omg how much of this poor woman's time did they take up with these classes :) And she got a thousand bucks out of it. Wow.
On 1/11/06, Gruss Gott <[EMAIL PROTECTED]> wrote: > New Programs Spur Working Poor To Begin Saving > Incentives, Counseling Inspire People to Clean Up Debts; > Setting Aside $50 a Month Just Paying Bills Is a Struggle > By JACKIE CALMES > Staff Reporter of THE WALL STREET JOURNAL > January 11, 2006; Page A1 > > Americans are rotten at saving. To encourage thrift, the government > hands out billions in tax breaks, mostly to the nation's wealthiest > half. The other half, it's long been assumed, either cannot or will > not save. > > In recent years, a growing number of state governments, nonprofit > groups, foundations and private companies have been running pilot > programs to induce poor and working-class Americans to save. The > results, they say, are surprising: When participants get the right > incentives and financial counseling, many open savings accounts, > arrange for payroll deductions, and begin accumulating assets. > > A Pennsylvania state program helped Michelle Simmons, 37 years old, to > go from living on the streets to owning her own home, and inspired > Dorothy Beale, 36, to clean up her debts and qualify for a mortgage. > Another program outside St. Louis helped Charlin Hughes, a 36-year-old > single mother of five, to begin saving for a home. Both programs offer > to match participants' savings, but only if they consistently save and > agree to attend financial-planning classes. > > The programs are drawing support from both the left and the right. > Advocates say they could become productive successors to liberal > anti-poverty programs of the 1960s and conservative welfare reforms of > the 1990s. > > But proponents acknowledge it is difficult to persuade many poor > people that they can afford to save, even with financial incentives. > And rolling out such a program nationally would be expensive, costing > about $40 billion over 10 years, according to one estimate. > > Ms. Simmons says she was a "hope-to-die dope fiend" living in > cardboard boxes on the streets of Los Angeles when she was arrested in > 1998 for prostitution. Freed from prison after one year, she returned > to her hometown, Philadelphia, and found low-paying work. With the > help of a nonprofit agency that helps administer Pennsylvania's Family > Savings Account Program, she got financial advice and opened an > individual development account, or IDA. > > The program offers to match participants' savings of up to $2,000 over > three years with state and federal funds. Households with incomes of > no more than twice the poverty level (about $40,000 for a family of > four) are eligible. They must save at least $10 a week and attend a > series of financial-planning classes. IDA savings must be used for > college, job training, buying a home or starting a business. > > By 2003, Ms. Simmons had saved $1,007. The program matched that > amount, producing enough for the down payment on a $50,000 home from > Habitat for Humanity. > > There are more than 500 asset-building projects across the country, > whose participants have opened more than 20,000 savings accounts. > Thirty-three states support such programs on a small scale, using > state funds and federal welfare-to-work subsidies for savings matches, > and contracting with nonprofits to run the programs. Demonstration > projects have also spread around the world from Canada to China. Great > Britain last year became the first country with a national program of > savings accounts for each child at birth. > > The U.S. savings rate -- the percentage of after-tax income that > Americans save -- has declined for nearly three decades. In 1984, it > was 11%. In 2005, it dropped into negative territory, meaning that > Americans were spending more than they earned. > > One-third of U.S. households have no financial assets. An additional > one-fifth have insignificant holdings. But households with about > $2,000 or more in assets, including retirement savings, are ineligible > for basic welfare programs, which provides a disincentive for the poor > to save. > > Broader Goal > > The savings programs have their roots in the work of Washington > University professor and social worker Michael Sherraden. His 1991 > book, "Assets and the Poor," argued that governments and charitable > groups should move beyond traditional welfare's aim to provide the > poor with income to meet immediate needs. The broader goal, he wrote, > should be to help the poor save money, which can provide them a > stepping stone to escaping poverty. > > He proposed that the federal government provide IDAs for every child > at birth, regardless of family income, tapping public and private > funds for initial deposits. The poor would get bigger initial > deposits, and also matches for