The Nonprofit Helping People Build a Savings Habit From Scratch
By offering financial incentives for hitting money saving goals, EARN helps low-income consumers start saving
Two years ago, Bradley Tanzman found himself in a tight financial situation. He’d struggled with several health scares over the years – battling HIV and overcoming cancer – and wanted to figure out a way to come off of disability and social security and start finally saving some money. But Tanzman, 52, wasn’t quite sure where to begin. Then he attended a seminar about saving hosted by the nonprofit EARN, held on Treasure Island in San Francisco where he lives, and realized it would only take a few small steps for him to get started.
In 2015, EARN, a nonprofit micro-savings provider based in San Francisco began beta testing its Starters Saving Program, a six-month long trial that offers monthly bonus payments of $10 to reward participants for saving $20 each month. Tanzman was one of the first participants in the program, which officially launched in October 2016. “When you’re living from check to check, you never can catch up,” he says. “I saw the value of their rewards and I decided to make a lifestyle change.”
To start saving right off the bat, Tanzman quit his daily habit of going to Starbucks and started making his own coffee at home. He then began putting aside a dollar a day every month towards a savings account. Later, he upped that amount to two dollars a day, using an automatic bank transfer at the start of each month. “EARN showed me how, at a dollar a day, I can catch up. It was a reinforcement tool,” he says. “It helped me create that habit of saving — sort of like training wheels for your savings account.”
Helping low-income families and individuals create a saving habit is what drove EARN to launch its Starters Saving Program, says CEO Leigh Phillips. Founded in 2001, EARN started as a resource to help working families in the Bay area save and invest toward long-term assets. With matching dollars from the federal government and philanthropists, the nonprofit helped more than six thousand families in the Bay area to start saving.
But as fintech’s ability to reach a broader base and its power to shift people’s behavior became more and more apparent, EARN began exploring how to impact more low-income people across the country, creating its Savings Starter Program. “EARN looked at what worked really well for low-income families and took that into a new phase,” says Phillips, who joined the non-profit as CEO in 2015.
Since its official launch on October 1, 2016, more than 10,000 people have registered on the EARN platform. “That’s pretty amazing when you consider that before the Starter Savings Program, we served 6,000 people in a decade,” says Phillips. To date, EARN enables users across fifteen banks and credit unions to link their accounts directly to the platform.
While philanthropists and corporations are providing the funding to help support the program, EARN is also working directly with nonprofit organizations and employers who want to establish saving incentives for their clients or employees by matching funds. “We want to be able to allow other organizations to integrate savings programs into their offerings,” says Phillips.
Anyone 18 and older living in the U.S. who has an email address and earns 80 percent or less than their area median income qualifies for the savings program. That means, for example, that a family of four in the Bay area with a median income of $80,000 is eligible to join, while the same family in Mississippi would qualify with a median income closer to $28,000.
Giving low-income families a way to start saving is a crucial step toward financial stability, says Phillips. According to a Federal Reserve Bank study, 47 percent of Americans would not be able to meet a $400 emergency expense without going into debt. But short-term emergencies – from car repairs to health scares – abound in the lives of most Americans. While many families are intimidated by long-term goals like buying a home, starting a business or going back to school, Phillips says the Starter Savings Program is designed to help first establish that pattern of saving and show people that it doesn’t have to be a daunting task.
What’s more, simply initiating the habit of saving gives consumers more confidence in their overall ability to manage money and plan for the future. In a survey by the Pew Charitable Trusts, around 90% of participants said they would rather have more stability in their finances than more money.
Take Tanzman, for example. With his new habit, he started to build up a big enough savings account to never have to worry about living check-to-check again. His savings has reached more than $4,000 and today he has enough saved up for a three-month safety cushion. “EARN allows people to start this process with as little as twenty dollars a month,” he says.
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