Building assets: a new approach: a movement is growing to create more opportunities for lower-income families to save and invest.

• Author: Lohmer, Josh

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Think assets, and the working poor don't immediately come to mind. A home, an education fund, retirement savings, a stock portfolio--these are the hallmarks of middle and upper class America.

Lower-income families, on the other hand, have relied on social policies crafted in the 1930s that may keep them afloat but don't do much to get them ahead. Designed to alleviate the ills of poverty, these programs always may be necessary. But beyond such safety nets, new ideas to help people climb into the middle class are taking root in legislatures, academic institutions and the business community. The approach is called asset building, and more than easing poverty, it's about making it possible for working-class Americans to construct secure, even hopeful financial futures--a goal that often seems out of reach.

In Hawaii, legislators are considering what sponsors call an Asset Policy Package, a group of five bills they say will reward work and make it a little easier for low-income families to save money and acquire assets. The legislation would create a state earned income tax credit, fund matched savings accounts (commonly referred to as Individual Development Accounts), and allow taxpayers to split their refunds so that a portion could go directly to savings.

The remaining bills in the package direct the state to establish a self-sufficiency standard--a measurement of the true cost of living in Hawaii--and, finally, call for the creation of a task force on financial education and asset building.

"Asset building efforts are essential for low-income working families and for all families," says Senator Suzanne Chun Oakland, a sponsor. "Assets lead to a more stable and secure future, and they allow families to plan ahead and realize their dreams and aspirations."

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The idea behind many asset building tactics is to make saving more worthwhile. For instance, Individual Development Accounts, like the ones Hawaii legislators are proposing, work by matching the account holder's deposits, sometimes by as much as four to one. This way, setting aside a little every month--a big challenge for many families--can lead to an impressive payoff.

For example, putting away $42 a month for three years nets a little over $1,500, not enough for a down payment on a home or four years of tuition. But with a 3-1 match, the same small but disciplined savings turns into more than $6,000.

To receive the match-money, savers must use their money for an approved investment, such as paying for school, buying a home or starting a business. In many cases, participants are also required to attend personal finance classes.

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