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Center for Social Development
Washington University in St. Louis
Schemes to Boost Small Savings:
Lessons and Directions
Michael Sherraden
Youngdahl rofessor of Social Development
Washington University in St. Louis! US"
World Ban#
May $%! &''(
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Center for Social Development
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)ocus is on saving as a strategy
for asset accumulation
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Center for Social Development
Washington University in St. Louis
*ncreasing +uestioning of *ncome asSole Definition of overty and Well,Being
"martya Sen -%$! %/ and others loo#ing to0ard
capa1ilities.
"ssets can 1e seen as part of this discussion: one
measure of long,term capa1ilities.
"ssets are li#ely to lead to a num1er of positive effects inaddition to deferred consumption -e.g.! sta1ility! investment
returns! longer time hori2ons! social standing/.
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Washington University in St. Louis
34ample: 5he 6"sset 3ffect7-Bynner and a4ton! &''%/
Methods: 8ational Child Development Study! longitudinal!
9LS regressions.
)indings: -%/ olding assets at age &$ associated 0ith later
positive outcomes: 1etter la1or mar#et e4perience! marriages!
health! health 1ehaviors! political interest.
-&/ resence of the asset appears to matter more than the
value of the asset.
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34ample: *mpact of Wealth on
Child Developmental 9utcomes -Williams! &''$/
Methods: anel Study of *ncome Dynamics!
longitudinal data! 9LS regressions
;ey findings: -%/ Wealth positively associated 0ith
cognitive development! physical health! and
socio,emotional 1ehavior.
-&/ 3ffects occur even among very income,poor
families.
-$/ Wealth seems to 1e a 1etter predictor as children
gro0 older -income is a 1etter predictor 0hen younger/.
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Center for Social Development
Washington University in St. Louis
34ample: "ssets! 34pectations! and
3ducational erformance- assets are positively associated 0ith
children>s educational attainment.
-&/ ?esults occur in part through e4pectations of the mother:assets are associated 0ith e4pectations! 0hich are in turn
associated 0ith educational attainment.
-$/ *ncome is not associated 0ith educational achievement 0hen
assets are in model.
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Center for Social Development
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@oal Should Be
Inclusion in "sset Building
Bring everyone into asset 1uilding.
Ma#e policy progressive! 0ith greater su1sidies for
the poorest families.
Ma#e asset 1uilding life,long and fle4i1le.
See# adeAuate levels of asset accumulation
for social protection and economic development.
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Center for Social Development
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"sset,Based olicies in the US:
Large and ?egressive
9ver $'' 1illion annually in US ta4 e4penditures
for assets -homes! investments! accounts/
9ver ' percent of this goes to households
0ith incomes over '!''' per year
"t same time! 0elfare policy provides disincentives
for the poor to accumulate assets
-Sherraden! %% o0ard! %E Seidman! &''%
Corporation for 3nterprise Development! &''F/
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Center for Social Development
Washington University in St. Louis
9ne olicy Strategy for *nclusion:
*ndividual Development "ccounts -*D"s/-Sherraden! %GG! %%/
• Special savings accounts
• Started as early as 1irth
• Savings are matched for the poor! up to a cap
• Multiple sources of matching deposits
• With financial education
• )or homes! education! 1usiness capitali2ation
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Center for Social Development
Washington University in St. Louis
?esearch on *D"s:"merican Dream Demonstration -"DD/
• )irst maHor demonstration of *D"s
•
)ourteen *D" programs around the country• "DD from %E through &''%! research through &''
• 9rgani2ed 1y Corporation for 3nterprise Development
• ?esearch designed 1y Center for Social Development
• )unded 1y t0elve foundations -)ord 0as the maHor
supporter! 0ith partnerships from CS Mott!
