Civic Savings

The financial challenges faced by Americans are complex and solutions will require the participation of all sectors of the economy. While government alone cannot solve financial insecurity, government is uniquely positioned to jumpstart, coordinate, and sustain a national, state, or local focus on broader financial security and opportunity.

At Commonwealth, we believe an important solution to financial vulnerability is government championing cultural norms that signal the importance of savings, fostering policies to make innovative savings products and distribution strategies accessible to the private and social sectors, and on occasion, directly providing products to address a market failure. Government can eliminate regulatory barriers to innovation, craft and protect policies that enable broad access to the financial system, introduce tools to encourage public-private collaboration, and deliver essential consumer products at scale. Examples of this solution in action include local governments establishing Children Savings Accounts, the IRS adding a mechanism for tax filers to easily split and save a portion of their refund, providing free tax filing software to the private and social sectors, and since 1935, the Federal Government selling U.S. Savings Bonds.

U.S. Savings Bonds

Commonwealth works to preserve, promote, and modernize U.S. Savings Bonds as unique, multi-purpose savings vehicles available to all Americans since 1935. Generations have given and received U.S. Savings Bonds as an act of patriotism, thrift, and confidence in America’s future. The savings bond is the one truly universal savings product including those outside of the mainstream financial system. Savings bonds offer a safe and easy way for people to begin saving small amounts of money and get on a pathway to longer-term financial security with low minimums, no fees, and the unique quality of giftability.

Bonds are currently sold online and through the Tax Time Savings Bond Program, which allows consumers to simply and seamlessly purchase bonds during tax filing. Tax Time Savings Bonds have generated over $100 million in savings since 2010. Commonwealth advocates for the continued sale of bonds, particularly at tax time. Commonwealth is exploring strategies to modernize the distribution and sale of bonds year-round.

Tax Time

The annual federal tax refund is the largest sum of money many American households receive all year, amounting to as much as 20% of annual household income. Households making less than $50,000 claim $100 billion in federal tax refunds each year, with an average federal tax refund of $2,792 for these families. With this windfall comes a unique opportunity to build financial security.

The tax-time moment is ideal for efforts to influence financial behaviors because it predictably happens every year and people are already thinking about their finances. Most tax filers use electronic filing tools that include the option to split their refund and direct deposit it into multiple accounts which makes saving easier. In most cases a tax preparer or tax software is on hand to prompt tax filers to consider new financial behaviors.

Commonwealth has already successfully advocated for two policy interventions and piloted a project with tax preparers to address the financial challenge of saving at tax time. We see additional opportunities to use tax time to address other financial challenges.

SaveYourRefund

SaveYourRefund (SYR) is a project that Commonwealth has piloted since 2013 to demonstrate the use of prizes to encourage saving at tax time. Partnering with VITA sites across the country, SYR offers cash prizes to tax filers who use IRS Form 8888 to split their tax refund and save a portion of their refund in a savings product. The pilot has proven successful with over 9,000 tax filers saving more than $7,500,000.

Commonwealth is continuing to innovate by exploring piloting SYR with private tax preparers and government.