Rochester, NY is one of the poorest cities in America, with one out of every three citizens living in poverty. At $31,684, Rochester's average household income lags far behind that of the nation as a whole ($57,652). Many Rochester families face hardships stemming from low wages, low credit scores, no bank accounts, and insufficient money saved up to weather a shock like a job loss or major expense.
The federal tax code provides a number of supports for low-income working families like the ones in Rochester--the Earned Income tax Credit (EITC) program is one of the most popular. While many Rochester families already take advantage of this tax benefit, the city has identified a way to leverage EITC to further boost families' stability and the local economy.
The idea looks like this: a matched savings program that encourages eligible families to divert their tax refund to a savings account. Program participants have their taxes prepared by Creating Assets, Savings, and Hope (CASH), a local provider of IRS-certified free tax prep services. During this process, they are prompted to allocate part of their EITC benefit to an interest-bearing savings account administered by Genesee Co-op Federal Credit Union, a trusted community financial institution that specializes in serving low-income residents. Funds in this account are disbursed to account-holders quarterly, and families can earn a percentage cash match when they maintain a required savings threshold. Participants can also take advantage of financial education classes, personalized financial coaching, and a support network of other families in the program.
LEO is studying Rochester's EITC matched savings program to understand its impact both on individual families and the community as a whole. We hope to find that the program enhances financial understanding and stability for families and connects them to mainstream financial resources. We are also eager to learn if the program helps grow community wealth and alleviates the current intergenerational cycle of poverty that so many Rochester families are ready to escape.