Our current tumultuous moment has confirmed it—savings are critical to the health and well-being of families across the country.  As we’ve mentioned before, Prosperity Now has released Saving for Now, Soon and Later: How Savings Products Can Better Meet the Needs of Low- to Middle-Income Individuals which explores a savings product that would allow users to save for short-, medium- and long-term goals concurrently and move flexibly between different types of savings. This all-in-one solution, informed by savings research and refined by practitioners at our 2018 Prosperity Summit, was tested by speaking with low- to middle-income people at sites in four states : California, Missouri, New York and Georgia.

But we all know that savings products aren’t enough. Policies that help LMI households save for the now, soon and later are a critical step. The savings policies featured below--Savings for the Future Act, Refund to Rainy Day Savings Act/Rainy Day 2.0  and Promise Accounts--try to make the act of saving easier for everyone, especially LMI households, through vehicles aimed at serving working families, employers, tax time and service providers. Passing legislation that makes use of these different avenues allows LMI households to access saving supports more easily. They can help families build flexible savings throughout their lives:

• The Saving for the Future Act would make it easier for employees to save for emergencies and for retirement. The bill calls for the creation of retirement savings accounts which would be available to all working Americans and portable across employers. The act automatically enrolls workers into a retirement savings program and an opt-out contribution of a percentage of their earnings. Furthermore, workers can opt-in to have the first $2,500 they accumulate allocated to a safely invested and accessible savings account to build emergency savings.  By making saving easy for employees, the Saving for the Future Act would help millions of workers build emergency savings and retirement savings.
• The Refund to Rainy Day Savings Act (and its next iteration: Rainy Day 2.0) bolsters the EITC, a policy that disproportionately helps households of color. This legislation would encourage savings at tax time—a time when tax refunds can account for as much as one-fifth of annual income for some households. Tax filers would be able to defer 20% of their refund for six months before having the refund and accumulated interest deposited into the filer’s account. In addition, the Refund to Rainy Day Savings Act includes language to expand the flexibility of the innovative Assets for Independence (AFI) grant program, which encourages savings by offering matching funds to help low-income workers save their own money and build assets. To help LMI households even further, expanded legislation, Rainy Day 2.0, would give families who qualify for the EITC a 50% government match on top of their deferred refund to continue supporting savings.
• Promise Accounts utilize insights from decades of research and experience to suggest a new matched savings program that enables and incentivizes working families to boost these medium-term savings and get on a wealth-building path. As Congress has become increasingly inclined toward promoting and improving saving for short-term emergencies as well as long-term goals such as retirement, there is still a need for flexible, medium-term savings options for critical asset purchases, such as higher education, business expenses and homeownership.

We look forward to working with our partners and advocates in 2021 to move these savings policies forward. Sign up here for our Advocacy Center to take action in 2021!