The Charleston Gazette (West Virginia)
By: Dianne Browning
January 22, 2010
CHARLESTON, W.Va. -- During Labor Day weekend, as we enjoyed the waning days of summer, President Obama announced that the option to buy a U.S. Savings Bond with a tax refund or credit was going to be available on the 2010 tax form, IRS 1040.
The recent economic turmoil, the most deep and widespread in a generation, has caused a sudden uptick in our national savings rate. It is now clearer than ever that savings matter: having back-up funds can safeguard a family when a job is lost or they experience other setbacks. Savings also increase the prospect of owning a home, getting an education and enjoying a secure retirement. While our savings rates have been dismally low in recent years (in 2005 it was -1 percent), lower than any other industrialized nation, it has not always been that way. In 1975, personal savings were 12 percent of income.
For people on the lower rung of the economic ladder, there is no question that setting aside money is hard. To compound this fact, a lot of people don't know where to save. The financial industry does not market to that demographic. In fact, many people don't even have bank accounts. According to a recent FDIC survey, in West Virginia, 27 percent of the population is unbanked or underbanked.
You don't need a bank account to purchase a Savings Bond; nor does it require a credit check. The $50 minimum purchase is low, the principal is always preserved, and the return is fair: the U.S. I-Bond currently offers 3.36 percent interest, a very competitive rate. At tax time, people's refunds are often their biggest lump sum of income all year, making setting aside some money easier then. A U.S. Savings Bond has just the right characteristics for many savers. Despite not being marketed by the government since 2003, Savings Bonds still have strong brand recognition; probably a lingering effect of past generations who bought them regularly. After World War II, 67 percent of U.S. households owned them. Another interesting fact: Savings Bonds are issued by the Bureau of Public Debt, which happens to be based in Parkersburg.
The decision of the Obama administration was largely based on the work of the Savings Bond Working Group, facilitated by the organization that Harvard University economist Peter Trufano formed, called Doorways to Dreams (D2D). D2D sponsored demonstration projects at tax-preparation sites around the country, and with permission from the U.S. Treasury, was able to offer Savings Bonds to taxpayers who were receiving refunds or credits. The high number of people with low or moderate incomes who purchased bonds from these sites made it clear to the administration that this option should be available to all American taxpayers.
The Southern Earned Income Tax Credit Coalition, which operates Volunteer Income Tax Assistance (VITA) sites in 10 Southern West Virginia counties, has four VITA sites that have been selected to continue D2D's savings bond research. The intent of this work is to make tax season an annual savings event and help renew thrift as an important national cultural value.
Browning coordinates the Rural Retirement Project from Greenbrier County for the D.C.-based Women's Institute for a Secure Retirement, wiserwomen.org, and is a member of the Savings Bond Working Group.