Alejandra Lopez-Fernandini: All Publications, Events and Press

AutoSave Overview

Asset Building — Tue, 03 Nov 2009 10:22:00 -0500

AutoSave is a unique savings plan that automatically diverts through payroll deduction a small amount of post-tax wages into an individual savings account. This new infrastructure nearly seamlessly enables individuals to contribute small amounts of their wages into an accessible, non tax-advantaged savings account. It will be especially valuable for individuals who have limited liquid assets, and who may otherwise be forced to meet emergency needs with high-cost emergency loans.

Revitalizing the U.S. Savings Bonds Program

Asset Building — Wed, 18 Mar 2009 15:07:00 -0400

Overview

U.S. Savings Bonds are a convenient, secure, and low-cost product that facilitate savings. Today, an estimated 55 million people hold U.S. Savings Bonds. Bonds retain a reputation as an easy-to-use and trusted brand-- even though they have not been actively marketed since 2003. It is a product that is especially attractive to small, first-time, or shorter-term savers. Bonds may be purchased for as little as $50 and redeemed as early as twelve months after purchase. They are backed by the U.S. government-- so there is no risk

Save More for Yourself and America

Cecille Isidro — Wed, 18 Mar 2009 14:12:00 -0400

As the economy slows, millions of Americans will cut their budgets to stay afloat. This generates conflicting impulses: If I skip that morning coffee and granola, will my thriftiness put my local coffee shop out of business?

Will that force America's granola farmers to lay off workers? What's a budget-conscious, patriotic and hungry girl to do?

Not to worry, saving a few dollars now will not prolong the recession. And, more important, spending all your discretionary income will not end the recession.

PODCAST: Savings Made Easy -- Perfect for Tough Times

Kate Schuler — Wed, 11 Mar 2009 14:13:00 -0400

New America Foundation and America Saves Week

Communications — Mon, 23 Feb 2009 14:08:00 -0500

Washington, DC -- The New America Foundation along with more than 100 government agencies, non-profit organizations, trade associations, and companies, is participating in America Saves Week, an organized effort to encourage and assist individuals to assess their savings and take action to advance their savings progress.

End the War on Savings

Cecille Isidro — Thu, 12 Feb 2009 09:58:00 -0500

Finland recently launched a war -- on household savings. The campaign warns Finns to lay off the piggy bank, pleading: "Don't feed the recession." The rhetoric there is quite similar to reports we've seen here from economists and Wall Street forecasters nervous at signs that U.S. consumers are starting to save.

The Effectiveness of Youth Financial Education

Asset Building — Mon, 15 Dec 2008 13:23:00 -0500

As a result of the current financial crisis, consumers are more concerned about their personal finances than ever before. Household confidence in job security and future employment prospects, income stability, and the ability to preserve and build assets is plummeting; meanwhile, high fuel and food prices and tightening credit conditions are placing more pressure on households to maximize their financial decisions.

AutoSave Concept Paper

Asset Building — Wed, 12 Nov 2008 14:37:00 -0500

Introduction

Asset Building Strategies for Domestic Abuse Survivors

Asset Building — Wed, 05 Nov 2008 12:21:00 -0500

This was presented at the National Network to End Domestic Violence on November 4, 2008. Also attached is a list of asset building and asset protection resources.

Asset Building Report in the Washington Independent | 'Shop Till We Drop — or Save?'

Cecille Isidro — Fri, 17 Oct 2008 11:46:00 -0400

In a policy paper issued last month by the New America Foundation, researchers Reid Cramer, Rourke O’Brien and Alejandra Lopez-Fernandini summarize the trend: “Millions of low-income Americans,” they wrote, “are hearing two conflicting messages from their government: Save and Don’t Save.” LINK

Presidential Promises

Asset Building — Fri, 19 Sep 2008 08:17:00 -0400

The Assets Agenda

Asset Building — Wed, 03 Sep 2008 07:25:00 -0400

The current economic downturn, triggered in part by excessive household debt and deflating housing prices, underscores the central role asset ownership plays in the economic security of American families and the broader economy. Broad asset ownership, whether through savings or investment, has the potential to connect economic opportunity with economic security and ensure that every member of society is afforded a real stake in the commonwealth. Assets are important not only because they can be deployed productively or tapped to help individuals and families weather unexpected events, but because they have behavioral effects that can change the manner in which people think about and plan for the future.

