1. Timothy Flacke Doorways to Dreams (D2D) Fund New America Foundation, Capitol Hill Event April 21, 2009 Capturing Refunds as Savings The Role of US Savings Bonds

2. Agenda D2D Fund & the Refunds to Assets Pilot Pilot Test Findings Lessons & Policy Implications

3. D2D (Doorways to Dreams) Fund, Inc. Mission: expand access to financial services, especially asset building opportunities, for lower-income families by creating, testing and deploying innovative financial products and services Boston (Roxbury) based, not-for-profit Organize national field tests of promising ideas Link private sector capabilities to public ideals Founded in 2000 by Harvard Business School professor & senior associate dean, Peter Tufano

4. Essential Saving Ingredients? Money to save Tax time: $115B (households w/ income < 40k) average ~ $1,680 per family Saving mechanism IRS split refunds: link refunds to savings Universal, permanent, free, recurring Saving product 40MM+ families un- or under-banked Millions unsure where to save Most have little money to start saving Where can we find a suitable saving product?

5. A Built-to-Order Product? Barrier Small balances Imperfect credit Risk averse Wary of banks Value sensitive No bank account Long-term aspirations, short-term needs Bond Feature Low $50 minimum No credit screen Risk free principal Government backing No fees, solid return (5.6%) Bank acct not required Earn interest for 30 years, access after 1 year Barriers to saving for lower-income people Relevant features of Series I US Savings Bonds

6. Test of US Savings Bonds Tax Season Refunds to Assets pilots TS09 – 80 Volunteer Income Tax Assistance (VITA) sites TS08 – 32 VITA sites TS07 – 4 VITA sites, 27 H&R Block offices

7. Agenda D2D Fund & the Refunds to Assets Pilot Pilot Test Findings Lessons & Policy Implications

8. Findings Strong demand (TS07-09) 3,300 buyers / 5,300 registrants $680k saved take up (VITA): 9.0% (vs. 1.2% for CD) Buyer: lower-income parent (TS08) 74% parents, 15% grandparents 81% female average income: $19.9k / year Extraordinary awareness (TS08) 74% familiar w/ bonds vs. 26% for IRAs, 34% for CDs

9. More Findings First time savings (TS08 & TS09) no prior money saved (64%) Less than $1k saved (84%) bond was first time saving part of refund (50%) wouldve saved less if hadnt bought bond (51%) Long-term saving bought for children (59%), grandkids (8%) saving for long-term, defined goal (74%) e.g., education, retirement plan to hold bond 5 yrs+ (58%), 10 yrs+ (40%) redemptions after 1 year: 11% vs. 10% for general pop

10. Agenda D2D Fund & the Refunds to Assets Pilot Pilot Test Findings Lessons & Policy Implications

11. Observations & Policy Implications Observations Tax time: huge saving opportunity not fully realized Working families want to, will save if we make it easy US Savings Bonds fill a hole in saving landscape trusted, appealing, unique, long history but this national asset is withering Bonds may attract first time savers Parents will save for kids before themselves Policy Implications Tax time should encourage, facilitate saving Return option to buy bonds with tax refunds US Savings Bonds must be marketed (again) Policy should allow saving for children, grandchildren

12. But How?

13. Proposed Future IRS Form 8888

14. Timothy Flacke Executive Director D2D Fund, Inc. tflacke@d2dfund.org 617.541.9064 www.d2dfund.org