Wealth building
- Issue Areas
- Financial security
Strategy overview
- Building wealth for low- and moderate-income households: Wealth is distributed extremely inequitably in the United States. The top 10 percent of households hold 67 percent of total wealth, while the bottom 50 percent of American households hold about 2.5 percent of total wealth. The wealth gap is particularly pronounced between racial groups, largely due to racist policies that historically shut out Black communities and others from wealth-building opportunities. Strategies to increase wealth for lower-income households vary widely–some help families grow their financial assets through subsidized savings programs, while others focus on housing.
- Matching savings: Individual development accounts (IDAs) are subsidized savings accounts for low- and moderate-income households. When participants deposit money into their IDA, the program sponsor deposits a matching contribution. These matching funds are eligible for withdrawal for qualified expenditures like home purchases, postsecondary education, and small business development.
- Savings accounts for children: Child development accounts (CDAs) are savings or investment accounts that allow children to build assets over time. Typically, a government agency or other sponsor provides an initial contribution and then encourages parents, relatives, and others to contribute additional funds as the child ages. In some cases, the sponsoring agency incentivizes additional contributions with matching funds.
- Baby bonds: Similar to CDAs, baby bonds are investment accounts established by a public or non-profit agency when a child is born. The agency provides initial seed money for the account, with higher amounts typically allocated to children in lower income or wealth households. Additional annual contributions may also be provided by the family or the agency. Children receive access to the funds upon their maturation date; typically when the child turns 18.
- Leveraging federal support: Another large-scale wealth-building strategy is the Family Self-Sufficiency program, run by the U.S. Department of Housing and Urban Development. In this program, residents of subsidized housing work with a case manager or a financial coach to set goals, connect with community resources, and engage in financial counseling and education, among other supports. As participants earn more, their rent increases, and an amount equivalent to this increase is placed in an escrow account, helping to build savings. The program is run by public housing agencies and private owners of HUD-assisted housing, which often collaborate with social service nonprofits to deliver components of the program.
- Owning a home: Homeownership is often the most powerful way for households to build wealth, but down payments and other borrowing constraints prevent many low- and moderate-income individuals from purchasing a home. Under the shared-equity homeownership model, a government or non-profit organization purchases or builds affordable housing and then applies resale restrictions to those properties to keep them affordable in the future. And initiatives to address tangled title (also known as Heirs’ Properties) seek to address loss of home ownership to ensure wealth can accumulate over multiple generations in low income communities.
Rigorous evaluations of multiple practices supporting wealth building demonstrated positive, significant results in building savings and accumulating assets. However, further comprehensive research is needed.
A 2021 quasi-experimental study found that residents who worked with Compass Working Capital, a non-profit that partners with housing authorities to deliver the Family Self-Sufficiency program, had annual household earnings 21 percent higher between one and three years after enrollment and 23 percent higher up to five years after enrollment than in the comparison group.
A 2021 research synthesis found that experts generally support child development accounts as a strategy for increasing asset accumulation and college enrollment.
A 2018 research synthesis found that individual development accounts can be associated with an increase in asset accumulation. However, additional research is needed to confirm effects.
Before making investments in this strategy, city and county leaders should ensure this strategy addresses local needs.
The Urban Institute and Mathematica have developed indicator frameworks to help local leaders assess conditions related to upward mobility, identify barriers, and guide investments to address these challenges. These indicator frameworks can serve as a starting point for self-assessment, not as a comprehensive evaluation, and should be complemented by other forms of local knowledge.
The Urban Institute's Upward Mobility Framework identifies a set of key local conditions that shape communities’ ability to advance upward mobility and racial equity. Local leaders can use the Upward Mobility Framework to better understand the factors that improve upward mobility and prioritize areas of focus. Data reports for cities and counties can be created here.
Several indicators in the Upward Mobility Framework may be improved with investments in wealth building. To measure these indicators and determine if investments in these interventions could help, examine the following:
Financial security: Share of households with debt in collections. These data are available from the Urban Institute’s Debt in America website.
Opportunities for wealth-building: Ratio of the share of a community’s housing wealth held by a racial or ethnic group to the share of households of the same group. These data are available from the Census Bureau’s American Community Survey.
Mathematica's Education-to-Workforce (E-W) Indicator Framework helps local leaders identify the data that matter most in helping students and young adults succeed. Local leaders can use the E-W framework to better understand education and workforce conditions in their communities and to identify strategies that can improve outcomes in these areas.
Several indicators in the E-W Framework may be improved with investments in this strategy. To measure these indicators and determine if investments in this strategy could help, examine the following:
Minimum economic return: Percentage of individuals that earn at least as much as the median high school graduate in their state plus enough to recoup their total net price plus interest within 10 years of completing their highest degree or leaving education.
Economic security: Percentage of individuals who reach median levels of wealth 10, 15, 20, and 30 years after completing their highest degree or leaving education (high school, workforce training, or postsecondary education).
