November 26, 2007

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Homelessness to Home Ownership:
New Study Shows How Financial Education and Matched Savings Can Bring a Family Back From the Brink

At a time of negative personal savings and rampant mortgage defaults, a new report from Silicon Valley Community Foundation and Lenders for Community Development, or LCD, shows that households earning less than $24,000 a year can save more than 10 percent of their annual income when provided with financial education and incentives.

The Assets for All Alliance program was launched in 1999 as a partnership between the community foundation’s Center for Venture Philanthropy and LCD. The program provides asset-building strategies to low-income working families in the Silicon Valley region through financial education and matched savings. Participants attend 20 hours of financial education classes at LCD before opening a savings account; their deposits are matched two-for-one by philanthropic and government dollars. When withdrawn, participants’ funds must be used to purchase a home, start a small business, pay tuition for higher education or save for retirement.

Pacific Consulting Group, an independent consulting firm, polled 250 participants across San Mateo and Santa Clara counties for two years to see if they maintained a pattern of savings and retention of their assets after graduation. Results are impressive. Prior to program enrollment, only half of the study participants had a savings account and monthly savings goals. The consultants found that among participants who completed the program:

• More than three-quarters had a savings account and were saving more than $3,000 annually.
• More than 50 percent of the participants had a financial plan for retirement and investments other than a savings account.
• 70 percent of participants’ children had savings accounts, showing a generational shift in financial knowledge as a result of the program.
• More than 130 families used their savings to buy a first home and more than 500 families invested $1.9 million for education.

“Initially, people were very skeptical about whether poor people would save,” said Eric Weaver, executive director of LCD. “However, we found that not only did people continue to save, but they were able to keep their homes, start small businesses and obtain the degrees they were seeking.”

The report profiles individuals like single mother Paulette Dellanini, who joined Assets for All through a welfare-to-work program after a period of homelessness. Dellanini started saving $20 a month that LCD matched two-for-one. She learned how to live on a budget, avoided going into more debt and was able to improve her credit score and secure higher-paying jobs. Dellanini now owns a home she purchased with her savings for her four children and has set aside money for an extra month’s mortgage payment.

“Paulette and hundreds of other participants have shared their success stories with us,” said Emmett D. Carson, Ph.D, CEO and president of Silicon Valley Community Foundation. “The stories of those who participated in Assets for All show us that matched savings and financial education are important strategies for helping individuals and families build safety nets to move out of poverty and become more fully invested in the economic well-being of the region.”

“Before the program, I didn’t work, and I didn’t have transportation,” Dellanini said. “It was very, very difficult. Now we can sleep at night knowing that we’re going to have a roof over our head and food in the refrigerator.”

Lenders for Community Development (LCD) is a nonprofit community development financial institution that provides financial tools and training to low-income individuals, families, and communities, helping them to move beyond poverty and toward self-sufficiency. Through its programs, LCD has directed over $110 million in community investment into economically challenged neighborhoods and has improved the lives of over 8,000 households.

The merger of Community Foundation Silicon Valley and Peninsula Community Foundation took effect on January 1, 2007, creating Silicon Valley Community Foundation, a leading voice and catalyst for innovative solutions to the region’s most challenging problems. Serving all of San Mateo and Santa Clara counties, Silicon Valley Community Foundation is among the largest community foundations in the nation, with more than $1.5 billion in assets under management and 1,500 philanthropic funds. Silicon Valley Community Foundation is a partner and resource to organizations improving the quality of life in our region and to those who want to give back locally, nationally and internationally. The integration marks the first merger of equals involving two of the country’s leading community foundations and sets new precedent in the philanthropic sector.