their personal savings, up to a limit. > He argued that the accounts, coupled with financial education, would > promote long-term savings for college, job training, buying a home or > starting a business. > > To Mr. Sherraden's surprise, his book was widely discussed by > economists and others, and he became well-known in the anti-poverty > world. Some critics, mainly from the political left, expressed > skepticism that the poor would be able to save, given their struggles > just to make ends meet. But Mr. Sherraden's proposals drew interest > from community groups, governors, members of Congress, and from the > first Bush and Clinton administrations. Private foundations stepped in > with funds for testing the approach. Led by the Ford, Charles Stewart > Mott and Annie E. Casey Foundations, philanthropic groups continue to > provide much of the money for such programs. Mr. Sherraden says he is > frustrated that the programs have yet to expand beyond experimental > projects. > > Advocates of asset-building programs concede it is difficult to get > low-income people to save. "The biggest hurdle is just getting them to > believe they can save," says Chris Krehmeyer, executive director of a > St. Louis nonprofit social agency, Beyond Housing/Neighborhood Housing > Services. Given "the struggles of keeping the utilities on, paying > your bills, keeping the car running and just dealing with life," he > says, even $10 a week is a huge amount. > > In Washington, support for a bigger federal role in asset-building > programs for low-income Americans ranges from conservative Republicans > such as Sen. Rick Santorum of Pennsylvania, former housing secretary > Jack Kemp and former House Speaker Newt Gingrich, to left-of-center > Democrats and potential 2008 presidential candidates Hillary Clinton > and John Edwards. > > Thus far, budget deficits and partisan politics have stymied advocates > of a nationwide policy. During his 2000 presidential campaign, George > W. Bush advocated fighting poverty "by building the wealth of the > poor." He proposed a $1 billion tax credit for banks that match some > savings deposits of low-income workers. As president, he didn't make > the proposal a priority, and it died in the House, in part for reasons > unrelated to the proposed credit. > > In 2001, Congress created the Saver's Credit, the only federal savings > incentive designed for low- and middle-income households. It reduces > taxes on savings of up to $2,000 a year for people making less than > $50,000 a year. But Americans who don't owe income taxes aren't > eligible. About 40% of Americans don't earn enough to have an > income-tax liability, according to the Retirement Security Project, an > academic venture sponsored by the Pew Charitable Trusts. > > The government spends about $150 billion a year on tax breaks to > encourage retirement savings, which mainly benefit the affluent. About > 70% go to the top one-fifth of earners, the Pew project concluded. > Many simply shift existing savings into tax-favored accounts. The 40% > of Americans who don't have tax liabilities do not qualify for these > breaks. And most low-income workers do not have jobs that offer 401(k) > retirement plans. > > "We are kidding ourselves if we think we are expanding savings" with > "a grotesque array of savings incentives that do nothing for > low-income Americans," says Fred Goldberg, the top Treasury Department > tax official and Internal Revenue Service commissioner in the > administration of President George H. W. Bush. > > Numerous ideas have been floated for encouraging low-income workers to > save more. Making enrollment in 401(k) plans automatic for new hires > is one. Giving taxpayers the option of saving all or part of their > annual tax refunds -- sometimes by offering them a financial incentive > -- is another. Tests of that concept in Tulsa, Okla., by a community > and academic team, and in St. Louis, by H&R Block and the Retirement > Security Project, showed that some people were willing to save a > portion of their refunds. > > More ambitious, and costly, are the proposals to roll out IDA-like > accounts on a national scale. A bipartisan bill introduced in Congress > to establish so-called Kids Accounts for every newborn, with greater > federal funding for the poor, would cost an estimated $40 billion over > 10 years. > > Pennsylvania started its Family Savings Account Program eight years > ago, making it one of the first statewide IDA programs. The program > gets about $1 million annually from the state, and another $1 million > from federal welfare funds. > > Starting a Halfway House > > After Ms. Simmons was released from a California prison, she found > work in Pennsylvania as a telemarketer. She wanted to start a halfway > house for women newly released from prison, so she took a > self-employment course run by the