Table Of ContentA Fragile Balance
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A Fragile Balance
Emergency Savings and Liquid
Resources for Low-Income
Consumers
Edited by
J. Michael collins
a fragile balance
Copyright © J. Michael Collins, 2015.
Softcover reprint of the hardcover 1st edition 2015 978-1-137-48781-0
All rights reserved.
First published in 2015 by
PALGRAVE MACMILLAN®
in the United States—a division of St. Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Where this book is distributed in the UK, Europe and the rest of the world,
this is by Palgrave Macmillan, a division of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills,
Basingstoke, Hampshire RG21 6XS.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-50398-8 ISBN 978-1-137-48237-2 (eBook)
DOI 10.1057/9781137482372
Library of Congress Cataloging-in-Publication Data
A fragile balance : emergency savings and liquid resources for
low-income consumers / J. Michael Collins, editor.
pages cm
Includes bibliographical references and index.
ISBN 978-1-349-50398-8
1. Saving and investment. 2. Low-income consumers.
3. Poor—Finance, Personal. I. Collins, J. Michael.
HB822.F735 2015
332.02400869942—dc23 2014036604
A catalogue record of the book is available from the British Library.
Design by Newgen Knowledge Works (P) Ltd., Chennai, India.
First edition: March 2015
10 9 8 7 6 5 4 3 2 1
Contents
List of Illustrations vii
Acknowledgments ix
1 Paying for the Unexpected: Making the Case for a New
Generation of Strategies to Boost Emergency Savings,
Affording Contingencies, and Liquid Resources for
Low-Income Families 1
J. Michael Collins
2 Liquid Savings Patterns and Credit Usage among the Poor 17
Leah Gjertson
3 Upside Down: The Failure of Federal Tax Policies to Support
Emergency Savings 39
Ezra Levin
4 Save at Home: Building Emergency Savings One Mortgage
Payment at a Time 55
Stephanie Moulton, Anya Samek, and Cäzilia Loibl
5 The SaveUSA Coalition: Using Behavioral Economics to
Build Unrestricted Savings at Tax Time 75
Jonathan Mintz
6 Refund to Savings: Creating Contingency Savings at
Tax Time 87
Michal Grinstein-Weiss, Krista Comer, Blair Russell,
Clinton Key, Dana Perantie, and Dan Ariely
7 Enhancing Financial Capability: TANF Bank Accounts 107
Karan Gill, Dana Mills, and Margaret McKenna
8 Building Emergency Savings through “Impulse Saving” 125
Kim Manturuk, Jessica Dorrance, and Jayson Halladay
vi Contents
9 Prosperity SmartSave Card: An Incentivized Emergency
Savings Strategy 141
Sharon Henderson
10 Accelerating Savings among Low-Income Households 153
Ed Khashadourian
11 S tart2Save: Helping Working Families Meet Unexpected
Expenses and Opportunities 175
Ingrid Holguin
12 Incorporating Savings into the Debt Management Plan 193
Karen Heisler and Seth Lutter
13 W ho Said Pigs Can’t Fly? A Learner-Centered Approach to
Emergency Savings 201
Sonya Caesar
14 E pilogue: Emergency Savings as a Central Component of
Family Financial Security 213
J. Michael Collins and Thomas Shapiro
Notes on Contributors 221
Index 225
Illustrations
Figures
2.1 Percentage of Families with No Emergency Liquidity by
Financial Satisfaction 30
3.1 Annual Federal Spending on Investment and Inheritance
Tax Programs in Constant Dollars 43
3.2 Share of Tax Expenditure Benefits Received by
Income Group 44
3.3 Average Income from Capital Gains and Dividends by
Income Group 46
3.4 Maximum Estate Tax Rate and Inflation-Adjusted Estate
Tax Exemption Levels: 1916–2014 47
6.1 Paper Check Intervention Experience 95
6.2 Direct Deposit Intervention Experience 96
10.1 Deposits and Total Account Value in SAA plan T16 over
18-Month Savings Period 160
11.1 Financial Indicators for Start2Save and Traditional IDA
Participants at Opportunity Fund: March 2012–February
2013 Cohort 181
11.2 Financial Indicators for Start2Save Year 1 and Year 2
Cohorts 182
Tables
2.1 SCF Household Emergency Saving by Income 22
2.2 NFCS Selected Metrics, by Emergency Fund and
Liquidity 24
2.3 NFCS Emergency Fund, Liquidity, and Financial
Satisfaction 26
viii Illustrations
4.1 MRA Design Considerations by Stage and Mechanism 63
4.2 Comparison of Models for Mortgage Reserve Savings
Accounts with HFAs 68
6.1 2013 R2S Prompts 97
6.2 Combinations of Prompts and Anchors Tested in the R2S
Experiment over Three Test Periods 98
7.1 TANF Bank Accounts Program and Comparison Groups 120
8.1 Impulse Savings Texts over Three Weeks for
Representative Client 136
10.1 Examples of Incentive Components in Savings Accelerator
Account 158
10.2 Examples of Two SAA Savings Models 160
10.3 Basic Demographic Information of SAA Participants 164
10.4 Selected Program Financial Information 165
12.1 Potential Savings: Debt Management Plan with Savings
Component versus Conventional Debt Repayment for
$25,000 Debt 195
Acknowledgments
This edited volume is the culmination of an effort organized by the Center
for Financial Security at the University of Wisconsin-Madison to promote
an innovation dialogue around emergency savings for low-income house-
holds (see also the Emergency Savings Project’s website at emergencysav-
ings.org). The success of the project was made possible by the contributions
of a multitude of individuals who played valuable roles.
The initial impetus for studying emergency savings at the Center for
Financial Security grew out of an event at the US Capital Building in 2011
organized by the New America Foundation. Caroline Schultz, Pamela
Chan, Alejandra Lopez-Fernandini, and many others generously shared
their time and insights, which influenced an early working paper I coau-
thored with Stephanie Chase and Leah Gjertson funded by MDRC. At a
subsequent UW-Madison webinar, Mae Watson Grote of the Financial
Clinic expanded the conversation to the potential role for community-
based programs in developing savings strategies.
In the fall of 2012, the Center for Financial Security issued a call for
proposals for papers describing new products, policies, and programs to
support emergency savings. An advisory committee selected the strongest
concepts, which were developed more fully for a Salon in May 2013 that
brought together the authors and other experts from across the coun-
try. JPMorgan Chase hosted the Salon at its offices in Chicago, greatly
enhancing the quality of event. The Salon was organized by the Center for
Financial Security and supported by the Charles Stewart Mott Foundation,
which provided generous support throughout the project and is chiefly
responsible for making this book possible. The concept for the Salon, and
ultimately this volume, would not have been possible without the creative
force and vision of Benita Melton at the Mott Foundation and the insights
and ongoing advice of Tom Shapiro at the Institute on Assets and Social
Policy at Brandies University.
The chapters in this volume would not have been developed without
the advice and counsel of the Emergency Savings Project Advisory com-
mittee: Ray Boshara, Sarah Gordon, Johnette Hartnett, Gary Koenig,
