Mercedes White, Courtesy Opportunity Savings Fund
When Regina Berrios, a 34-year-old single mother of two girls and a boy, talks about her dreams for her family, her eyes sparkle and her smile gets wide. The Redwood City, Calif., resident would like to finish college and get a master's degree in social work, open up her own business and buy a home for her family.
Until recently, Berrios wasn’t optimistic she'd achieve any of these goals. Dreams cost money, something Berrios doesn't have much of. She supports her kids working full-time at a flower shop where she earns around $16,000/year ($1,200/month). To put in perspective how meager her income is, the Department of Health and Human Services pegs the poverty line at $23,500/year ($1,900 a month) for a family of four. Just buying groceries and paying her phone bill were tough.
Berrios is what economists call asset poor, meaning she does not have sufficient savings to sustain life for three months at her current consumption rate. One in five American households fit into this category, according to a report from the Corporation for Enterprise Development (CFED), a progressive nonprofit group based in Washington, D.C. Minorities are particularly vulnerable to asset poverty, according to CFED reports. African-American families are 2.7 times more likely than whites to have no savings whatsoever. Hispanic families are two times as likely as white families to be living without any money in reserve.
Without anything to fall back on, many asset-poor households are just one unexpected cost away from financial ruin. A trip to the doctor or expensive medication can throw these families into a financial tailspin that is hard to escape, according to Harvard sociologist Matthew Desmond. But savings could help insulate these families from the fall from an emergency expense or losing a job.
But as anyone who has ever put money aside knows, saving is easier said than done. Berrios knew saving could help her achieve her long-terms goals and protect her family in the case of an emergency, but given her tight budget she wasn't sure where the money would come from.
There is hope for people like Berrios, however, in the form of an innovative program called an Individual Development Account (IDA), which is basically a fancy term for a savings account. Low-income families who qualify commit to saving a certain amount of money every month. The money participants save is matched dollar for dollar, and often more, by the organization sponsoring the IDA.
In California, where Berrios lives, Opportunity Fund runs one of the largest and longest running IDA programs in the state. For every dollar their participants deposit into a IDA account, Opportunity Fund kicks in two dollars.
When Berrios initially heard about the program, she thought it sounded too good to be true. But as she looked into the program and spoke with Opportunity Fund representatives, she saw that this was a legitimate opportunity for her to change her spending habits and create a little nest egg for herself and her family.
Berrios reviewed her budget and goals with an Opportunity Fund case worker. Together they determined that by cutting back on occasional trips to Starbucks and changing a few things on her phone plan, she could save $42 per month. For the last three years she's been depositing that sum into her IDA account. During this time she has accumulated nearly $1,500 in savings, and that is before Opportunity Fund's contribution, which will triple her account balance.
This still may not be enough to pay for a college education or buy a house, but it's more money than Berrios has ever had in the bank. “I feel like I am finally on the path to something better,” she said. Even though money is tighter now than it was before she started saving, she feels less stress. "I'm less worried about money now that I have my savings," she said. "It is a really happy and peaceful time for us."
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