Empowering low-income individuals to become long-term savers

Last week I joined several Citi colleagues and many of our nonprofit and policy partners at the CFED Assets Learning Conference in Washington, D.C.There we examined strategies for empowering American families to save and build assets. I was invited to share some of our experiences in Houston, Texas, developing collaborative new approaches to asset building.

Household savings provides financial security and offers individuals the opportunity to move up the economic ladder; however, we have found that many Texas families -- and many Houstonians, in particular -- have little or no savings.

According to the recently released FDIC 2011 National Survey of Unbanked and Underbanked Households, more than a third of households in Houston do not even have a savings account. Nearly 12 percent have no bank account at all. As a state, Texas ranks near the bottom in many overall measures of household financial security on CFED's 2012 Assets & Opportunities Scorecard. In fact, one in two Texans lacks enough "rainy day" savings to weather a temporary loss of income. As a result, Texans are much more at risk of turning to predatory lending to weather a temporary need for cash.

The FDIC survey also found that even for Houston households that do have a savings or checking account, almost 25 percent used an alternative financial service provider (AFS) such as a payday lender or check cashing service in 2011. It is clear that asset poverty is a substantial community need in Houston.

So, over the last year, Citi has worked with the United Way and other community organizations in Houston on an innovative program, offering individuals a path toward economic stability and away from the use of high-interest, high-fee AFS providers. This initiative includes a low-cost loan product that also acts as a credit-building tool and keeps families out of asset poverty.

This year, in deepening our relationship with the United Way's THRIVE program, we discussed the importance of providing products and services to low- and moderate-income (LMI) individuals at tax time that will encourage them to save a portion of their tax refund. This discussion evolved into a multifaceted community partnership that combines a matched deposit product with information and incentives that empower low-income individuals to become long-term savers.