Asset building as a field generally refers to efforts made to develop productive assets (e.g. savings, post-secondary education, a home, a business) among low-income or disadvantaged populations in order to improve their economic self-sufficiency. There are many policies, programs, and strategies employed by those in asset building. For example, a community campaign that publicizes EITC benefits and encourages direct deposits of tax refunds into savings accounts is working on asset building.
Another example of asset building is the Individual Development Account (IDA), a short-term, goal-oriented, matched savings account. IDA programs are typically run by non-profits and community-based organizations with funding from an outside source like a private foundation or a government grant. The Assets for Independence (AFI) program, administered by ACF’s Office of Community Services (OCS), is the largest federally-funded IDA program. Since 1999, more than 500 grants have been awarded under the AFI program, with a collective monetary value of over $149 million. As participants deposit their earned income into an AFI IDA, their savings are matched at a rate of up to 8:1, that is, eight dollars of match to one dollar of savings. Match funds can be used—in combination with an individual’s savings—to buy a first home, establish a small business, or pay for postsecondary education and training. In addition to the development account itself, IDA programs, including AFI programs, require that participants receive financial education, which may be tailored to the needs of a particular population or to address specific issues related to the desired asset.
Although financial education and asset building are overlapping fields, they are not interchangeable. While asset building focuses on low-income populations, financial education efforts are normally broader, encompassing the general population. Financial literacy skills are frequently part of school curricula because they are considered to be necessary life skills for everyone, like literacy and numeracy skills. It should be noted that particular organizations or practitioners working in financial education may target specific subpopulations based on age, income, or other criteria.
Defining Key Terms
Financial literacy: the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.
Source: Jump$tart Coalition. 2007. National Standards in K-12 Personal Finance Education.
Financial education: the process by which people improve their understanding of financial products, services and concepts, so they are empowered to make informed choices, avoid pitfalls, know where to go for help and take other actions to improve their present and long-term financial well-being.
Source: Organization for Economic Co-operation and Development. 2005. Improving Financial Literacy: Analysis of Issues and Policies.