Do Seoul Hope Plus Savings Accounts Increase Savings and Assets for Working Poor Families in Korea?

Background and Purpose: The Seoul Hope Plus Savings Account program (Seoul Hope Account) is a citywide Individual Development Account (IDA) demonstration implemented by the Seoul Metropolitan Government and the Seoul Welfare Foundation in South Korea. Seoul Hope Account is designed to help asset accumulation and long-term financial capability of working poor families in Seoul. Seoul Hope Account participants set up their savings goal, generally housing, education, or small business start-up, and participate for three years. They are eligible for financial incentives (savings match) and other services including financial education and counseling. Program participants can use total accumulated savings (deposits and savings match) for the targeted purpose. This study assesses whether Seoul Hope Account promotes savings outcomes of working poor families in Seoul.

Methods: The data were collected using a structured survey in 2011. The sample includes 391 treatment and 179 comparison participants (N=570). The independent variable was treatment group status. The treatment group participated in Seoul Hope Account program and received financial incentives and other supports. The comparison group neither participated nor received program benefits. The dependent variable was average amounts of total monthly savings. It include both their own deposits to Seoul Hope account (savings matches not included) and any other savings. The two groups were significantly different in demographic and socioeconomic characteristics. We conducted Propensity Score Matching (PSM) analysis to minimize pre-existing differences in comparing the savings outcome. Based on propensity scores, we identified study participants who had comparable characteristics (e.g. age, family size, sex, education, marital status, employment status, family income, debts, and perceived family economic condition). Then, we compared monthly savings between treatment and comparison groups using independent samples t-test; we also ran a Tobit analysis to control for demographic and socioeconomic status (weighted N=782).

Results: In the weighted full sample, participants were 45.5 year old, 29% had a college education, and reported annual family income about USD 17,033 (A rate of USD 1 to KRW 1,000 was applied for convenience; same hereafter). Average monthly savings were significantly higher for the treatment group than the comparison group. The treatment group reported USD 31.13 on average, while the control group did USD 19.92 (t=3.06, p< .01). The difference was greater when demographic and socioeconomic characteristics were controlled: the Tobit analysis showed that the treatment group saved more by USD 17.33 than the comparison group, when other factors were constant (p< .001).

Discussion and Implications: There is little empirical evidence regarding the effects of asset-building programs for working poor families in Korea, despite considerable attentions from policymakers and researchers. The study findings demonstrate that Seoul Hope Account promotes positive savings outcomes and asset building for working poor families in Seoul. Asset-building policies and programs are one promising strategy to reduce barriers to saving and financial capability. Researchers and policy makers should invest continuous efforts in providing structured opportunities for low and moderate income families to save and thus achieve financial capability.