Topics
Asset Building can encompass a wide range of topics. The newspaper
and magazine articles, research, and policies on AssetBuilding.org can
be sorted by the following 34 topics. Select a topic from the list below
to learn about its relevance to asset building.
African Americans
In general, blacks hold about 10% of the wealth of whites, and that number
could be thought of as the culmination of prior efforts to deny blacks
opportunities to build assets (such as the non-delivery of 40-acres-and-a-mule
and discriminatory housing policies). One could say that this assets perspective
on wealth has revealed that assets are not just "storehouses of hope,"
as Sherraden argued, but also "storehouses of sin."
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Asset Control/Deployment
Once a person or community has accumulated assets for themselves, they
then must be able to use these assets in a beneficial way. For example,
if someone owns land but does not have proper documentation or cannot
use the land to generate any type of revenue or future return, they are
not able to effectively control or deploy that asset for their benefit.
This is especially true in developing countries, where laws and public
institutions may not be in place to allow people to effectively deploy
their wealth. It also remains true in the U.S., in particular for Native
Americans. Some Native American-owned land is held in trust by the Federal
Government, and royalties earned from the use of other assets has not
materialized, prompting several lawsuits. Finally, the notion of individual
asset ownership is foreign to many Native Americans for whom assets are
shared or communally owned.
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Asset Limits
Many federal benefit programs-especially Temporary Assistance for Needy
Families, Food Stamps, Medicaid, and Supplemental Security Income-not
only restrict eligibility on the basis of income, but also on the basis
on assets. These asset limits discourage low-income people from saving
or accumulating wealth, since they may put their benefits at risk. Similarly,
people seeking assistance first must spend down any wealth or assets that
they own to become eligible for public assistance. Some of these rules
are set by the Federal Government, some by states, and some by a combination
of the two.
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Asset Poverty
While varying measures of asset poverty exist, it is generally defined
as the net worth that is needed in order to get by for a few months at
the poverty level. All measures of asset poverty are higher than measure
of income poverty, with some showing that asset poverty reaches into the
middle class. Moreover, while income poverty has declined over the last
couple of decades, asset poverty is rising. Finally, there are some academic
efforts to add asset poverty as another official measure of poverty, but
such efforts have not yet moved forward.
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Asset Protection/Preservation
Once assets have been accumulated, they must be preserved and protected
so that the benefits continue to be enjoyed. Over the past century, several
laws have been enacted that help consumers make more informed decisions
and better protect their assets. However, the protection of assets remains
a huge issue in low-income communities, with predatory lending and other
potentially harmful practices receiving much attention in recent years.
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Assets Theory
Theories on asset building explore why and how people save, which assets
they will seek to acquire, and how this asset accumulation will affect
behavior. They also examine the viability of asset building as a strategy
to improve the lives of poor people, compared to traditional income-based
approaches. Assets theory has also informed debates about community development,
welfare reform, human capital development, and a variety of international
debates, including the relevance of Sen's theory of "capabilities"
to Sherraden's theory of assets, and vice versa. Finally, there are discussions
about where to situate assets in broader theoretical debates-institutionalism,
new pluralism, welfare capitalism, developmentalism, etc.
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Children's Savings Accounts
A saving account granted to every child at birth has been proposed
in several forms, but generally would serve as seed money, which could
be topped off by relatives, public funding, and other sources throughout
childhood. After the account grows through these deposits and compounding
interest, it could be used for post-secondary education and training,
a first home, business capitalization, or retirement. Proponents of this
idea note that this "start in life" deposit may help stem increasing
inequality by providing greater access to opportunities for all children.
The United Kingdom recently implemented universal children's saving accounts
through its Child Trust Fund program and the U.S. Congress is considering
the creation of "KIDS Accounts" in the proposed ASPIRE Act.
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Common/Public Assets
Common or public assets refer to the wealth owned-or that should be owned-by
all people within a community, country, or other collective unit. These
assets may be natural resources such as the water or sky, infrastructure
such as the Internet, or cultural resources such as broadcast airwaves.
Over the last decade, there have been both community-based efforts as
well as public policy proposals to recognize common assets as such, place
those assets in a legal trust, charge users for the right to use those
assets, and then use the proceeds to benefit all stakeholders. The Alaska
Permanent Fund, which shares the state's oil revenues on a one dividend
per citizen share, is one example of a commonly held and used asset.
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Community Assets
Investments in low-income communities have the potential to spur private
sector development and prosperity. Often, however, this economic growth
does not directly benefit low-income residents and may lead to eventual
displacement if their incomes cannot keep pace with rising property values.