Past efforts to democratize access to property, capital, and credit have had positive effects. Yet the most notable feature of our current policy paradigm is how many it excludes. Through targeted tax breaks, affluent families are given many options to acquire assets, while those with fewer resources are offered less attractive ways to build wealth. The poorest families among us are given limited access to income supports and social services. This approach misses the potential of assets to help chart a path out of poverty. If we are to successfully broaden savings and assets ownership, our policy efforts must be expanded, strengthened, and directed toward those with the greatest need.

The purpose of this report is to outline a federal public policy agenda to broaden savings and asset ownership opportunities for lower-income Americans who have limited resources at their disposal. In developing our thinking on the subject, we have drawn on the research and expert analysis of many others in the field. The agenda we present here includes calls for new structures and policies at the federal level, as well as changes to existing tax systems, government programs, and financial products. Some of these policies are well developed, others need more seasoning, but all of them have the potential to contribute to the economic well-being of millions of American families.

This edition of New America's Assets Agenda is the most comprehensive to date, with 84 innovative asset-building ideas. Following the introduction, it is organized in 13 sections, each beginning with a brief synopsis of a problem, followed by specific policy proposals.

AutoSave Overview

Asset Building — Wed, 16 Jul 2008 10:00:00 -0400

The overview below revisits the proposal explored in a July 2006 Working Paper by Reid Cramer. Please click here to access that document, or see below for the updated overview.

read more

Making a Transaction and Savings Account a Certainty, Just Like Taxes

adminn — Thu, 22 May 2008 15:00:00 -0400

In the Feb. 20 issue of Paybefore Update, my colleague, Melissa Koide, discussed a proposal to use prepaid cards to deliver tax refunds through a unique alliance of government and industry, Viewpoints: A Convergence of Opportunities: Delivering Prepaid Accounts at Tax Time (February 2008). We believe the prepaid sector can and should play a major role in working with government to provide an "assets and transactions account" (ATA), a low-cost, high-value transaction account that facilitates savings for financially underserved consumers. The ATA would be opened when a tax filer's refund is deposited at a regulated financial institution and accessed through a prepaid card, giving the filer access to the mainstream financial system and a host of prepaid card features.

A critical step in the development of an ATA product is to understand the banking needs and product preferences of the 39 million potential users. To that end, we analyzed evidence from surveys, focus groups and pilot programs aimed at lower-income consumers to determine the core functions and features most desired by this segment.

Here are a few common themes:

Convenient and quick access to funds through ATMs and point-of-sale terminals. Research shows a need to get cash through ATMs and to pay for purchases at the point of sale. Empirical data from two samples of prepaid cardholder transactions show that consumers actively access funds through both point-of-sale purchases and ATM withdrawals. And, anecdotal evidence in the prepaid space suggests that consumers move toward transactions at the POS over ATMs as they become more familiar and comfortable with the card product.

Automatic savings capabilities. Conjoint analysis and focus groups show that lower-income households prefer prepaid cards with automatic savings features to those without. Furthermore, adding a savings capability creates a "stickiness" that leads to longer term use, delayed funds spend-down and increased take-up of other savings programs.

Ability to receive additional deposits such as wages and salary. Lower-income households strongly prefer to add funds from more than one revenue source (e.g., wages and government benefits) and through a variety of channels (e.g., cash loading at a teller or kiosk and Internet reloads). Consumers value the ability to make direct deposits into their accounts and actually may save more with direct deposit. With respect to network branded prepaid cards, the financial services industry, in particular, asserts that direct deposit is important for facilitating use of the card and sees it as critical to driving interchange revenue, thus helping to make the product viable over the long term.