Economic mobility: Percentage of individuals who reach the level of earnings needed to enter the fourth (60th to 80th percentile) income quintile in their state or above 1, 3, 5, 10, and 15 years after completing their highest degree or leaving education (high school or postsecondary).
Access to jobs paying a living wage: Percentage of jobs in a county or metropolitan statistical area (MSA) for which the ratio of average pay to the location-adjusted cost of living is greater than one.
Cumulative student debt: Median student debt.
Direct investment in people: A wealth-building initiative can take multiple forms but fundamentally needs to be about making a direct investment in people: directing capital to individuals who have otherwise been shut out from opportunities to accumulate wealth. These investments can help low-income households pay off debt or improve access to credit as well as accrue assets.
Direct investment in place: An effective wealth building strategy also recognizes that low-wealth households are often concentrated in the same areas geographically, which in turn devalues assets. Without corresponding investment in places, wealth-building efforts could fall short of breaking intergenerational poverty cycles. Places need better infrastructure, from transport links to well supported businesses, to create wealth and prevent asset devaluation. Place-based tax credit programs offered by state and local governments, when tightly tied to specific outcomes, can help.
Cultivating confidence and trust in wealth-building measures: Wealth building initiatives frequently target communities that distrust institutions, largely because of historical and ongoing structural injustices. It is therefore important to establish trust and credibility with communities over time. For instance, experts cite tax relief for low-income communities as a simple, fast tool for local leaders to direct investment to communities and build confidence that a new initiative can generate meaningful change.
High-quality staff delivering culturally sensitive, client-centered support: Trust and credibility with communities can also be built through a well trained and embedded workforce who understand the cultural and historical context of the communities they are working in. One expert practitioner noted that many members of their delivery team have lived experience with poverty and some had graduated from the program themselves. Initiatives should be built around the needs of the client rather than compliance with the program, which necessitates highly competent and responsive practitioners.
Incentivize participants to contribute their funds: When possible, subsidized savings programs should use incentives like matching funds to encourage participants to make their own contributions. By doing so, the program can foster participants’ sense of ownership in the process and increase the wealth they accumulate.
Reducing frictions in the system: Administrative hurdles can significantly reduce the impact of a wealth-building initiative. Complicated forms, arbitrary deadlines and long wait times can all deter participants or cause program attrition. It is therefore crucial to simplify processes so that marginalized communities with little time are not shut out from measures designed to support them.
Explicitly address the impact of racism on wealth accumulation: Alongside historical injustices that have led to the racial wealth gap like redlining and Jim Crow segregation, there are contemporary structures in place that exacerbate differences in wealth by race. For instance, housing stock appraisal processes are fraught with in-built biases caused by historically racist policies. Similarly, one expert notes that the property tax assessment system remains a product of segregation, where white property owners were able to negotiate lower property tax contributions than others. Acknowledging the historical and current impacts of racism on the wealth gap will be crucial to designing an effective wealth-building initiative.
Prioritize participant agency: Wealth-building is fundamentally about empowering communities. As a result, it is important that wealth-building initiatives enhance the agency of their participants, by respecting the priorities of families, not placing constraints on how new capital is used. One expert practitioner noted that the goal of their program is to make sure participants have as much information as possible about their options, not to direct them towards a specific financial outcome.
Center participant voice in the design of the program: Opportunities for community members to participate in the design of the program will ensure programs meet the diverse needs of participants. This might include focus groups and interviews with potential or existing participants to shape offerings. Participant voice should also act as a feedback loop during the implementation of the program. One expert practitioner created a committee of current and previous program participants who have sign-off on any program changes. It is also important to use language that reflects the voice of clients, particularly in programs that can be hampered by financial jargon.
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Consider environmental justice: The impact of climate change will exacerbate existing wealth gaps unless proactively addressed by local leaders. Communities of color in the US are often more exposed to the worst effects of climate change. As such, home insurance is becoming an increasingly important aspect of not only wealth building, but protecting wealth that families already possess in the form of homes or other property. It is important that local leaders work to prevent people of color from getting locked out of insurance markets as a result of rising natural disaster risk in their communities, particularly with regard to wealth-building and preservation initiatives that focus on homeownership.
Local government: A range of staff in local government can play an important role in wealth-building initiatives. Staff with access to real-time datasets on vulnerability will be able to inform targeting of support and outreach. Civil servants focused on public sector innovation and breaking down administrative barriers are often powerful allies in program design. Staff that shape the tax code can reverse previous inequitable decisions around property tax regulations. City planners will be needed for both effective use of eminent domain and strategies concerning vacant properties. Master planning processes are important opportunities to consider how to increase wealth for residents and ensure local zoning ordinances increase home ownership opportunities for marginalized communities.
Nonprofits and community organizations: It is often helpful to have an intermediary organization to play a coordinating role in wealth building efforts–organizing partners, creating a shared understanding of the challenge, and supporting actors to coalesce around the solutions. Civic organizations that have wealth-building as a central mission can be important intermediaries for state and local leaders to ensure community buy-in.
