Nest egg, a Creative Commons Attribution (2.0) image from Frizzychick’s photostream

Several years ago, New York City embarked on an innovative experiment to determine if they could help people living in poverty begin to save money in savings accounts. Working with the federal government and a group of behavioral economists, New York City officials created a program called SaveUSA. The idea behind the program is that creating incentives for low- and moderate-income people to begin saving money would relieve some of the pressure on their families, allow them to make the purchases that would bring them closer to the middle class, and expand financial literacy and responsibility. The results of the experiment were remarkable. The 1,600 New York City families who participated in the SaveUSA program had saved nearly $1 million dollars after the first year, more than $600 per family. New York City officials believe that SaveUSA can be a path out of poverty for many of the families who participate. I believe it can work for Pittsburghers, too.

1. SavePGH

Building on the success of SaveUSA in New York City and the spin-off programs that have been created in Newark, NJ, San Antonio, TX, and Tulsa, OK, I want to create a similar initiative in Pittsburgh -– SavePGH. The way the program would work is that the City would offer a set number of special SavePGH savings accounts working with partners in the banking industry. Families would apply to be able to open one of the accounts and would pledge to save at least $200 of their federal tax return in their account. For every dollar saved in the account for at least three months it would be matched with $1 from federal funds and corporate sponsors, up to a maximum of $500. The program will provide an avenue for banks to meet their federal Community Reinvestment Act goals and their local Responsible Banking Act goals while providing a unique service to low- and moderate-income families to begin to build wealth and move out of poverty.

I envision the program being run out of the Pittsburgh Financial Empowerment Centers that I plan to create in low- to moderate-income areas of the city. Eligible families would come to the centers for help with tax preparation and create their SavePGH account at the same time. When their tax refunds arrive, at least $200 would be deposited into their SavePGH account and begin to accrue interest and matching funds. After several months when they have met their maximum matching fund limit, these families would be left with hundreds of dollars in savings that they can continue to build on for a rainy day, pay tuition for a child to attend college, or put toward a significant purchase like a down payment on a house. Meanwhile, families who may not have much experience with mainstream banking begin to build crucial financial literacy tools that will serve them throughout their lives.