Citigroup! )annie Mae! 3M ;auffman! MetLife! )B
eron! Levi Strauss! ?oc#efeller! and other foundations/
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*ncome and Savings 9utcomes in "DD-Schreiner! Clancy = Sherraden! &''&
Schreiner = Sherraden! forthcoming &''(/
Method: "ccount monitoring research
;ey )indings:
-%/ Controlling for other factors! income is only 0ea#ly
associated 0ith savings outcomes.-&/ 5he poorest *D" participants save a much higher
proportion of their income than less,poor participants.
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Washington University in St. Louis
*D"s and )uture 9rientation in "DD-M.S. Sherraden et al.! &''F/
Method: *n,depth intervie0s 0ith *D" participantsand controls
;ey finding: @reater future orientation:
-%/ *D" participants say they can 6see more clearly7
and 1etter 6visuali2e a future7 than 1efore *D"s.-&/ *D" program said to 6create goals and purpose.7
-$/ *D" program said to provide 60ay to reach goals.7
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*mpacts of *D"s in "DD-Mills et al.! &''F Center for Social Development!
research in progress/
Methods: 34periment! *D"s and controls randomly
assigned! three 0aves
;ey findings:
-%/ *D"s have positive impacts on home o0nership! dura1le
goods! education! self,employment! and net 0orth
-&/ ome o0nership effects are prominent! and stronger for "frican,"mericans than for 0hites.
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*nfluence of *D" ?esearch in US
*ncreases in 0elfare asset limits in nearly all states
during %'s
*D"s included as a state option in %( 60elfare
reform7 "ct -Boshara! &''$/
)ederal "ssets for *ndependence "ct in %G! first
pu1lic *D" demonstration -Boshara! &''$/
9ver F' US states have some type of *D" policy
-3d0ards = Mason! &''$/
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?eflections on US olicy rogress
*D"s introduced a change in thin#ing a1out poverty and
policy. Saving and asset 1uilding 1y the poor is no0 common
in US policy discussions.
But *D"s in the US are in a 6demonstration7 phase of
community,1ased proHects! 0hich is not a 6scala1le7 model.
Some proposals for inclusion of the 0hole population:
• Universal Savings "ccounts -Clinton! %/• Children>s Savings "ccounts! "S*?3 "ct -8e0 "merica
)oundation! &''F/.
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Supported Savings "1road
• 6Saving @ate0ay7 and 6Child 5rust )und7 in the
United ;ingdom -;elly and Lissauer! &''' Blair! &''%
.M. 5reasury! &''$ a4ton! &''$ ;empson et al.! &''F/
• )amily Development "ccounts in 5aipei -Cheng! &''$/
• *D"s and 6Learnave7 demonstration in Canada
-;ing0ell et al.! &''$/
• Matched saving in "ustralia -?ussell and )redline! &''F/
and Uganda -CSD>s "ssets"frica initiative/.
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Center for Social Development
Washington University in St. Louis
34ample: Matched Savings 0ith
*IJ"*DS 9rphans in Uganda
)red Sse0amala -Sse0amala and Curley! &''/
igh ris# population! including li#ely *I infection later
"iming for US('' for secondary schooling
Savings of US&'' matched 0ith USF''
ilot successful
8o0 larger proHect 0ith US 8* funding! significance:
• 9ne of fe0 8* grants outside of US
• 9ne of first 8* grants to test economic intervention on health• Step to0ard Ss0eamala>s goal of an account for all orphans in
Uganda! and eventually all children in Uganda.
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Center for Social Development
Washington University in St. Louis
• *ncentives
• *nformation
•
34pectations• "ccess
• )acilitation
• ?estrictions
• Security
• -Simplicity/
-Beverly and Sherraden! % Sherraden! et al.!
&''$ Sherraden and Barr! &''/
*nstitutions Matter: )actors that
"ffect Saving and "sset "ccumulation
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Center for Social Development
Washington University in St. Louis
34amples of *nstitutional 3ffects in
*D" ?esearch-Schreiner et al.! &''& Schreiner and Sherraden! &''(
M.S. Sherraden et al.! &''F/
Match cap -e4pectation/ is associated 0ith a F' to ' cent
increase in savings for each dollar increase! a large effect.
