Ford Foundation President's Remarks at the 2009 National Conference on Children and Youth Savings
The Ford Foundation has long supported the pioneering work of the Corporation for Enterprise Development (CFED) including its Saving for Education, Entrepreneurship, and Downpayment (SEED) Policy and Practice Initiative, which demonstrates the positive impact of Children's Savings Accounts. As part of this effort to promote opportunities for all Americans to save and build assets, the foundation is supporting CFED's inaugural Conference on Children and Youth Savings, held in Brooklyn, New York, from June 14 to June 16. Read the remarks of Ford Foundation President Luis Ubiñas below.
June 2009 — I am delighted to be here today and to speak to this important forum. And I am happy to be joined here by Ford Foundation staff who have been such leaders in this work, including Pablo Farías, Frank DeGiovanni and Kilolo Kijakazi. Most of you know them, they hardly need introduction.
You know, I have now been at the Ford Foundation for about a year and a half. And I am deeply honored and inspired as I enter the foundation each and every day. Ford works with visionary leaders on the frontlines of social change in the United States and around the world. We do that for one reason — to build a world where everyone has the opportunity achieve their full potential, contribute to society and have a voice in the decisions that affect them.
As all of you who share this commitment already know, this is complex and challenging work. But it's also as urgent as ever. Far too many people still lack opportunity and voice, limiting not just their potential but the potential of the societies in which we live. And the challenges we face are only growing. Economic disparities are widening; human dignity and basic rights are under attack; too many obstacles still stand in the way of such basic opportunities as access to education.
But despite all this, when I walk into Ford each morning — and when I get the chance to meet Ford grantees like many of you — I am inspired and I am full of hope. And that is because, while the challenges have grown, so too has our ability to meet them. Advances in knowledge, technological innovation, global connections among people are allowing us to have greater impact.
But I am also inspired for another reason — I believe we have an unprecedented chance to engage in a new conversation about fairness and opportunity in this country.
This conversation has already been sparked by the economic crisis, but also by events before it, like the hurricanes in Gulf Coast. I believe that Americans are asking themselves, more than ever before in recent history — what kind of society do we want to create? How can we ensure that the institutions that shape our lives do a better job of serving all citizens, rather than a select few? How can government be smarter, more effective and better at promoting opportunity for everyone? How, in short, can our country be a fairer country?
So what can be done?
This conversation about fairness and opportunity could not be more relevant to our meeting today and to our collective efforts on Children's Development Accounts.
These accounts — which I'll call kids accounts — are all about fairness and opportunity. Further, they are about overcoming what has been unacceptably unfair about access to economic opportunity in this country.
For too long, even the most basic level of economic security has been out of reach for whole segments of American society.
Let me be specific about what I mean:
- In 2004, 58% of all earned-income went to the top 20% of earners, while 80% of all assets were owned by the top 1% of all wealth holders.
- 16% of Americans have zero or negative net worth. Not one dollar.
- 22% of all households — almost a quarter of all of Americans — are asset poor, which means that they could not survive at the poverty level for 3 months if their income were interrupted.
But the real tragedy of these figures becomes even clearer when we take a closer look by race and gender:
- For every $1 of net worth owned by white households, minority households have 13 cents.
- For every $1 of net worth owned by male-headed households, women-headed households have 59 cents.
- 40% of minority and 38% of female-headed households with children are asset poor. They lose their incomes for 12 weeks they are on the street.
These figures are deeply troubling, and if we do nothing, they are likely to get worse. Imagine an America where a full quarter of the population sits on the margins, unable to get ahead, deeply vulnerable to any crisis — and — raising children who are almost certain to face a similar situation when they become adults.
I know that everyone in this room would agree that such a future is an unacceptable one.
But there's an even more troubling part of this story. And that is this: Government policies, which could help lift up all citizens, are actually helping to deepen this inequity.
Every year, the federal government provides at least $350 billion in programs and tax incentives that promote individual asset building — such as the home mortgage interest deduction and various tax-deferred savings programs. But most of these benefits go to upper-income Americans and bypass the majority of Americans who need the benefits the most.
