Innovations in Savings: the $aveNYC Account New America Foundation April 21, 2009 Cathie Mahon Executive Director and Assistant Commissioner

Office of Financial Empowerment (OFE) To educate, empower, and protect New Yorkers with low incomes. Launched by Mayor Bloomberg in December 2006 as the first program under the Center for Economic Opportunity. First local government initiative in the nation focused exclusively on anti-poverty and financial empowerment efforts for those with low incomes.

$aveNYC Account Pilot Program Purpose : Test a scalable, national model to increase savings among low-income individuals Program Structure : Must direct deposit at least $100 from tax refund Obtain a 50% match (up to $250) on restricted savings account if participants save for at least for 1 year Can make additional deposits throughout the year, but account will close if participants deplete below initial contribution New Approach to Savings : Non-Prescriptive Short-term Designed to be administered at low cost and easy scale

- Participant average income: $15, % were working full time - 73% have children Even individuals with very low incomes can and will commit to saving if presented with a convenient, simple tax time vehicle.

Match money offered through the $aveNYC account is a powerful motivator to save.

- 31% of participants were UNBANKED at program start - 72% had less than $500 in savings when the program began - 25% of respondents had no intention of saving a portion of their tax refund The $aveNYC Account is already changing savings behavior. The $aveNYC Account motivated even those with no track record of saving.

Participants intended to save for the long term 95% of respondents indicated they planned on keeping the account open long enough to receive the match Match money motivated majority to save for the full year 74% of 2009 SaveNYC participants kept their account for 1 year. 79% of those who received the match rolled over the account. Of those who rolled over – 33% contributed again in % of respondents who closed their account did so because of an emergency, childrens expenses, or job loss The $aveNYC Account is already changing savings behavior. Most $aveNYC participants were able to save for the whole year.

$aveNYC Account participants are saving for a variety of non-frivolous short and long term goals.

Policy Implications Tax time represents a unique opportunity to encourage low-income individuals to save. Financial incentives, combined with trustworthy and effective implementers, can convince even the very low income and unbanked to save (even in difficult economic times). Asset-building policy must incorporate the full gamut of savings needs, including for short-term emergency funds. Short term savings can help reorient people towards longer-term planning and financial management. Cities and states can add to our knowledge base through experimentation with varied savings approaches.

42 Broadway, 8th Floor New York, NY