The data about savings and debt in our state and nation is sobering.
- Twenty percent of Washington residents are asset poor – without liquid savings to maintain their household for more than three months.
- Washington State ranks 47th in home ownership rates, with 32 percent households renting.
- More than 30 percent of Washington’s low and moderate-income individuals do not have a bank or credit union account.
- The United States savings rate has been near zero percent for the past three years.
- Forty three percent of United States households spend more than they earn annually.
- Washington ranks 43rd in the nation in credit card debt.
- In 2007, 44 percent workers say they live “paycheck to paycheck”, an increase from the prior year.
- Eighteen percent of eligible Washington workers do not apply for the federal Earned Income Tax Credit, missing out on up to a $4,700 individual cash credit – a total of about $60 million per year statewide.
These savings and debt facts underscore the need to provide the motivation, education and tools to low and moderate-income households for savings and asset building. Research shows that given incentives and tools, savings and ownership of assets is possible even for our lowest income families.
Savings and assets also help individuals and families focus attention on the future. Planning and saving for home ownership or repair, education and training, and business ownership benefits individuals, families, and communities. Incentives along with financial skill development, tools and consumer protection training are all required to help people become successful savers and meet their asset goals.
Asset building moves low and moderate-income people up the continuum toward greater self-sufficiency through the accumulation of savings, protection from non-predatory credit practices and acquisition of long-term assets. But the goal is more than increased income and assets. It also includes decreasing the degree to which an individual or a family is living each day in survival mode. Awareness and access to economic supports enable people to both handle crises and build their assets, regardless of income.
For some, a positive step may mean moving away from dependence on means-tested supports, such as the federal Earned Income Tax Credit (EITC) or subsidized housing. For others it could mean moving to non-means-tested supports, such as a credit-line or mortgage reduction. Buffers, such as a savings account, retirement plan, property equity, insurance, and credit enable people to weather crises so their lives don’t fall apart with an illness or missed pay check. Many low-income residents could move faster up the economic continuum with financial literacy training, credit repair, an Individual Development Account (IDA) or down payment assistance for a home. By increasing knowledge and access, as opposed to simply increasing income and assets, long-term economic stability can be reached and maintained.