Consider just one example: In the 2005 federal budget, the poorest fifth of the population received on average $3 in benefits to promote savings and asset building, while the wealthiest 1% received, on average, more than $57,000.
Statistics like these show us what we are really dealing with: a question of fundamental fairness. If the impact of these policies were better understood, I believe that more Americans would demand new solutions. Solutions that develop the talents and aspirations of all our citizens. Solutions that drive smart, new public policies that end the cycle of intergenerational poverty and inequity, rather than strengthen it. That's what fairness and opportunity look like — and it's what we need to make our country stronger for all of us.
Let's talk about Children's Development Accounts.
The Ford Foundation, like so many of you, is in the solutions business. We're with you on the frontlines of social change, championing ideas that are full of promise but also new — and often times different from what many are used to.
And so about twelve years ago, our staff took a look at the inequities I just described and said, "Let's do something about it." Let's step back from the old approaches and think through a long-term solution — one that can serve as a model for turning the tide on persistent, intergenerational poverty in this country.
What we knew, and what Michael so clearly described, is that the key to all of these efforts is assets. Finding ways for poor families to build long-term assets — not just short-term income — is absolutely critical to climbing out of poverty and joining the economic mainstream.
Assets represent the ability to invest in the future—to build skills to earn a decent income, acquire the security of a home, access the marketplace with a new business, and invest in education. Most importantly, these assets build long-term household security, allowing families to weather the crises and unexpected challenges that are an inevitable part of today's world.
Yet we know from what I described earlier that low-income families have a very hard time building assets in this country.
So our team at Ford — and so many of you — came together to propose a bold new solution to help children from low-income families build assets right from birth. Children's Development Accounts do just that — and they are designed to give kids a critical "head start" in building wealth over the course of their lives.
Now, since I'm relatively new to the Ford Foundation and wasn't here during much of this work, I don't have to be modest about the incredible progress we've seen over the last several years. And it's important to step back and look at where all of us have come in just a short time.
- When this work began, most people in America believed that poor people were simply unable or unwilling to save. At a fundamental level, many believed, asset-building programs for the poor were a waste of time.
- We funded — and many of you helped manage — a national demonstration of matched-savings accounts for adults that changed all that. Known as IDAs — or individual development accounts — the project proved that poor families can and will save when given access to appropriate incentives and products. What's more, the data showed that poor families actually saved a greater percentage of income than wealthier families, turning conventional wisdom completely on its head.
- This was a nothing short of a sea change in the fight against poverty. And since then the idea has caught fire. In 1997, there were just 3 IDA programs in all of America. Today, there are more than 1,100 programs across the country, benefiting some 85,000 savers. This number continues to rise, thanks to new interest from all levels of government and organizations working across a range of issues important to families and communities.
The Ford Foundation has now made more than $60 million in grants to support matched savings and other asset-building programs over the last twelve years. Today our work is about building on this success, with a special focus on convincing policymakers at the state and federal level to enact legislation that supports life-long savings accounts. Legislation that moves the dialogue from programs that foster dependence to programs that foster market-driven independence.
We hope that by providing a saving account at birth to every child born in the U.S, all families will be encouraged to:
- Develop a savings habit;
- Improve their financial literacy;
- Save for — and believe in — the possibility of higher education for their children;
- And develop early and lasting relationships with mainstream banks, reducing their dependence on high-cost financial services like pay-day lenders.
Impact of Children's Development Accounts
Our demonstration projects are still underway. But let me tell you: The early results are very strong. And the impact is real.
I want to share with you the story of Jamar Nembhard. Jamar is a 16-year old from Wilmington, Delaware, and he personifies everything that this work is all about. Almost four years ago, he received a savings account through our demonstration project in Delaware, managed by the Boys and Girls Club of Delaware.
To date, Jamar has saved just under $3,000 — a very impressive sum. And through the financial education classes offered with program, Jamar tell us that he has learned "the importance of budgeting, and the value of saving, spending and sharing." He and his classmates have even learned about the stock market.