Community Asset mechanisms, which allow residents to gain economic benefits
by linking these community investments with individual wealth building,
are a possible solution to this problem. Mechanisms such as community
land trusts, resident ownership of community businesses and real estate
trusts, and community investment corporations are examples of ways that
low-income residents can become vested partners in their community's economic
development.
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Effects of Assets
Researchers have argued that assets not only have economic value and impact,
but also social, civic, psychological, and behavioral effects as well.
These "asset effects" have thus far been posited and increasingly
documented by researchers, practitioners, and others. In general, researchers
have growing evidence that asset accumulation is positively correlated
with household stability, educational attainment, community involvement,
and lower levels of poverty across generations. IDA experiments are also
showing positive asset effects, but these are anecdotal at this point.
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Earned Income Tax Credit and Assets
The Earned Income Tax Credit (EITC)-a refundable tax credit for low-income
workers-usually comes as a large lump sum payment as part of a federal
income tax return. Recently, non-profits and community groups have started
initiatives to help EITC recipients use this money as a first step to
building assets and as entry points into the mainstream financial institutions.
These initiatives usually involve providing alternatives to fee-based
commercial tax preparers and arranging for the refund to be deposited
into a savings account, which may be matched. Also, there have been recent
proposals to directly link EITC and other tax refunds directly to a longer-term
savings and asset accounts.
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Employee Stock Ownership Plans
An Employee Stock Ownership Plan (ESOP) is a benefit plan that makes employees
owners of their company's stock. To create an ESOP, a company makes annual
contributions into a trust, which is then allocated to individual employee
accounts. Because ESOPs give employees a financial stake in their company,
they can serve as an incentive for better work effort and lower turnover.
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Financial Education
Financial education can foster a better understanding of bank accounts,
credit, money management, and consumer protection laws, serving as an
important component to successfully building and protecting assets. Recent
survey research indicates that many youth and adults do not possess the
needed knowledge and skills to operate in what is an increasingly complex
financial world. Proposals to bring elements of financial education into
school curricula and providing financial education through banks, employers,
and community groups have emerged to address these knowledge gaps. Finally,
financial education efforts linked to Individual Development Accounts
have proven to be successful in generating higher rates of savings.
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Hispanic Americans
While minorities historically have had lower incomes than their white
counterparts, the differences in asset holdings are much starker and have
serious implications for the perpetuation of racial inequality. Hispanic
Americans may face additional barriers such as immigration status, language,
and basic knowledge of financial services.
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Homeownership
Americans, a home is the most significant asset many families will acquire.
In the U.S., Homeownership is greatly subsidized by federal policies and,
in most circumstances, is one of the best performing investments that
can be made. In addition to financial return, many argue that homeownership
has many other beneficial effects to individuals and society, including
neighborhood stability, community involvement, and a variety of positive
impacts on children. While homeownership rates are at a record high, rates
for low-income and minority families remain well below the national rate
and rates for whites. And while homeownership is not the right asset purchase
for all low-income or minority persons (affordable rental housing may
be the best step for many), public policy can expand homeownership opportunities
for those who are ready and able.
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Individual Development Accounts/Matched Savings
Accounts
Individual Development Accounts (IDAs) are matched savings accounts that
are typically used for asset building purposes such as homeownership,
small businesses, and higher education or training. These accounts are
designed for the working-poor (and some youth) and are generally accompanied
by financial education. Several evaluation of IDAs have shown that the
poor can save and acquire assets, although many questions remain about
how the poor can save, what difference IDAs make, and how "scaleable"
IDAs are.
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Inequality
Measures of inequality capture the distribution of a nation's income and
wealth. In the U.S. (and many other nations) income inequality receives
the most public attention even though wealth inequality is greater (and,
some would argue, more consequential). Framing the problem in terms of
income also leads to policies and proposals framed in terms of income.
According to recent Federal Reserve data, the top 1 percent, next 9 percent
and remaining 90 percent each own about one-third of the nation's wealth.
Also, inequality in America is at its highest level since the dawn of
the New Deal, and the U.S. is more unequal than any other advanced democratic
nation. From an asset building perspective, however, the challenge is
not to redistribute wealth per se but rather to increase and structure
opportunities for lower-wealth persons to accumulate more wealth.
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Intergenerational Wealth/Estate Tax
An intergenerational wealth transfer occurs when one generation gives
assets to the next, either throughout their lives or as an inheritance
after death. Some examples of these transfers include parents financing
a child's education or helping with a downpayment on a home or the capitalization
of a small business. After death, this transfer may be in the form of
property, unspent retirement accounts, or other wealth accumulated over
a lifetime. Presently, about one-half of wealth comes through intergenerational
transfers. These transfers, which build gradually over several generations,
are one of the explanations of why white and better-off Americans own
substantially more wealth than others.
