Savings at Tax Time: The Effect of $aveNYC on Savings in Low-income Households

Publication Date

September 2013

Author(s)

Clinton C. Key, Jenna N. Tucker, Krista Holub, Michal Grinstein-Weiss

Abstract

This paper examines savings outcomes after one year for participants in the $aveNYC tax-time matched savings program compared to a group of New York City tax filers who were not offered access to the program. $aveNYC was administered at Volunteer Income Tax Assistance (VITA) sites during the 2008 – 2010 tax seasons. The program offered tax filers the opportunity to open a savings account with a portion of their tax refund and receive a 50 percent match on their initial deposit, up to $500. Accountholders were allowed to make additional deposits and withdrawals, however if they withdrew below their initial deposit, the account was automatically closed.

We test whether the incentives of the program and the savings it generated affect the savings situation of participants one year later. We compare participants in the 2009 program to a comparison group on the following outcomes: volume of savings, ratio of savings to monthly expenses, having non-zero savings, and having enough savings to cover one and two months of expenses at current consumption levels.

Because our group of participants actively chose to take part in a savings program while the comparison group did not have the option to make that choice, we examine our outcomes using methods that address self-selection into the program. We also describe and address the high dispersion of the data on savings in our analysis.

After one year, we find a significant effect of participation on savings levels, on the presence of savings, on the ratio of savings to expenses, and the likelihood of having savings to meet one month’s expenses. We find that the treatment effect is significantly stronger for participants without children in the household and that when children are present in the household, treatment may not significantly increase savings.