Savings linked to tax time, automatic transfers to savings and financial incentives. Lower-income tax filers desire savings products to support savings goals and are attracted to products and programs linking tax time and savings. Several experiments demonstrate that auto-enrollment in retirement and other savings plans increase participation and contribution amounts, especially among lower-income and minority populations.

Federal protections including FDIC insurance coverage and protections against lost cards. Protections on funds provided under FDIC or equivalent insurance are important both in terms of providing actual insurance against loss and because federal protections are valued as an important signal among lower-income consumers. Given a choice to use a federally protected prepaid card or not, consumers prefer federal protections that limit losses on a lost or stolen card. A Network Branded Prepaid Card Association survey shows that consumers view prepaid cards as a way to obtain such protection.

Transparent fees. Fees are important to this consumer segment, but low fees do not appear to affect overwhelmingly product take-up. Instead, fee transparency, access to services and interest earnings matter as much or more than low fees for lower-income consumers. Anecdotal evidence suggests that for underbanked consumers with few banking options, low advertised fees may be a big enough incentive to take up the card. However, practitioners observe that as consumers incur a series of fees, they re-think the value of the card and often drop it. So, for first-time users with few options, low fees may tip consumers into adopting the card but may not be enough to ensure continued use.

Areas for Further Research

Consumer education, marketing and messaging are important factors in driving consumer demand and take-up. Marketing that explains the specific capabilities and customer value-add is likely to lead more consumers to adopt a prepaid product.

Less is known about the extent to which consumers in this segment desire the ability to interact personally with a financial institution for routine transactions. A more thorough understanding of the importance of a bank or card issuer's presence within the neighborhood would complement the evidence that consumers desire and benefit from early-stage, in-person customer service. Lastly, limited research and anecdotal evidence suggest that electronic daily balance notices and real-time balance information, bill pay and purchases, electronic check writing and remittance capabilities would be valued by lower-income users.

Reinforcing the Need for an Account

Many lower-income households that live paycheck to paycheck do not rely solely, if at all, on traditional bank accounts for cash management. They are discouraged by minimum balance requirements, high overdraft penalties, delayed crediting of checks and monthly maintenance fees. Yet, alternative financial services are sub-optimal, offering little consumer protection, savings capability or ability to establish a credit history. Though alternative financial services provide immediate liquidity, they do not tend to build wealth.

Our work involves crafting and analyzing policies that promote the development, protection and intergenerational transfer of wealth and assets. As envisioned, the ATA would enable consumers to take a step in this direction.

Individually, the prepaid industry and policy institutes, such as the New America Foundation, have amassed critical knowledge of the preferences and behaviors of these individuals. Market research, such as the national segmentation study of the underbanked to be released next month by The Center for Financial Services Innovation, will contribute key learnings that will enhance the success of such endeavors. We welcome your involvement as we continue to refine the product features and functions that would maximize consumer interest, encourage participation by the financial services industry and develop a policy strategy to leverage the near universal process of tax filing.

The Assets Report 2008

Asset Building — Wed, 12 Mar 2008 01:03:00 -0400

The purpose of this annual report is to summarize and take stock of the current state of federal policy through an asset-building lens, especially as it affects the asset base of families with lower incomes and fewer resources, which is the focus of our work. The report is divided into three sections. The first is a review of policy developments from the past year related to asset building, highlighting administration action and significant legislation, including assets-related bills introduced in the first year of the 110th Congress; the second is an examination of the President’s budget proposals for Fiscal Year 2009 from an assets perspective; and the third is a forecast of the assets policy issues that may be considered in Congress during the year or two ahead. A companion report, The 2008 Assets Agenda, to be released in April will offer a detailed description of a range of policy proposals to broaden savings and asset ownership.

Below are the highlights of the report:

2007 Review

The Administration responded to the housing crisis by creating the HOPE NOW alliance to conduct aggressive outreach to homeowners at risk of delinquency and foreclosure.

FHASecure was launched as a refinancing option for homeowners with non-FHA adjustable rate mortgages in response to the housing crisis.

