Savings plans provide incentive for change

March 05, 2006|By JANET KIDD STEWART | JANET KIDD STEWART,TRIBUNE MEDIA SERVICES

Don't blame Americans' negative savings rate on Marie Anderson.

Despite supporting a family of four on her $18,000-a-year job, the longtime Chicago resident has socked away $900 since April.

"I'm not eating fast food. Whatever I eat at lunchtime is from home," said Anderson, a billing coordinator for the Lawndale Christian Health Center, where uninsured residents in her neighborhood can go for medical attention.

Gone, too, are pricey sodas at work, and junk food at home. She has started walking to work instead of taking the bus, and buying secondhand clothes.

There's an added purpose behind the belt-tightening: Anderson is racing to save $2,000 before an April 2007 deadline. If she can do it, she will qualify for $4,000 in matching funds under Chicago's Save Up program, one of about 500 individual development account programs around the country that mix government and private dollars to help low-income families save to buy first homes.

Funding for many of the local programs expires next year.

Under a pair of congressional proposals - one introduced last month in the House - such programs could see massive growth. Under the bill, known as the Savings for Working Families Act of 2006, banks and other financial institutions would be given tax credits to offer savings accounts with matching funds to 900,000 low-income families. Over a decade, the total cost would be $1.2 billion in tax credits.

The plan, however, has died in Congress twice before.

Skeptics, including some economists, long argued that poor people would be unable to save in the matching programs because so much of their income must go to pay necessary expenses. But while it would appear the programs are a success - more than 30,000 individual development accounts have been opened around the country - some believe the benefits are mixed.

O.S. Owen has been counseling low-income people about their debts for more than a decade, first with consumer credit agencies and today as financial education director for Chicago's Center for Economic Progress, one of the community organizations administering these programs.

The center, a 15-year-old nonprofit organization, offers free tax-preparation services, savings programs and other economic assistance to low-income families.

Skyrocketing home prices, even in poorer neighborhoods, are rendering the savings useless to many potential homebuyers, Owen said.

When the programs end next year, any matching money not spent is returned to the government.

Still, Owen believes the efforts have value in their ability to force change in personal savings habits.

"People often assume you have to save money in big chunks, but in our classes we get them to see that even saving $55 a pay period can help people build wealth," he said.

Janet Kidd Stewart writes for Tribune Media Services.

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