Housing providers and housing associations: Housing providers can help lower barriers to entry for residents looking to enter the formal housing market. Staff in housing associations and related housing programs should think broadly about eligibility requirements to ensure they are reaching those who would benefit most.
Federal Government: Given the levels of investment required, federal government involvement is often an important consideration for large-scale wealth-building programs. For instance, Senator Cory Booker championed Baby Bonds through a Senate bill in 2018. Similarly, given HUD’s role in delivering major federal asset-building programs, the Department can identify best practices and amplify lessons around effective implementation of programs like the Family Self Sufficiency program.
Identify a consistent source of funding: All subsidized savings programs, especially those for children, make long-term commitments to the individuals they serve. Programs should seek funding commitments from reliable sources to build buy-in and trust among community members. Additionally, programs aiming to serve a large number of participants will need to secure public funding to operate at scale.
Establish effective data systems: Local leaders should seek to identify vulnerable households who have the opportunity for wealth accumulation over time. Effective data systems at the city and state level will be crucial to inform targeting of wealth building initiatives and ensure local leaders are reaching marginalized communities.
Provide financial education: Building participants’ financial knowledge and helping them align their financial choices with their goals can complement wealth building programs. Financial education can enhance participants’ capacity to build and use their savings effectively.
Ensure effective feedback loops in the implementation of the program: It is important to strengthen mechanisms to learn from participants during the design phase and rollout of programs. This can yield unexpected benefits–an expert practitioner explained that in one case, embedded feedback loops and close community connections revealed a lack of cooling stations in urban heat islands, which the program was then able to address.
Collaborate to build quality and capacity: Program sponsors may have limited expertise in aspects of subsidized savings or shared equity programs. Working with community organizations with relevant experience (e.g., in setting up investment accounts or providing financial counseling) can improve program quality and capacity.
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Resources
Evidence-based examples
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Outcome Area |
This ranking reflects how these approaches are scored in one of the major government- or philanthropy-led clearinghouse resources. For more: https://catalog.results4americ... |
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Unconditional Cash Transfers for Low-Income Mothers
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Stable and healthy families |
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The Family Self-Sufficiency program (FSS) offers case management, a range of support services, and financial incentives to eligible housing-assisted families.
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Stable and healthy families Supportive neighborhoods |
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Provides free financial education and counseling to residents
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Stable and healthy families |
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Grameen America provides microloans, financial training, and other services to women living in poverty planning to start or expand a small business.
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High-quality employment |
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A refundable tax credit program for low-income adults without dependent children.
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Supportive neighborhoods |
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An asset-building intervention that targets tax filers with low-income backgrounds.
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Stable and healthy families |
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The THRIVE East of the River program was a pilot of a direct cash assistance program that provided low-income residents an unconditional cash transfer.
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Stable and healthy families |
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Contributors
Markita Morris-Louis
Markita Morris-Louis is CEO of Compass Working Capital, a nonprofit working to end asset poverty and narrow racial and gender wealth divides. Through her career and lived experience, Markita has become a national leader in asset building programs and policy change that support families with low incomes in building pathways out of poverty.
Andre Perry
Andre M. Perry is a senior fellow and director of the Center for Community Uplift at the Brookings Institution. He is also a professor of practice of economics at Washington University in St. Louis. A nationally known and respected commentator on race, structural inequality, and education, Perry is the author of the forthcoming book “Black Power Scorecard: Measuring the Racial Gap and What We Can Do to Close It,” published by Henry Holt, available April 15, 2025 wherever books are sold. In 2020, Brooking Press published Perry’s previous book, “Know Your Price: Valuing Black Lives and Property in America’s Black Cities.”
Perry is a regular contributor to MSNBC and has been published by numerous national media outlets, including The New York Times, The Washington Post, The Nation, Bloomberg CityLab, and CNN.com. Perry has also made appearances on HBO, CNN, PBS, National Public Radio, NBC, and ABC. Perry’s research focuses on race and structural inequality, education, and economic inclusion. Perry’s recent scholarship at Brookings examines well-being across racial groups and regions in America, focusing on how investments in critical assets can lead to thriving.
Kristopher Smith
Kristopher Smith is the Community Development Program Officer at LISC Jacksonville and brings nearly 20 years of experience in community engagement and development, grantmaking and capacity building to the organization. As part of his role with LISC Jacksonville, Kristopher supports the economic mobility of Jacksonville residents through the Family Wealth Creation Program.
The Family Wealth Creation Program helps “transfer generational wealth by assisting with financial and estate planning, probate, clearing titles, and consolidating property ownership.” The Family Wealth Creation Program builds economic mobility by alleviating the ‘silent barriers’ that constrain wealth building and structural neighborhood vulnerabilities like clouded titles, tax liens, and unclaimed tax exemptions.