The IRS began allowing taxpayers to directly deposit their tax refunds among a maximum three accounts, a change expected to facilitate savings by simplifying the process of making deposits.

The Senate introduced the New Saver’s Act, a set of 14 low-cost proposals to increase savings, especially by lower-income Americans.

The House of Representatives reintroduced the ASPIRE Act, to establish universal children’s savings accounts, opened automatically at birth.

The Freedom to Save Act, the first sweeping proposal to reform asset limits in major public assistance programs was introduced by Representative John Conyers (D-MI).

Proposals to reform the asset limit in the Food Stamp Program were included in both the House and Senate versions of the Farm Bill.

The College Cost Reduction and Access Act was passed, changing the way some Section 529 accounts are treated in financial aid calculations.

Presidential candidates in both parties highlighted savings policies as part of their economic policy platforms.

President’s Budget Proposals FY 2009

The budget includes over $407 billion in tax expenditures related to asset building, which will overwhelmingly accrue to middle- and upper-income households, according to the Joint Committee on Taxation.

Consolidation of tax-preferred savings accounts is proposed which would create a system of Retirement Savings Accounts, Lifetime Savings Accounts, and Employer Retirement Savings Accounts.

The President makes his second consecutive proposal to extend “Saver’s Credit” eligibility to deposits made in Section 529 College Savings Plans.

The Community Development Financial Institutions (CDFI) is again slated for a drastic funding reduction, including the outright elimination of funding for Native Initiatives.

2008 Preview: What’s on the Agenda in Congress This Year

The stimulus package, passed by Congress in January and signed into law by the President, will deliver $110 billion in tax rebates beginning in May.

The potential onset of a recession may trigger additional calls for a policy response, which could include a focus on savings incentives and financial education. Though passage of specific savings legislation is unlikely, savings proposals are expected to generate interest and attention.

Further examination of issues that created the housing crisis may lead to legislative and regulatory changes in the mortgage market and more broadly to the provision of financial services.

Deteriorating economic conditions may lead to a second stimulus bill, creating opportunities to consider additional policies designed to encourage savings and financial stability.

For the full text of the assets report, please see the PDF attached below.

The California Assets and Transaction Account

Asset Building — Wed, 06 Feb 2008 11:43:00 -0500

In support of state-wide efforts to bring more Californians into the financial mainstream, the State of California could deliver a pre-paid account through the state’s tax filing process. The Assets and Transaction Account, or ATA, would expedite tax filers’ access to their tax refunds and serve as a safe, affordable, and convenient financial tool for lower-income Californians to conduct routine financial transactions and build saving throughout the year.

The state tax filing process presents a unique opportunity to reach and deliver a valuable financial product to millions of under-banked Californians, while also saving the state government millions of dollars each year through the electronic delivery of tax refunds.

The full report is available below in PDF format.

Saving Promises

Asset Building — Wed, 19 Dec 2007 10:14:00 -0500

For the first time since 1952, the absence of incumbents vying for the nomination of each major party has created a wide open race, one where the stakes are remarkably high. This has contributed to an extended campaign process that will last almost two years by the time the presidential election is held in November of 2008. While some lament the length of this campaign cycle, it has generated a great deal of activity in the policy arena as each candidate has sought to articulate their vision for America’s future and proposed policies that will help take us there.

In the field of savings and assets building, many insightful proposals have been made that are worth highlighting. Some of these proposals address issues of economic security, others focus directly on savings and access to financial services, and another set offer policies to promote homeownership and asset protection. This document represents our attempt to capture the major proposals and statements related to saving and asset building from the 2008 presidential campaign.

This paper will review and describe the set of proposals that have emerged from the candidates for president in both parties. These proposals have been presented by the candidates and campaigns in a variety of formats and in various degrees of detail. Some are included in detailed plans and policy briefs, others are outlined more generally on campaign websites, and others have been presented more rhetorically in speeches or on the campaign trail.

The full document can be downloaded below in PDF form.