
- First major demonstration of IDAs
- Funded by 11 foundations
- 13 program sites
- 2,364 participants
- Research designed by the
- Center for Social Development
6IDA Savings Outcomes
- Average monthly net deposit 19.07
- Gross deposits - Unmatched withdrawals
- Months of participation
- Excluding exits 33.81
- Net deposits plus match 1,543
- Deposit frequency 6 of 12 months
Schreiner, Clancy, Sherraden, 2002
7Income and Saving
- Controlling for other factors, income is not
associated with program dropout or with the
amount of net deposits in IDAs - Â
- Welfare recipients save as successfully as other
IDA participants - Â
Schreiner, Clancy, Sherraden, 2002
8Saving Patterns
- IDA deposits increase sharply in March,
probably reflecting income tax returns and the
impact of the Earned Income Tax Credit (EITC) -
Schreiner et al., 2001
9Institutional Characteristics and Saving
- Savings increased with more financial education,
up to 8-10 hrs -
- Direct deposit appears to help people stay in the
program, but not to save more
Schreiner, Clancy, Sherraden, 2002
10Practice Implications
- Match incentive encourages people to join and to
save. - Focus on goal is incentive for saving.
- Legitimacy of program and source of information
about the program are important factors in
effectively marketing to disenfranchised
populations.
11Practice Implications
- Inclusive asset-based policy can be successful
for low-income individuals. - IDA participants, regardless of income are
responding to matches and expected saving
amounts.
Sherraden, 2002
12IDA State Policy
gwbweb.wustl.edu/csd/statepolicy/states.html
13College Savings Plans
- Post-secondary education savings
- Small initial contributions
- Earnings are free from federal tax
- State tax-free growth of earnings
- Many offer state tax deduction
14Who is Participating?
- Few states track demographics
- Tax incentives benefit people in higher tax
brackets - Brokers and tax planners market to high-wealth
individuals
15State Innovations for Inclusion
- Match for low- to moderate-income
- savers (5 states)
- Link college savings plans with IDAs facilitate
rollovers or use plan as investment vehicle for
IDA (3 states)
N40
16State Innovations for Inclusion
- 501(c)3 registration (31 states)
- Assets not counted for state tuition grant
purposes (18 states)
N40
17State Innovations for Inclusion
- Creditor protection (17 states)
- Scholarships and awards (9 states)
- Gear Up programs (4 states)
N40
18Community-based Partnerships
76 agree or strongly agree that partnership with
community-based organizations provides
opportunities to reach low-moderate income
participants.
N38
19Include Low-Income Savers
86 agree or strongly agree that plans should
include more low-income participants
N36
20Plan Rules not a Hindrance
Majority disagrees that plan rules and
regulations discourage participation by
low-moderate income group
N37
21Workplace Enrollment
95 agree or strongly agree that the effort to
introduce 529 plans into the workplace provides
an opportunity to reach participants of all
incomes
N37
22Potential for Partnership
- Facilitate outreach and enrollment
- Provide financial education sessions
- Encourage deposit of EITC refunds
- Allow for rollover of balances into college
savings plan
23Why is this Important?
- Opportunity for increased participation by people
of all income levels
24Publications and Resources
Center for Social Development George Warren Brown
School of Social Work Washington University in
St. Louis Website http//gwbweb.wustl.edu/
csd Phone (314) 935-8178 E-mail
mclancy_at_gwbmail.wustl.edu