Promoting Financial Planning and Long-Term Capability of Low-Income Families: Evidence From the Seoul Hope Plus Savings Accounts Program
Community-based asset development programs have been proposed and implemented to promote financial capability of individuals and families with low- and moderate-income. The Seoul Hope Plus Savings Accounts (Hope Accounts) is a pilot program testing Individual Development Accounts (IDAs) in the Seoul metropolitan area, South Korea. Partnering with community-based organizations, the Hope Accounts program was launched by Seoul Metropolitan Government and Seoul Welfare Foundation to encourage asset accumulation by the working poor families. It offers match dollars to deposits made by program participants and additional supportive services, including financial literacy education and individual counseling. In particular, the program requires participants to attend financial education classes three times (or more) each year for the purpose of advancing financial management skills and knowledge. After 3 years in the program, participants can use their cumulative savings for housing, education, or business start-up.
Given limited empirical evidence on asset-building programs in international contexts, this study aims to examine the extent to which the Hope Accounts program influence financial planning and behavior of study participants.
Following the baseline survey in 2009 and 2010, extensive data were collected in 2011 from Hope Accounts program participants (treatment group) and comparison group on demographic characteristics, socio-economic status, financial behaviors and attitudes, and participants’ program experiences/evaluations. Both quantitative and qualitative studies were conducted. Quantitative research employed data from face-to-face structured survey collected from 570 study participants (391 in treatment group and 179 in comparison group). Qualitative research was conducted using in-depth interviews with 20 treatment participants.
Results indicate positive impacts of the Hope Accounts on financial planning and behavior. The treatment group significantly differs from the comparison group in terms of financial planning; treatment group members are more likely to plan ahead before spending money than comparison group members (χ2=60.21, p<0.001). Also, the treatment group differs from the comparison group in educating their children about basic financial management; about 85% of treatment group report that they educate their children about how to save and spend money, while about 64% of the comparison group do so (χ2=22.51, p<0.001). Controlling for other factors in logistic regression, the positive program impact on financial planning and financial education to their children remain statistically significant correspondingly. In-depth interviews suggest consistent results with richer information. Most treatment participants show a strong feeling of achievement that they can make savings on a regular basis. Some participants express economic pressure related to monthly deposits, but many participants indicate that the savings account helps them make a financial planning on how to spend the cumulative savings (e.g. for what, when, for whom). In addition, they tend to reduce expenditures not planned before.
Conclusion and Implications
Study findings suggest empirical findings that the Hope Accounts program encourages program participants to make increasing efforts toward savings and financial planning. The results confirm that asset-building programs and policies are promising to facilitate financial capability of low- and moderate-income families in many aspects. The pilot study calls for further discussion and attention among social work practitioners and policy-makers.