What Can You Learn From an Experiement ?

It is no secret the U.S. has one of the lowest savings rates of any industrialized nation. Moreover, the financial meltdown of 2007 and 2008 exposed many consumers as being even more careless with debt. Yet, the simple lower income households in the U.S. have even lower savings rates as the asset gap between the wealthy and poor continues to widen (Loibl, Grinstein-Weiss, Min, & Bird, 2010). When the results of low income households who completed an Individual Development Account (IDA) program as compared to the general low income population were examined, there were statistically significant difference between the two populations. Those who completed an IDA program had higher levels of saving, higher rates of home ownership, higher rates of saving in investment accounts, and reported experiencing less financial strain (Loibl, Grinstein-Weiss, Min, & Bird, 2010). Since their creation in 1998 the federal, state, and community funding amounts have amounted to a little over $200 million into IDA programs, or roughly an average of $4,000 per household (Loibl et. al, 2010). What is more, the funds being saved are for secondary education, business development, career skill development, and new home purchase. It would seem a logical idea to run a similar program on a large scale to provide an incentive to save for specific goals. Even if 30 million households were put on the program it would cost roughly 17% of what was spent on the bank bailout, which in large part was exacerbated by a lack of consumer understanding. Somehow, rewarding excess and greed and ignoring basic financial education, seems a little backwards.
Nonetheless, the purpose of this post is not to debate domestic policy, but to highlight the importance of maintaining a savings discipline for specific goals. Not only can saving change your bottom line, progress toward a goal can change the psychological factors which are often a part of the financial decision making process. Even when teaching children to save, providing a match may provide more incentive to continue saving. Whatever the case may be, understanding your own habits is a key point in defining your financial future. Today there are a number of tools which can help you do so in a quick a streamlined manner. One site, www.mint.com, pulls in your transactions and helps you monitor your family’s spending in minutes. If you have question about assessing your financial behavior feel free to shot me an email at markeith@wiserfinancial.com, and if you are not sure if you have a problem- if you have more than $1500 in credit card debt, the average among low income household IDA program graduates, then chances are it's time to evaluate the first step in any twelve step program.
Information on the NC IDA program(Each State or local program may be different):
http://www.nclabor.com/ida/ida.htm
Reference
LOIBL, C., GRINSTEIN-WEISS, M., MIN, Z., & Bird, B. R. (2010). More Than a Penny Saved: Long-Term Changes in Behavior Among Savings Program Participants. Journal of Consumer Affairs , 98-126.