Many U.S. households do not have enough savings to help them manage temporary losses of income or increased expenditures from unexpected events. Particularly for low- and moderate-income families, increased savings might help them avoid resorting to high-cost (sometimes "payday") loans or failing to meet monthly rent bills and minimum credit card payments. To support the buildup of savings, some experts have proposed encouraging low- and moderate-income individuals to save part of their annual tax refunds, capitalizing on these large, one-time influxes of cash. Some past research suggests that this approach might be promising; other research indicates that many low- and moderate-income individuals need their refunds to pay bills or reduce debt.
The SaveUSA evaluation, a randomized controlled trial launched by MDRC in 2011 and concluded in 2015, contributes strong evidence relating to several aspects of this debate. SaveUSA is a voluntary tax-time savings program. Through a 50 percent matching incentive, SaveUSA aims to make the accumulation of emergency savings more attractive to low- to moderate-income families. When filing their taxes, these households are presented the opportunity to directly deposit some or all of their tax refunds into special savings accounts, set up by a bank or credit union, and pledge to save between $200 and $1,000 of their deposit for about a year. Money can be withdrawn from the accounts at any time and for any purpose, but only those who maintain their initially pledged savings amount throughout a full year receive a 50 percent match on that amount. Account holders, irrespective of match receipt, can deposit tax refund dollars in subsequent years and become eligible to receive additional savings matches on their new tax refund deposits.
MDRC studied SaveUSA's implementation in four cities -- New York City, Tulsa, Newark, and San Antonio, and its longer-term effects on savings and other financial outcomes in two cities, New York City and Tulsa. In these latter cities, tax filers interested in SaveUSA in 2011 were randomly selected either to a group whose members were offered the opportunity to open a special savings account (the "SaveUSA group") or to a group that could not do so (the "Regular Tax Filers" group). The analysis compared the savings and other financial behaviors of these two groups over time to estimate SaveUSA's effects. The findings thus suggest the effects that savings policies structured similarly to SaveUSA's might have.
SaveUSA's operation and evaluation were supported by the Social Innovation Fund (SIF), a program of the Corporation for National and Community Service (CNCS). This particular SIF project was led by the Mayor's Fund to Advance New York City and the New York City Center for Economic Opportunity (CEO) in collaboration with MDRC. CEO and the New York City Department of Consumer Affairs Office of Financial Empowerment led SaveUSA program operations, and MDRC conducted the program's evaluation.
-- SaveUSA was successfully implemented in all four cities participating in the evaluation. About two-thirds of the SaveUSA group received at least one savings match during the three program years. Across the whole SaveUSA group (including those who did and did not receive a match), total match dollars averaged $365 over the three program years.
-- As of the 42-month follow-up point, SaveUSA had increased the percentage of individuals with any nonretirement savings by almost 8 percentage points and had increased the average total amount of savings held by $522, or 30 percent, above the average for the group that did not have access to a SaveUSA account. These effects were present even after most of the SaveUSA group no longer had access to a 50 percent match on savings.
-- The program led to improvements in some measures of financial security, such as having more cash available to pay for normal household expenses or for emergency or unexpected expenses, that were directly related to (and reflected) the program's savings increases. SaveUSA had no positive or negative effects on general indicators of financial security, including debt, financial net worth, and incidence of financial hardship.