*ncreased match rate -incentive/ a1out a lo0 level has little
effect on savings.
)inancial education -information/ up to a1out %' hours is
associated 0ith increased savings a1ove %' hours! no effect.
*D" savers are positive a1out limited uses -restrictions/.
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Center for Social Development
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• Continue to clarify institutional constructs! and test in
different conte4ts: 1uild a systematic 1ody of #no0ledge that
can inform policy
• 9rgani2e effective constructs into designs of savings plans -Clancy! Cramer! and arrish! &'' ?utherford on saving
plans in @rameen **/
•
?oles for 1oth government and commercial financial sector
• 5est savings plans in developed and developing conte4ts
• "im for large,scale! inclusive policies.
5heory and olicy Directions
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?eferences
Beverly! S.@.! = Sherraden! M. -%/. *nstitutional determinants of saving:
*mplications for lo0,income households and pu1lic policy! Kournal of Socio,
economics &G! FE,FE$.
Blair! 5. -&''%/. Savings and assets for all! speech. London: %' Do0ning Street!
"pril &(.
Boshara! ?. -&''$/. )ederal policy and asset 1uilding. Social Development *ssues
&-%=&/! %$',%F%.
Bynner! K.B.! = a4ton! W. -&''%/. 5he asset effect. London: *nstitute for u1lic
olicy ?esearch.
Cheng! Li,Chen -&''$/. Developing )amily Development "ccounts in 5aipei: olicy
innovation from income to assets. Social Development *ssues &-%J&/! %'(,%%E.
Clinton! W.K. -%/. State of the Union address. Washington: US 34ecutive 9ffice of the resident.
Corporation for 3nterprise Development -&''F/. idden in plain site: " loo# at the
$$ 1illion federal asset,1uilding 1udget. Washington: Corporation for 3nterprise
Development.
Curley! K.! = Sherraden! M. -&'''/. olicy lessons from children>s allo0ances
for children>s savings accounts! Child Welfare! E-(/! ((%,(GE.
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Center for Social Development
Washington University in St. Louis
3d0ards! ;.! = Mason! L.M. -&''$/. State policy trends for *ndividual Development
"ccounts in the United States! Social Development *ssues &-%=&/! %%G,%&.
@old1erg! ). -&''/. 5he universal piggy 1an#: Designing and implementing a system
of savings accounts for children. *n M. Sherraden! ed.! *nclusion in the "merican
dream: "ssets! poverty! and pu1lic policy. 8e0 Yor#: 94ford University ress.
.M. 5reasury -&''$/. Details of the Child 5rust )und. London: .M. 5reasury.
aveman! ?.! = Wolff! 3.M. -&''/. Who are the asset poor Levels! trends!
and composition! %G$,%G. *n M. Sherraden! ed.! *nclusion in the "merican dream:
"ssets! poverty! and pu1lic policy. 8e0 Yor#: 94ford University ress.
o0ard! C. -%E/. 5he hidden 0elfare state: 5a4 e4penditures and social policy in
the United States. rinceton: rinceton University ress.
;empson! 3.! Mc;ay! S.! = Collard! S. -&''$/. 3valuation of the C)L* and Saving@ate0ay pilot proHects. Bristol! United ;ingdom: University of Bristol.
;ing0ell! .! Do0ie! M.! oller! B.! = Kimene2! L. -&''F/. elping people help
themselves: "n early loo# at Learnave. 9tta0a! Canada: Social ?esearch and
Demonstration Corporation.
;elly! @.! = Lissauer -&'''/. 90nership for all. London: *nstitute for u1lic olicy
?esearch.
?eferences -cont./
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Center for Social Development
Washington University in St. Louis
?eferences -cont./
Lindsey! D. -%F/. 5he 0elfare of children. 8e0 Yor#: 94ford University ress.
Mills! @.! atterson! ?.! 9rr! L.! = Demarco! D. -&''F/. 3valuation of the "merican
Dream Demonstration! final report. Cam1ridge! M": "1t "ssociates.