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Investments
Increasingly, families are investing in stocks, bonds, mutual funds, and
other investment vehicles. In fact, the 2001 Survey of Consumer Finances
has reported that-for the first time-over half of the population is invested
in the stock market, although many of the new investors are now participants
because of the rise of defined-contribution pension plans such as 401(k)s,
and most of these balances are quite small. Accordingly, wealth from investments
still remains greatly concentrated at the very high end of the income
distribution.
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Land
Land (usually a part of home, business ownership, or agricultural operation)
remains an important asset to many persons. In the U.S., about one-quarter
of today's adult population owes its legacy of asset ownership to our
nation's largest land-based asset building program, the Homestead Act.
However, for many low-income, minority, or Native Americans, the land
necessary for individual, business or community development is unaffordable,
inaccessible, or not easily controlled by them for their benefit. In many
less-developed countries, landowners cannot effectively control or leverage
their property for financial gain because of a lack of appropriate institutions
and legal frameworks.
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Microenterprise/Microfinance
Microenterprise, or self-employment, strategies have been largely successful
within and outside the U.S. at enhancing the income and assets of the
poor. While microenterprise will not be the route to economic security
for all families, it is the main route for up to 10 percent of the population
in the U.S. and a far greater percentage in developing countries, who
then have the potential to create jobs and help stabilize low-income neighborhoods.
Microenterprises in the U.S. are generally defined as a business with
five or less employees that requires a loan of $35,000 or less to begin
operations, but can start up at significantly smaller scale in other countries.
Microfinance institutions, most of which operate outside the U.S., provide
low-income persons loans to start and expand businesses and, increasingly,
access to savings and other financial services.
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Native Americans/Indigenous Populations
While Native populations historically have had lower incomes than their
non-Native counterparts, the differences in financial asset holdings are
much starker and have serious implications for the perpetuation of inequality
and lack of opportunity. For example, Native American tribes and communities
face unique challenges related to assets owned but not controlled by them,
geographic isolation, and cultural norms around ownership that may differ
significantly from those in rest of the U.S.
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People with Disabilities
Recently, people with disabilities, in conjuction with the organizations
that represent them, have developed ways to supplement benefit programs
and work efforts with strategies to build savings and wealth-especially
Individual Development Account programs. While these have been largely
successfully, assets limits (especially in SSI) and (for those unable
to work) earned income requirements have been barriers to more success.
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Post-Secondary Education/529
College Savings Plans
In today's knowledge-based economy having a college education and frequently
updating skills have become increasingly important. Obtaining a college
degree often leads to higher earnings and greater opportunities over a
lifetime, which can make greater asset accumulation possible. In fact,
some argue that human capital development is not only the most important
asset building strategy for individuals, it is also the most stable and
highest-yielding one a nation can make. Like other forms of asset development,
however, rates of college attendance and graduation are much lower for
lower-income and minority persons. A broad range of policy strategies-including
broadening college savings plans and enhancing the amount and flexibility
of financial aid-have been proposed to expand post-secondary educational
opportunities.
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Race and Wealth
While minorities historically have had lower incomes than their white
counterparts, the differences in asset holdings are much starker and have
serious implications for the perpetuation of racial inequality. In the
U.S., according to the Federal Reserve, the family net worth of whites
is about seven times that of minorities, and this large difference has
deep historical and cultural roots. Many of these discriminatory policies
and practices continue today, although in less obvious ways.
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Refugees
Those who flee their homeland to live in another country to escape persecution
or other threats often arrive with little or no assets, regardless of
their former levels of income or wealth. By providing access to a first
home, small business, computer, car, and education and skills, public
and private asset-building programs (especially Individual Development
Account programs), have been successful in helping refugees resettle in
the U.S.
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Remittances
"Remittances," the common name for transfering funds from
one country to another, are typically used by immigrants to send money
to relatives living in their home countries. The Federal Reserve reports
that remittance flows to developing countries typically exceed official
development assistance, are similar in magnitude to foreign direct investment,
and are more stable than either of these other flows. Remittances hold
potential for poverty alleviation and economic development, however their
high cost and risk have undercut that potential. Though there have been
important strides to lower these costs and minimize risk, many remitters
and recipients of remittances are unbanked and lack financial literacy.
Remittances services can be a tool to build financial literacy skills
and a gateway for both groups to broader financial relationships with
banks in Latin America and elsewhere. If individuals establish bank accounts
for the purpose of sending and receiving remittances, they become far
more likely to use other services offered by the institution, such as
savings accounts. Consequently, they will be better able to acquire and
leverage assets for their future, which in turn will help them to buy
houses, finance education, and create small businesses.
