Institutions and Inclusion in Saving Policy

BABC 04-15: Low- and moderate-income households save for routine payments, such as rent, as well as for major purchases, such as a washing machine or a car. Saving also cushions households against the economic consequences of significant life events for these families, including illness or injury, job loss, births and deaths. For some households, saving can be a way out of poverty, through moving to a better neighborhood, purchasing a car to get to better job, or even capitalizing a micro-business. Growing evidence suggests that low-income households save, but surprisingly little attention has been paid to these households in public policies for saving, or in the scholarly research. This article makes two contributions: First, we posit an institutional theory of saving, in which individual saving outcomes can be shaped in large part by the constraints people face. Second, we explore in practice how existing institutions promote dissaving among the poor, and how new policies could better promote saving and asset accumulation among these households…