Women's Opportunities Resource > Center, a local social-service agency. She learned there about the > savings-match program, and signed up. To save money, she shopped at > thrift stores and went without cable television, a cellphone or > manicures. > > Today, she owns a three-story townhouse in Norristown, just north of > Philadelphia, which she bought in 2003. She has regained custody of > two daughters, who have their own bedrooms. Not far away stands the > halfway house she opened. In three years, she has housed 33 women > fresh from jail and "graduated" 17 to jobs and housing, she says. She > urges residents to open IDAs. "I sell it," she says. "I tell them, > 'This is an investment, y'all.' " > > Ms. Beale and her three children were living in her mother's house > when she heard about Pennsylvania's IDA program in 2003. Despite her > $40,000-a-year hospital clerical job, debt had piled up after a > divorce. She'd had her car repossessed and had exceeded limits on > three credit cards. She opened an account and signed up for evening > money-management classes. "I hadn't even realized I was spending more > than I was making," she says. > > To save, she cut out manicures and cable television, and shopped only > for "needs, not wants." By saving $80 a month, she accumulated about > $1,000 in a year. She added another $1,000 from her tax refund, > entitling her to the $2,000 maximum match. With help from agency > counselors, she cleaned up her credit rating by paying off small debts > and negotiating payment plans with her credit-card companies and > utilities. By September 2004, she had a $77,000 mortgage for a > townhouse in northeast Philadelphia. > > In her kitchen "bill corner," Ms. Beale keeps her budget in a journal. > She still saves about $50 a month, and also contributes to a 401(k) > retirement account and a college-savings plan for her children. She > has opened savings accounts for all three. > > With funding from Ford and other foundations, a consortium of > social-service organizations is testing Mr. Sherraden's idea to > encourage savings early in life at 13 sites across the country. At > Delmar-Harvard Elementary School in mostly working-class University > City, Mo., outside St. Louis, 50 students are in the third year of a > four-year pilot program managed by Beyond Housing. Each student > received an initial $500, and a promise that his or her own savings > would be matched dollar-for-dollar. They receive $2 for attending each > weekly meeting of the "I Can Save" club. > > On a recent afternoon, more than a dozen second- and third-graders met > after school, then trudged a couple blocks to Commerce Bank to make > deposits. Nine-year-old Jessica Washington deposited $50. "I earned > it, and my mom gave me some," she said. Seven-year-old Alexia Luckett > deposited her $4 check for attending meetings. Sometimes she brings > her earnings from cleaning her room, but this time, she said, "my mom > didn't have the money." > > The children do not know their balances. But all agree on what the > money is for: college. That is drummed into them by their teachers and > parents, who also attend workshops. The most recent data show that > through November, the 7- to 9-year-olds had saved a total of $64,093. > The average account contained $866. > > Beyond Housing also oversees IDA accounts for about 80 adults. One > year ago, Ms. Hughes, the single mother of five, was homeless. Now she > has $50 a month deducted for her IDA from the $31,000 a year she earns > working at an insurance office. > > According to Beyond Housing accounts manager Linda Thomson, if Ms. > Hughes saves $1,500 over 30 months, sometime in 2007 she will get a > two-to-one match of $3,000 -- half from United Way of Greater St. > Louis Inc. and half from federal funds. With that $4,500, plus closing > costs from the nonprofit, she could get an affordable mortgage of > about $85,000, Ms. Thomson says. > > Last fall, a fire destroyed the townhouse Ms. Hughes had been renting > since May, along with her family's possessions. A member of her church > provided temporary housing. By December, her savings plan was still on > track. "It was hard to save, but for the money coming out of my check > automatically," she says. > > Ms. Hughes says she tells her kids "no" a lot. There were no Christmas > presents this year. "I have to lead by example," she says. "I can't > tell my kids what to do if I don't do it myself." > > Write to Jackie Calmes at [EMAIL PROTECTED] > > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Message: http://www.houseoffusion.com/lists.cfm/link=i:5:191881 Archives: http://www.houseoffusion.com/cf_lists/threads.cfm/5 Subscription: http://www.houseoffusion.com/lists.cfm/link=s:5 Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=11502.10531.5 Donations & Support: http://www.houseoffusion.com/tiny.cfm/54
