Overview

The Need to Build Assets

Asset ownership is the key to getting ahead and staying ahead.^[i]  Assets provide stability in the event of unforeseen costs and income fluctuations, and serve as a stock of resources to invest for increased future income and long-term development. It is primarily through accumulating and investing assets that individuals and families find long-term success.

Assets not only provide financial security, they change the way people behave. Asset owners tend to lead more stable lives, think in longer time frames, and have more hope for the future.^[ii] They are also more likely to be involved in community affairs and to plan for their children’s futures. For example, children of asset owners are more likely to succeed in school and to escape poverty. In fact, the effect of asset ownership on education and test scores is more significant than that of income.^[iii] Accordingly, assets are increasingly being recognized as the missing link in helping low-income households climb the economic ladder.

A Hand-Up or a Hand-Out?

While high- and middle-income households in the U.S. have access to asset-building opportunities through tax breaks (e.g., through deposits into IRAs or the home mortgage interest deduction), low-income households are frequently unable to take advantage of these opportunities. Instead, the government has opted to help low-income citizens through income transfers.

Government policies have emphasized income transfers as a means of temporary aid to low-income households for the last fifty years through social programs including Food Stamps (now the Supplemental Nutrition Access Program) and Temporary Assistance to Needy Families. While these programs do stave off immediate physical hardship, they discourage work and often penalize people for accumulating assets. Hand-outs from these programs also can lower the self-esteem and motivation of individuals already faced with challenges, making it more difficult to chart a path to self-sufficiency.

A Better Way: Asset Building

Fortunately, the asset-building movement has gained momentum. In the past 15 years, the asset building approach to poverty reduction has grown through programs like Health Savings Accounts and Individual Development Accounts (a matched-savings program for eligible low-income individuals). These kinds of savings instruments are likely to continue to grow in popularity; and as more people understand their advantages, they might someday replace New Deal-era social insurance programs (like Social Security and Unemployment Insurance) as the dominant form of 21st century social policy.

Asset-building advocates in the U.S. have mostly tiptoed around welfare and social insurance programs and emphasized that asset-building policies should supplement, not replace, traditional social insurance programs. But with limited tax dollars at hand, asset building programs will be too expensive to make a sufficient difference without a different approach. What this nation needs is to convert faulty existing programs into asset-building programs. That’s where Cascade steps in.

FEATURED ARTICLES ABOUT ASSET BUILDING:

Wanted: Asset Accounts, Not Income Transfers

Effective Asset-Building Coalitions Diversify

Poverty Is About People, Not Money

Opportunity Inequality

Asset Ownership Is Life-Changing

Assets and Inequality

CASCADE ASSET OWNERSHIP ARCHIVES

[i]1Michael Sherraden, Inclusion in Asset Building, Testimony for Hearing on “Building Assets for Low-Income Families,” Subcommittee on Social Security and Family Policy Senate Finance Committee (2005).

[ii] Michael Sherraden, Assets and the Poor (1991).

[iii] Zhan & Sherraden, Assets, expectations, and children’s educational achievement in single-parent households, 77 Social Service Review 191-211 (2003).