2008 Small Grants Competition: Financial Risk, Assets, and Poverty
High-cost financial services, barriers to saving, the lack of insurance, and credit constraints may contribute to ongoing poverty among families and individuals. Low-income individuals often lack access to adequate financial services at a reasonable cost and with appropriate consumer protections. Without mainstream financial services, low-income families face higher transfer costs and may find it more difficult to save and to plan financially for the future. Living paycheck-to-paycheck leaves them vulnerable to medical or job emergencies that may endanger their financial stability. Low-income families may lack the financial literacy to avoid predatory or questionable financial services, such as payday loans with very high interest rates and subprime mortgages. Lack of savings undermines their ability to improve skills, become a homeowner, and build wealth. Inadequate access to financial services also diminishes the value of government income transfer programs and the Earned Income Tax Credit.
Policies designed to address these problems include public sector efforts that range from homeownership initiatives, to asset-building initiatives, to regulation of informal credit markets, to enforcement of anti-discrimination policies in mortgage markets. Public programs designed to help families insure against bad outcomes (such as unemployment or health insurance) also help smooth consumption and create financial stability. At the same time, needs-tested public assistance programs with asset limits can create disincentives for saving among the poor. Private sector policies may be just as important as public sector initiatives in this area. Financial institutions can choose to serve low-income families with debit accounts or low-fee checking accounts. Employers can offer automatic paycheck deposit, require families to have bank accounts, or make employee savings easy through special automatic savings accounts. Credit card companies can facilitate savings or encourage indebtedness.
The focus of the National Poverty Center’s 2008 small grant competition is on the effects of assets, debt, savings, and financial resources on the lives of low-income persons and families.
Testing Long-Term Impacts of Individual Development Accounts and Asset Building on Social and Economic Well-Being Michal Grinstein-Weiss, University of North Carolina at Chapel Hill; William Gale, The Brookings Institution; William Rohe, Center for Urban and Regional Studies; and Michael Sherraden, Washington University, Center for Social Development.
Financial Literacy, Cognitive Biases and Payday Lending Adair Morse, University of Chicago and Marianne Bertrand, University of Chicago.
Testing Strategies to Increase Saving and Retention in Individual Development Account Programs Cäzilia Loibl, The Ohio State University; Emily Haisley, Carnegie Mellon University; and George Loewenstein, Carnegie Mellon University
A Proposal to Examine the Effect of Relaxed Welfare Asset Rules on Auto Ownership, Employment and Welfare Rolls: A Longitudinal Analysis Lorien Rice, Mills College and Cynthia Bansak, St. Lawrence University
Funds for this competition are provided by the Office of the Assistant Secretary for Planning and Evaluation (ASPE) at the U. S. Department of Health and Human Services.