Sondra G. Beverly

Measures of Material Hardship: Rationale and Recommendations

Abstract Although there has been much discussion in the United States regarding the definition of economic poverty, we continue to measure poverty almost exclusively in terms of current income. However, there are many reasons to supplement measures of income-poverty with measures of material hardship. First, material hardship and income-poverty represent alternative conceptions of poverty. Second, material hardship is of both normative and instrumental concern. Third, hardship measures are useful tools for policy analysis, particularly in the context of welfare reform. Specific recommendations for developing and using hardship measures are presented.

Income, Institutions, and Saving Performance in Individual Development Accounts

This article examines the relationship between income and saving performance in Individual Development Accounts (IDAs). The authors first discuss theories of saving. Next, for IDA participants in the American Dream Demonstration (ADD), they look at income sources and distribution, followed by tabulations of income and IDA savings outcomes. Following this, the article discusses results from regression analyses on IDA savings outcomes. It was found that the IDA savings amount did not increase with income and that the IDA saving rate decreased with income. Although the data do not reveal exactly what caused this, the authors believe that institutional factors in IDA programs played an important role.

The Role of Savings and Wealth in Reducing "Wilt" Between Expectations and College Attendance

‘Wilt’ occurs when a young person in high school expects to attend college but does not do so shortly after graduating. In this study we find that youth with no savings account in their own name are more likely to experience wilt than any other group examined. In multivariate analysis, young people who expect to graduate from a four-year college and have an account are approximately six times more likely to attend college than those with no account. Teens who expect to graduate from a four-year college and have designated a portion of their savings for college are approximately three times more likely to attend college than those with no account. Additionally, when savings are taken into account, academic achievement is no longer a significant predictor of college attendance. Policy implications are discussed.

Staying on Course: The Effects of Savings and Assets on the College Progress of Young Adults.

Increasingly, college graduation is seen as a necessary step toward achieving the American Dream. However, large disparities exist in graduation rates. For many families, the current family income is not enough to finance college. Therefore, many young adults have to rely on education loans, which may be difficult to repay, leaving them strapped with debt after leaving college. This study examines the potential role of assets and savings for promoting college progress among young adults. Overall, findings suggest that policies, such as Child Development Accounts (CDAs), that help parents and youth accumulate savings—especially savings for college—may increase college attendance and graduation completion rates.

A Framework of Asset-Accumulation Stages and Strategies

Based on a study with 298 low-income participants, we propose that asset accumulation occurs in 3 stages. In the first stage (reallocation), current resource inflows exceed current outflows. To do this, people reallocate resources from consumption or leisure. In the second stage (conversion), people may convert resources from liquid to illiquid forms. In the third stage (maintenance), people resist temptations to dissave. We theorize that people adopt psychological and behavioral strategies to achieve these objectives. Putting psychological and behavioral strategies together with the stages of reallocation, conversion, and maintenance results in 6 strategy groups. We provide real-world examples of each strategy group and discuss implications for encouraging account ownership among the unbanked, improving asset-accumulation programs, and improving financial education.

Splitting Tax Refunds and Building Savings: An Empirical Test

Families are more likely to save if they can commit to savings before funds are in-hand (and subject to spending temptations). For low- and moderate-income U.S. families, an important savings opportunity arises annually, during income tax season. We study a group of low-income individuals in Tulsa, Oklahoma, who were encouraged to save parts of their federal refunds at the time of tax filing. Those who agreed to save directed a portion of their refund to a savings account and arranged to have the rest sent to them in the form of a check. Eligible individuals could also open low-cost savings accounts. We document the demand for these services, the characteristics of those who sought to participate, the savings goals of those who participated, the immediate savings generated by the program, and the disposition of savings a few months after receipt. This pilot study suggests that there may be demand among low-income families for a refund-splitting program that supports emergency needs as well as asset building, especially if a basic savings product is available to all at the time of tax filing.

Early Program Enrollment in a Statewide Child Development Account Program

College Savings Plans (529 plans) and Child Development Accounts (CDAs) are two policy tools designed to encourage families to save for college. In Maine, a statewide CDA program has been established using the states 529 plan platform and offering a

Family Assets and Child Outcomes: Evidence and Directions.

500 financial incentive for postsecondary education to every newborn. This program is designed to increase access to higher education by encouraging college savings at the beginning of a childs life. Survey data from eligible parents (N = 437) suggest that the

Socioeconomic Status and Early Savings Outcomes: Evidence from a Statewide Child Development Account Experiment

500 incentive was attractive and financially sophisticated parents were more likely to enroll their child. We conclude that financial incentives can increase enrollment in asset-building programs but are not the ideal strategy to achieve universal enrollment.

Universal Accounts at Birth: Building Knowledge to Inform Policy

For poor families, the possession of assets—savings accounts, homes, and the like—has the potential not only to relieve some of the stress of living in poverty but also to make a better future seem like a real possibility. If children in families that own certain assets fare better than children in families without them, then helping poor families build those assets would be an effective strategy for two-generation programs. Indeed, write Michal Grinstein-Weiss, Trina Williams Shanks, and Sondra Beverly, plenty of evidence shows that assets are connected to positive outcomes for poor children. For example, young people who have any college savings at all, even a very small amount, are more likely to go to college; children in households with assets score higher on standardized achievement tests; and children of homeowners experience fewer behavioral problems. But this evidence comes from longitudinal data sets and is therefore correlational. Looking for causal relationships, the authors examine the results of experimental programs that opened various types of savings accounts for poor people and matched their contributions. Several of these trials included a control group that did not receive a savings account, making it possible to attribute any positive outcomes directly to the savings accounts rather than to their owners’ personal characteristics. These programs dispelled the myth that poor people can’t save; participants were generally able to accumulate savings. It’s too early to tell, however, whether assets and asset-building programs have long-term effects on children’s wellbeing, though one experiment found positive impacts on disadvantaged children’s social-emotional development at age four. The most promising programs share several features: they are opened early in life; they are opened automatically, with no action required from the recipients; and they come with an initial deposit.