Jamar has also learned some key strategies for saving — for example, he now gives himself a twenty-four hour "cooling-off period" before deciding to make a purchase. (I think that's something all of us could try.)
Jamar is now looking forward to starting his own technology business someday. He hopes to donate computers to organizations like the Boys and Girls Club in order to help disadvantaged kids in the community. He says: "I now recognize that no matter how little the amount of money that I begin with, if I allow time to work for me, I can accomplish a better way of life."
But there's also another very interesting part of Jamal's story, and that involves his mother. After watching her son's incredible progress, Jamal's mother tracked down a local program that offered IDAs — similar savings accounts for adults. She is now enrolled in the program and pursuing a degree in the healthcare field, having been inspired by the example of her son.
Stories like these are why we are all here today.
And they show that Jamal and his mother's savings are about so much more than money. They are also about hope for the future — a different outlook on life that makes education and employment a concrete part of the plan.
And that lesson is emerging in our work throughout the country. Beyond building financial assets, these accounts are about making poor families full participants in our society. They're about independence — freedom to chart one's own course, pursue one's own dreams, and break free from the cycle of dependence that has marked government anti-poverty efforts of years' past.
And all of this is possible through a market-based approach that simply makes available to poor families the same incentives to save that many of our own families take for granted. It's a solution that is well overdue.
So, what's next?
Based on these early results, we need to move aggressively. How will we translate the learning of these demonstration projects into policy around the country? How do we make kids' accounts a reality for all?
The answer lies in working together. I want to say very clearly: this effort cannot survive through the support of the Ford Foundation alone. We already have some very valued philanthropic partners, but we need many more. We look forward to welcoming new funders to this work in the months and years ahead.
We also need to break down the old barriers that stand in the way of community groups, advocacy and social service organizations, financial institutions and government agencies working together on this issue.
That is why I am so encouraged to see such a diverse array of organizations represented in the room today. Your presence says clearly — kids accounts are something we can all get behind. And the message is simple: If you care about strong communities, reducing poverty, lifting up the next generation of Americans, strengthening our free market economy, you should care about kids' accounts.
While we have a lot of work ahead of us, I am happy to tell you that the momentum is on our side. Around the country, at all levels of government, we are seeing a growing interest in smart policies that promote savings and asset building. President Obama himself recently said, "We must lay a new foundation for growth and prosperity — a foundation that will move us from an era of borrow and spend to one where we save and invest." And the spirit of that charge is reflected in an array of proposals now poised to go before Congress, including the ASPIRE Bill, which would go a long way in advancing federal assets policy in this country.
We are also inspired by the creative new efforts underway in our states and cities. I want to take a moment to salute the efforts of leaders in Arkansas and Texas — some of whom are here today — for enacting savings programs in your states and providing an example for the rest of the country. And we see progress in our cities, like San Antonio, where officials who are also with us today are launching new savings programs for adults and children. This is work we should all be proud of.
With much of our demonstration and development work behind us, it is clear that much of the work that lies ahead will focus on advocacy and mobilization. For our part, we will continue to support advocacy efforts at the federal level and are planning to ramp up our support for state-level organizing and advocacy efforts. We are committing an additional $20 million over the next five years to strengthen asset-building networks in key states. We believe that these networks can play a critical role in building support for effective state policies that promote savings and other related asset policies.
We will also support efforts to build a more robust communications effort that links both national and state policy organizations. We believe that this coordinated analysis and advocacy can prove vital to influencing public policy at all levels of government.
Despite all of the incredible momentum, we know that the road ahead will not be easy. Our challenge is this: for as much as we have accomplished, our greatest work lies ahead. So let us come together to forge new partnerships to advance this work together. And let's commit ourselves to telling the story of kids' accounts to anyone who will listen.
Because we all know that there is so much at stake.
So I urge you to never forget what this work is all about: fairness — opportunity — hope for the future. A chance for more of our children to build a future for themselves and their families. A country where more of its citizens have a chance to reach the American Dream.
I look forward to working with you. Thank you.