Low Wealth Savings Programs
What is meant by low wealth savings programs?Low wealth savings programs are designed to help the small saver build wealth, step by step, over time. Many households have ambitions to save, but don’t have the $500 or $1,000 to open a traditional certificate of deposit. A regular savings account with no withdrawal limitations may be too easy of a source of funds and make long term savings difficult. Low wealth savings products ideally, will require a small amount to open the account, small regular monthly deposits over some period, and will limit or penalize withdrawals. Many programs are designed to help the small saver reach some desired goal, such as a down payment for a car or home or save for college. The goal is to help the small saver develop a savings habit over time and realize building wealth is within his/her capacity.
Who are the low wealth savers?Eighty percent of households hold just 16% of total U.S. net worth distribution. So there are a lot of low wealth households. Whereas even high income level households can fall into the definition of low wealth and vice versa, those households most apt to be low wealth savers include: * Low- to modest-income households * Minorities * Young adults * Single parent households * Those with disabilities
Why should credit unions care?Thirty million workers in the U.S. today between the ages of 18 and 64 earn $9 per hour or less. That equates to $18,800 per year and puts a family of four at the poverty level. An added burden to low wage families is the lack of common employee benefits such as health insurance, sick leave and even vacation time. A single catastrophic event such as an illness can leave these families without shelter or adequate food if they have no savings on which to fall back. Helping households of modest means build wealth is part of the credit union social mission.
What can credit unions do?Credit unions can develop creative, innovative savings products to help low wealth households build assets incrementally, over time. Credit unions can help their members develop savings goals and make saving money manageable and easy through monthly or weekly automatic transfers. Credit unions were the forerunners of “pay yourself first.”
New Implementation Guide!
Now credit union executives who wish to implement products to help low-wealth households establish savings have a practical and objective implementation guide at their fingertips. The REAL Solutions® Savings Products for Low-Wealth Households Implementation Guide was developed by Nancy Pierce, Ph.D. – President of Tipton Research Group in Kansas City, MO – for the National Credit Union Foundation (NCUF). As a REAL Solutions® Field Coach, Nancy has worked through nine state leagues/associations to help hundreds of credit unions develop and implement products & services for modest means households to build wealth and financial security. Click here to learn more about the implementation guide
Pot Of Gold » View detailsPrince George’s Pot of Gold account enables members to save for a specific goal within a 5-year term with automatic monthly or bi-weekly transfers. It also features a tiered interest rate structure and is extremely popular with members.
Langley Saves » View detailsLangley Saves is an upside-down, three-tiered interest rate product to help people of modest means develop a savings goal and habit. Members only have to save $10 per month to open the account and are limited to two withdrawals per calendar year.
Credit Builder Loan » View details
Loan made to member in which the proceeds are deposited in a savings account at CoVantage Credit Union.
Individual Development Accounts (IDA's) » View detailsLow income individuals and families that are able/willing to save and participate in financial education receive matched funds to help them acquire an economic asset to achieve long-term financial stability. Members must be able to save $25 per month with maximum savings of $2,000 per individual and $4,000 per family.
How-To Develop Savings Products for Low-Wealth Households
- Individual Development Accounts: What’s Involved in Getting Started
- Savings for Life: A Pathway to Financial Security for All Americans – Aspen Institute
- Building Wealth: A Beginner’s Guide to Securing Your Financial Future – Federal Reserve Bank of Dallas
- Turning Today’s Economic Inflection Point into Tomorrow’s Savings Behavior – Center for Financial Services Innovation