Connecting the Dots: What Does SNAP Have to do with Asset Building?

RESULTS issues are all important, but sometimes it is hard to see how they all connect together. Of course they all relate to fighting poverty and helping families who experience hard times, but certain policies may be even more connected, and in some cases, work against each other. Let’s look at SNAP and our Asset Building Campaign.

Our recent work on SNAP and the Farm Bill provides a good illustration about the importance of asset building for low-income families. Many federal programs have an “asset test” to qualify, meaning that a person or household many not have assets that exceed a certain amount. For SNAP, households may not have more than a mere $2,000 in assets,* a level which has not changed since 1986.

While perhaps justified in theory, in reality these asset tests are counterproductive. They encourage families to not save money because saving too much would make them ineligible for assistance. Thus, when hard times hit, families simply don’t have the resources to weather these emergencies, making them more dependent on public assistance. The main argument in support of asset limits is that if a family has any disposable income, they should be spending their own money on necessities. This ignores what we know about poverty and upward mobility. Families need savings and assets for that surprise car repair or unexpected medical bill or to continue their education. Saving is for emergencies and investment, not to cover day-to-day expenses.

Without savings, very little stands between getting by and falling into poverty. The Great Recession very starkly showed what can happen to a family when a parent loses a job and the family is left to rely on savings. In fact, there is an actual numerical measurement used to determine a family’s financial stability. The Corporation for Enterprise Development (CFED) uses the term “asset poverty” meaning “households without sufficient net worth to subsist at the poverty level for three months in the absence of income”. The calculation varies based on household composition and currently in the US is extremely high — 26 percent, much higher than the income poverty rate.

Assets decrease government dependency, cushion the blow of tough economic times, and have added psychological benefits (reduced stress, orientation to the future). RESULTS supports enacting the Family Financial Security Credit. This credit allows low-income households to designate some of the tax refunds from the EITC and CTC to a savings account right on their tax returns. To encourage participation, their deposits are matched by the government up to $500 per year. By letting people create a matched savings accounts right on their tax return provides the ease and incentive for people to save.

We should support low-income families who, despite their financial circumstance are still putting a little away in savings. Encouraging asset building is both moral and effective. So be wary of asset limits on other anti-poverty programs. These asset limits could be part of the poverty trap.

*Under categorical eligibility, states have flexibility to raise or eliminate this test. The House Farm Bill would have eliminated categorical eligibility, making the $2,000 limit standard for all states.