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Retirement, Employer-Based
In the past, many employers provided their employees with defined benefit
plans such as pensions, which, combined with Social Security benefits,
provided for a comfortable retirement. Today, increasing numbers of employers
have substituted these plans for defined contribution plans such as 401(k)s.
This shift has placed more responsibility onto workers, who usually must
opt into these plans and ensure their investments are properly allocated.
Presently, only about half of all workers-the vast majority of them higher-income-have
an employer-provided retirement plan. Moreover, two-thirds of the $120
billion a year in federal tax subsidies for retirement savings (for both
employer-provided and private savings plans) benefit the most affluent
20% of Americans.
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Retirement, Private Savings
Individual retirement saving plans, such as IRAs, have tax advantages
similar to employer-sponsored defined contribution plans, but are opened
by individuals. While the tax advantages of these plans are highly attractive
for those with tax liabilities, there are fewer incentives the poor to
save for retirement in these accounts. Two-thirds of the $120 billion
a year in federal tax subsidies for retirement savings (for both employer-provided
and private savings plans) benefit the most affluent 20% of Americans.
Combined with the fact that low-income workers are much less likely to
have an employer-sponsored retirement plan, they are particularly vulnerable
to financial insecurity during their later years.
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Retirement, Social Security
While some Americans are building up their retirement savings through
employer-sponsored or private savings vehicles, many Americans-and the
majority of the poor-will continue to depend on Social Security benefits
for their sole source of retirement income. With the future stability
of Social Security unclear once the "baby boomer" generation
retires, however, several large-scale reforms have been proposed, including
various proposals for "private" accounts. Some of these are
"carved out" of Social Security, while some are "add ons"
to Social Security-and either, if structured properly, could be a route
to broader asset ownership. From an asset building perspective, what matters
most is that any individual account system should be inclusive, progressive
and heavily informed by the experience of Individual Development Accounts
and other accounts aimed at the poor.
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Savings/Savings Rate
As is well known, the U.S. savings rate is low and falls well below that
of many other advanced capitalist nations. Most economists agree that
higher rates of savings-individual and national-are critical to the long-term
health of the economy. While economists do not necessarily agree on the
impact of tax policy on savings rates for middle- and higher-income Americans
(since their savings may just get shifted to accounts with better tax
advantages), there is consensus that any additional savings of lower-income
persons would represent net new savings since these persons save little
if anything right now. Accordingly, Individual Development Account programs-which
have demonstrated that the poor, even the poorest of the poor, can save-and
other savings initiatives aimed at the poor would contribute to both individual
and national well-being.
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Unbanked/Access to Financial Services
Access to mainstream financial services and products is often the first
step to building assets and wealth. Many low-income people, however, do
not have bank accounts and instead pay high fees to check cashers, payday
lenders, and other "alternative" financial institutions. With
the development of new cost-cutting technologies, large funding steams
prevalent in low-income communities (such as "remittances"),
and partnerships between non-profits and financial institutions, some
innovative ideas are helping to bring the unbanked into the banking mainstream.
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Universal/Lifetime Savings Accounts
Over the last decade, and especially since 1999, there have been major
proposals from the White House and Congress to create long-term or lifetime
savings accounts for all or nearly all persons (some at birth, others
later). Some of these proposals were retirement focused, while others
were for pre-retirement assets, while others (in particular President
Bush's Lifetime Savings Accounts) could be used for any purpose. The more
progressive proposals included matching deposits for lower-income workers,
while less progressive proposals allowed tax-free accumulations and withdrawals.
In the future, the myriad of savings and asset accounts now in existence
may collapse into one, portable, multiple- use account along the lines
of these universal and lifetime savings proposals. From an asset building
perspective, any lifetime or universal account should be inclusive (truly
universal), progressive, and informed by the experience of Individual
Development Accounts and other savings programs targeted at the poor.
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Veterans & Military Families
Ensuring that United States veterans receive sufficient benefits has taken on new urgency as tens of thousands of servicemembers return from Iraq and Afghanistan. Benefits such as covering the full cost of a college education and granting of low-interest loans to start a business are among those proposed to update the Montgomery GI Bill. Such benefits are key ways that servicemembers who have served their country with honor can build assets once they arrive home—
as the “Greatest Generation” did upon returning from the battlefields in Europe and Asia at the end of World War II.
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Women
Because women have traditionally earned less, have been more likely to
leave (or suspend) paid employment, and historically had fewer ownership
opportunities than men, they generally have lower levels of wealth than
men. Female-headed households-even those without children-generally have
lower levels of net worth, financial assets, and non-financial assets
than households headed by men. And these gender-based disparities in asset
ownership are compounded when the woman is minority and/or low-income.
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