8e0 "merica )oundation -&''F/. "S*?3 "ct summary. Washington: 8e0 "merica
)oundation.
8issan! D.! = Le@rand! K. -&'''/. " capital idea: Start,up grants for young people! policy report no. F. London: )a1ian Society.
a4ton! W.! ed. -&''$/. 3Aual shares Building a progressive and coherent asset,1ased
0elfare policy. London: *nstitute for u1lic olicy ?esearch.
o0ers! 3.5. -%G/. Does means,testing 0elfare discourage saving 3vidence from a
change in ")CD policy in the United States! Kournal of u1lic 3conomics (G! $$,$.
?ussell! ?.! = )redline! L. -&''F/. 3valuation of the Saver lus pilot proHect."ustralia: ?M*5 University.
Schreiner! M.! Clancy! M.! and Sherraden! M. -&''&/. Saving performance in the
"merican Dream Demonstration! research report. St. Louis: Center for Social
Development! Washington University.
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Washington University in St. Louis
?eferences -cont./
Seidman! L. -&''%/. "ssets and the ta4 code. *n 5. Shapiro = 3.8. Wolff! eds.!
"ssets for the poor: Benefits and mechanisms of spreading asset o0nership!
$&F,$(. 8e0 Yor#: ?ussell Sage )oundation.
Sen! ". -%$/. Capa1ility and 0ell,1eing. *n M. 8uss1aum = ". Sen! eds.! 5he Auality
of life! $',$. 94ford: Clarendon ress.
Sen! ". -%/. Development as freedom. 8e0 Yor#: ;nopf.
Sherraden! M.S.! McBride! ".M! anson! S.! = Kohnson! L. -&''F/. 5he meaning of
saving in lo0,income households! paper at annual meetings of 3astern 3conomics
"ssociation! Washington! )e1ruary &',&& -forthcoming in Kournal of *ncome
Distri1ution/.
Sherraden! M. -%GG/. ?ethin#ing social 0elfare: 5o0ard assets. Social olicy! %G-$/!
$E,F$.Sherraden! M. -%%/. "ssets and the poor. "rmon#! 8Y: M3 Sharpe.
Sherraden! M.! = Barr! M.S. -&''/. *nstitutions and inclusion in saving policy! in 8.
?etsinas = 3ric Bels#y! eds.! Building assets! 1uilding credit: Bridges and 1arriers
to financial services in lo0,income communities. Washington: Broo#ings *nstitution.
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Sherraden! M.! Schreiner! M.! = Beverly! S. -&''$/. *ncome! institutions! and saving
performance in *ndividual Development "ccounts! 3conomic Development
+uarterly %E-%/! ,%%&.
Sse0amala! ).S.! = Curley! K. -&''/. *mproving life chances of orphan children in
Uganda: 5esting an asset,1ased development strategy! 0or#ing paper ','%. St.
Louis! Center for Social Development.
Williams! 5. -&''$/. 5he impact of household 0ealth and poverty on child outcomes:
e4amining asset effects! doctoral dissertation! Washington University in St. Louis.
Yadama! @.! = Sherraden! M. -%(/. 3ffects of assets on attitudes and 1ehaviors:
"dvance test of a social policy proposal! Social Wor# ?esearch &'-%/! $,%%.
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CSD ?eports and Wor#ing apers
Center for Social DevelopmentCampus Bo4 %%(
Washington University
St. Louis! M9 ($%$' US"
$%F,$,EF$$
http:JJg010e1.0ustl.eduJcsdJpu1licationsJ
http://gwbweb.wustl.edu/csd/publications/http://gwbweb.wustl.edu/csd/publications/
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?ecent Boo#s
Sherraden! M.! ed. -&''/. Inclusion in the American dream:
Assets, poverty, and public policy. 8e0 Yor#: 94ford
University ress.
Schreiner! M.! = Sherraden! M. -forthcoming &''(/. Can
the poor save? Saving and asset accumulation in
Individual Development Accounts. 8e0 Yor#: "ldine de@ruyter.