Financial Inclusion

Last week the United Kingdom’s Treasury released details on Junior Individual Savings Accounts (ISAs), which are designed to replace the Child Trust Fund (CTF). The CTF, which was in operation from 2005 to 2010, provided universal savings accounts to all newborns in the U.K. with progressive contributions for eligible account holders. Their replacement, Junior ISAs, will retain little of these same features when they become available on November 1, 2011, calling into question whether their features will benefit children from low-income backgrounds.

Originally posted on www.youthsave.org

The First FDIC-Insured Bank Designed just for Young People Turns 24 Years Old

The research on young people’s savings points to early access to basic financial services to improve young people’s life outcomes, including things like improved financial and educational outcomes. Just to give a few examples, research by William Elliott and colleagues finds that young people who have their own savings accounts are significantly more likely to attend and graduate from college. Some of my own research finds that young people are significantly more likely to continue saving later in life when they have access to savings accounts early in life. Given the apparent importance of young people’s savings for improving their life outcomes, financial institutions have a role to play in including young people in basic financial services.

On July 15, 2011, Reid Cramer, Director of the Asset Building Program, presented the keynote address to the Advancing Workplace Savings Initiatives conference at the Federal Reserve Bank of Richmond emphasizing the need to provide automatic savings opportunities to more Americans and presenting the most recent learnings and policy implication from the AutoSave pilot.

My wife and I love to attend baptisms and any kind of new baby-party. There is something about seeing someone so young and thinking about their future. That is why we favor U.S. savings bonds as a gift. A 3-month old generally doesn’t need toys or clothes, so the gift of savings seems ideal. They can use it for college, starting out in their first apartment, or even something huge like buying a house or starting a business. This last weekend we were pretty disappointed in our attempt to purchase a bond for a baptism. We couldn’t do it!

A report released today by the Pew Research Center finds that the Great Recession has worsened an already-widening gap in net worth between Whites, Latinos, and Blacks. Using data from the Survey of Income and Program Participation (SIPP), researchers found that between 2005 and 2009, in percentage terms, “inflation-adjusted median wealth fell by 66% among Hispanic households and 53% among black households, compared with just 16% among white households.”

A lot has been said about homeownership recently, especially the role that homeownership plays in families moving forward (or, las familias se mueven adelante) on the path to economic mobility. Stable and affordable housing, qualities attributed to homeownership, may have significant and positive impacts on young people’s life outcomes. And there is particular interest on the relationship between homeownership and young people’s educational outcomes, like college attendance and graduation. In other words, improving homeownership may give young people and their families greater stability, which can lead to improved educational outcomes and ultimately upward economic mobility.

That's the buzz circulating around the President's selection of Richard Cordray to head the CFPB. Ezra Klein says that her possible Senate candidacy is a good reason to nominate someone else.

President Obama will formally announce today that his choice for the first director of the Consumer Financial Protection Bureau will be former Ohio Attorney General and current CFPB Director of Enforcement, Richard Cordray. Cordray’s resume is loaded, from education, work experience, and even being a Jeopardy champion (no joke).

With the “golden age of behavioral research,” as New York Times columnist David Brooks recently described, comes a golden opportunity for the asset building and financial inclusion fields.  Indeed, the latest breakthroughs in social science and behavioral research beg – or perhaps even force – us to think differently about poverty reduction and the policies and mechanisms that can enable it.