Association for Public Policy Analysis & Management

Many households do not have enough savings to help them manage temporary losses of income or increased expenditures from unexpected events.  Increasing liquid assets for emergency expenses has become an important policy issue, highlighted by the recent economic downturn that resulted in significant job loss, underemployment, and an increase in financial hardship for many individuals, particularly people who lack the income to weather financial crises. 

SaveUSA, a voluntary program launched in 2011 in four cities, encourages low- and moderate-income individuals to set aside money from their tax refund for savings.  Tax filers at participating Volunteer Income Tax Assistance (VITA) sites can directly deposit all or part of their tax refund into a special savings account, set up by a bank or credit union, and pledge to save between $200 and $1,000 of their deposit for about a year. If successful, savers earn a 50 percent match. Irrespective of match receipt, money withdrawn from SaveUSA accounts (pre- or post-match) can be used for any purpose, and account holders could deposit tax refund dollars in 2012 and 2013 and receive additional savings matches about 12 months later.

Programs incentivizing unrestricted-use, tax-time savings have rarely been rigorously evaluated.  The SaveUSA evaluation, a randomized control trial (RCT) launched in 2011, is thus contributing strong evidence about the potential of this type of policy strategy to increase the financial stability of vulnerable households. The proposed paper presentation would summarize long-term effectiveness findings that will be publicly released at the end of 2015. 

Interim results from the RCT, released in 2014, indicated that that SaveUSA was implemented successfully in all four involved cities.  During the first program year, individuals randomly assigned to the SaveUSA group directly deposited an average of $506 of their tax refunds into SaveUSA accounts. About two-thirds of those in the SaveUSA group saved for about a year and received a first savings match; about two-fifths set aside part of their tax refund for saving again in the program’s second year. At the 18-month follow-up point, SaveUSA had increased the percentage of individuals with any short-term savings of any kind (by 7 percentage points) and had increased the average total amount of nonretirement savings of any kind held by individuals (by $512), compared with what individuals would have saved via any method without the program. The program also had increased the proportion of individuals expressing a commitment to save.

The proposed presentation would report on SaveUSA’s effects at the 42-month follow-up point, a few months after SaveUSA group members could have received their final savings match.  In addition to summarizing the program’s longer-term impacts on savings, the presentation would show whether increases in savings have resulted in higher overall levels of financial well-being (using a “balance sheet” approach). Thus, the program’s effects on households’ debt levels, use of high-cost credit, material hardship, and other aspects of financial security will be reported.

SaveUSA program operations and the evaluation are being funded by a federal Social Innovation Fund (SIF) grant.