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.
 
The resilience of American families depends both on being able to save and accumulate assets and being able to draw down these resources over an often-short time horizon that corresponds to household emergency and income-smoothing needs. With the exception of a recent upturn, the personal savings rate has been steadily declining since the early 1980s and briefly went into negative territory in 2005. Americans are simply not saving adequately for retirement; and many low- and moderate-income households do not have the emergency savings necessary to deal with unexpected, but necessary, expenditures-like a medical emergency, or a car breakdown.
 
According to the Center for Social Development at Washington University, increasing the number of households that save and the amounts that they save will allow more Americans to achieve greater control, security, independence, and choice in their lives.

America Saves Week is an opportunity for individuals to assess and attempt to improve their efforts to save, as well as a chance for employers and the federal government to make saving convenient and rewarding.

Facts About Americans and Their Savings:

• Without financial resources, many American families are vulnerable to severe hardship if they suffer an 'income shock' due to illness or temporary unemployment: 38% of all households are in a state of asset poverty, in that they lack liquid financial resources to support their family for three months at the poverty level. 

• The Urban Institute estimates that eight out of every ten low-income families are asset poor.      

• A consistent segment of the American population remains outside the financial   mainstream where they rely on costly check cashing and lending institutions: 11% of households do not have a checking account and 9% do not have a transaction account of any kind.

• Recent polling of a nationally representative sample of adults showed that 52% do not believe that they are saving adequately, and 17% report that they "cannot afford to save at all."

• In the last three years, the personal savings rate has hovered close to zero, which means that Americans are spending almost all of their disposable income. In 2007, U.S. households saved $42.9 billion, or only 0.4 percent of total disposable personal income.

• According to a national representative sample, only 40 percent of Americans reported setting aside funds for emergencies, and only about half of emergency savers did so through automatic and regular transfers from a checking account to a savings account. Younger, lower-income, and minority households are less likely to have emergency funds, compared to 58 percent of households earning $75,000 or more.

• In 2004, 12.2 percent of families were heavily indebted, that is, their debt exceeded 40% of their income. 40% of households headed by an individual near retirement age (55-64) and almost 60% of households headed by an individual of retirement age (65-74) had no retirement assets. Further, 47 percent of working Americans lack access to tax-preferred retirement accounts, such as a 401(k), at their place of employment. Equally troubling, nearly 20% of eligible workers in jobs with employer-sponsored retirement plans do not participate in them. Workers earning less than $15 an hour are a third as likely as their better-off counterparts to have access to defined benefit plans and nearly two-thirds less likely to have access to any retirement benefit.

• An estimated 29% of black and Hispanic households headed by an individual between the ages of 47 and 64 are not retirement ready; the comparative figure for white households is 24%.

Personal savings and increased wealth-development can be encouraged by improved public policy as well. For Example, America could adopt one or all of the following policies:

• Children's Savings Accounts - One of the most promising ways to achieve a universal, progressive asset-building system over time is to provide an account at birth, including $500, to all children born in the United States.  Contibutions for low-income children would be matched up to $500 each year, and the earnings on all contributions would grow tax-free.  As they grow up, children could then use the money that's been invested and growing for them as a source of funding for post-secondary education, the purchase of a home, or hold onto it as a way to fund their retirement.  With Children's Savings Accounts we could effectively connect all Americans to the financial services industry, create a culture of savings, and promote sustainable efforts to go to college, buy a home, and provide for themselves in retirement.

• Saver's Bonus - Each year the federal government provides hundreds of billions of dollars in incentives for families to save and build wealth through the income tax system, but low-income families are not eligible for most of them, and if they are eligible, receive a substantially smaller benefit.  The Saver's Bonus would help remedy this by providing working families with an incentive to save at tax time.  Every dollar deposited in an eligible savings vehicle would be matched with another dollar up to a total match of $500 each year.  Savings in restricted accounts such as certificates of deposit, savings bonds, Individual Retirement Accounts (IRA), 529 college savings accounts and others are eligible for the match.  The Saver's Bonus would help millions of poor families build wealth and move towards greater financial stability. The Saver's Bonus rewards those working-poor families who save their tax refunds for retirement, their children's college education and emergency savings. 

• Savings Bonds - U.S. Savings Bonds are a convenient, secure, and low-cost product that facilitates savings. Bonds retain a reputation as an easy to use and trusted brand even though they have not been actively marketed since 2003. U.S. Savings Bonds are currently not available for purchase at the time many low-income families are most able to buy them, which is when they receive their federal tax refund.The Treasury Department should make it possible for Americans to purchase savings bonds directly on their tax forms. Revitalizing the U.S. Savings Bond Program can contribute to a renewed culture of thrift and savings in America.

Employers can also help their employees save:

• AutoSave - AutoSave would allow employers to offer savings accounts and set up an automatic payroll deduction of a small percentage of each paycheck into a newly established savings account.  By automating the decision to save, employers can provide a no-cost benefit to their employees that will help to build financial security and prepare families for the unexpected, but necessary, expenditures that can severely impact a low- or moderate-income family.

The following New America Foundation experts are available to discuss what individuals, the government and employers can do to help Americans save.

• Ray Boshara Vice President for Domestic Policy Programs; Director, Asset Building Program
• Reid Cramer, Research Director, Asset Building Program
• Alejandra Lopez-Fernandini, Senior Policy Analyst, Asset Building Program
• Justin King, Federal Policy Liaison, Asset Building Program

For Broadcast Interviews:
Kate Brown
202-986-3058 (o)
414-737-0462 (m)
brown@newamerica.net

For Print Interviews:
Erin Drankoski
202-986-2700 ext 335
202-997-8727
drankoski@newamerica.net

About New America
The New America Foundation is an independent, nonprofit, nonpartisan public policy institute whose purpose is to bring exceptionally promising new ideas and new voices to the fore of our nation's public discourse. New America is headquartered in Washington, D.C. and has offices in California.