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$aveNYC program shows promise as asset-building tool

Tax season can be a dreaded time of year for many Americans. But for low- and moderate-income households, tax time can bring a significant financial boost in the form of tax refunds.

These lump-sum annual payments – from tax credits, such as the Earned Income Tax Credit, or from over-withholding of payroll taxes during the year – offer families that struggle paycheck-to-paycheck a rare opportunity to set aside savings.

For this reason, researchers, advocates and practitioners are searching for effective strategies to encourage and enable low-income taxpayers to use tax refunds to save and build wealth. The ability to accumulate savings is a critical step in becoming financially secure.

One promising asset-building program is $aveNYC, developed by the New York City Department of Consumer Affairs Office of Financial Empowerment and piloted during the 2008-2010 tax seasons. The UNC Center for Community Capital, along with UNC’s School of Social Work, is in its third year of data collection to evaluate the effectiveness of this program in a study funded by The Ford Foundation.

With $aveNYC, participants signed up while having their taxes prepared at select Volunteer Income Tax Assistance (VITA) sites. They agreed to direct a portion of their tax refund to a branded $aveNYC account and, if they maintained their original account balance for one year, were matched 50 percent up to $500.

Early study results show promise:

  • 2,200 $aveNYC account holders contributed nearly $1.8 million to their accounts during the three-year period, from 2008-2010.
  • Nearly 80 percent of the program’s participants – largely single parents with average annual earnings of about $18,000 – saved for the full program period and received the match.
  • More than 30 percent of participants who received the match continued saving in subsequent years.

“This program not only capitalized on the windfall moment of tax time but also offered matching funds to incentivize savings,” said Kim R. Manturuk, the center’s senior research associate in financial services, who leads the study team. “The savings match as well as the ease with which participants could sign up were two components that appeared to make a big difference in the program’s success.”

Importantly, participants were more likely than the comparison group to say they had enough savings to live for one month in the absence of income. Participants saved approximately $300 more than a comparison group of households who were not offered the program.

Behavioral analysis sheds light on solutions

While many traditional asset-building efforts require participants to commit to long-term savings goals and engage in ongoing financial education activities, $aveNYC provided an opportunity for low-income households to “learn by doing,” building short-term savings through an easily accessible, incentivized program. Its design drew on several behavioral economics principles to make it easier for participants to save and, ultimately, move along the pathway toward greater financial stability.

Center researchers are using two methods to evaluate the program. Telephone surveys track the savings outcomes of a group of $aveNYC program participants against a comparison group of individuals who were not offered the accounts. Intensive in-person interviews with a subset of $aveNYC account holders give researchers a deeper understanding of the participants’ financial lives, saving and spending needs, behaviors and goals for the program.

The research team’s findings have revealed a complex set of determinants that impact and guide financial decision-making behavior. For example, developing a sense of self-efficacy – a belief in one’s own competence – is a recurring theme. Several individuals report an increase in their confidence around savings due, in part, to their participation in the program. Others describe a change in their expectations related to savings.

One participant, Sharlene, explains that after participating in $aveNYC: “I know that now I can say to myself, when…I hear people talk about the money they have in their bank account, ‘You know what? Me, too. I have money put away, too. I have the ability to do it, too.’ Just because I come from a low-income budget, my life as a low-income person doesn’t mean that I can’t save.”

Evaluation informs policy

UNC’s analysis of the program is ongoing, and researchers expect to learn much more as the program continues. Designed for replication as a federal tax credit, the program was included in the Corporation for National Community Service’s Social Innovation Fund award to the Mayor’s Fund to Advance New York City. It is being replicated as the SaveUSA Program in four cities – New York City, Newark, San Antonio and Tulsa – during the 2011-2013 tax seasons.

Still, the initial study findings hold important policy implications. Among them, they show this type of behaviorally informed tax-time savings program can be effective in helping low-income households build short-term savings.

The Center for Community Capital, based in the College of Arts and Sciences at The University of North Carolina at Chapel Hill, is the leading center for research and policy analysis on the transformative power of capital on households and communities in the United States. For more information, visit

Topics(s): Financial Capability, Financial Inclusion, Savings & Asset-Building
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