Asset building enhances the growth of financial resources, creates a financial foundation and results in stable futures for many low-income families in the United States. With a significant degree of wealth inequality in the United States among low-income, minority populations, asset building can improve the financial, psychological and social wellbeing for these populations. Possession of assets is associated with economic stability for a household, a decrease in residential mobility, an increase in property maintenance, encouraging long-term planning among individuals, an increase in personal efficacy and creating a sense of social connectedness.
One of the most valuable financial assets in the United States is a retirement account; however only 10% of families in the lowest income quintile (families earning less than $18,500) have such savings and with amounts much lower than the average American family. On average, for a family in the bottom fifth, debt is greater than 40% of income. Lack of assets also affects the financial future of our nation’s children. The intergenerational impacts of poverty are too important to ignore—42% of sons born to a father in the lowest income quintile remain in the bottom fifth when they grow up [1].
The relationship between financial stability of families and its impact on children is obvious: lack of financial resources results in fewer opportunities for children to engage in social and academic settings. In sum, policymakers should focus legislative efforts on asset building in their respective states to assist low-income families “save” their way out of poverty.
In 2008, the Family Economic Success Task Force recommended that states
should enact policies that allow families to earn an adequate level of income and benefits to build financial assets. States should require K-12 financial literacy programs in schools, and promote financial and job training, workforce development, affordable housing, and access to higher education for adults. Federal, state, and local governments should consider support for tax policies that minimize the burden on low-income families as they work their way out of poverty.
[1] Asset Building and Low-Income Families, edited by Signe-Mary McKernan and Michael Sherraden, Urban Institute Press, 2008. Unless otherwise indicated, all statistics are for 2004.
According to the U.S. Department of Health and Human Services, a quarter of American households are "asset poor," meaning the individuals and families have insufficient financial resources to support them at the poverty level for three months (during a suspension of income).
Asset poverty affects children at a disproportionately greater rate. Forty-seven percent of all American children live in households with no net financial assets. Rates for racial and ethnic minorities and minority children in the United States are even more severe.
Research shows that families with assets:
- demonstrate an orientation toward the future
- demonstrate a decrease in marriage dissolution
- demonstrate an improved housing stability
- experience improved health and well-being
- experience increased civic and community involvement
- experience decreased rates of transfer of poverty to the next generation [2]
[2] U.S. Department of Health and Human Services, Office of Community Services, Asset Building, http://www.acf.hhs.gov/programs/ocs/afi/about.html
Families in low-income areas are often the most vulnerable to exploitative market practices. In order to offset these exploitative market practices, financial literacy and empowerment can assist low-income families in securing a stable financial future. Families can increase their personal savings and investments through fair and effective financial management. Financial literacy empowers families to take control of their financial futures and gives low-income families the tools to establish or improve their financial credit, educate themselves about financial planning, improve their financial status through proper savings and investments, and contribute to personal and community financial growth.
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