Saving performance in individual development accounts : Does marital status matter?

Research indicates that marriage has a large effect on reducing the risk of poverty and is associated with a higher probability of attaining affluence over the life course when compared with nonmarriage. Using data from the American Dream Demonstration (N = 2,364), this study compares savings performances of married and unmarried low-income participants in a matched savings program-individual Development Accounts. The results indicate that both married and unmarried low-income participants can save in Individual Development Accounts. After controlling for program and other participant characteristics, there were no significant differences in savings between married and unmarried participants. We further examined possible factors that are associated with Individual Development Account savings performance for these two groups. Key Words: assets, Individual Development Accounts, marital status, poverty, savings. Marriage has a large effect on reducing the risk of poverty. A number of studies have indicated that unmarried individuals are more likely to live in poverty than their married counterparts (Blank, 1997; White & Rogers, 2000). Compared with married couples, unmarried people also save much lower portions of their income and accumulate fewer assets, even after controlling for other demographic and socioeconomic factors. For example, median assets of married households is approximately three to four times larger than the other marital groups (Lupton & Smith, 2003). Similarly, married older couples have higher median incomes and net worth than older adults who are not married (Seigel, 1993). Studies that examine the effect of marital history on wealth accumulation find that individuals who remain married throughout the life course have significantly higher wealth than those who are not continuously married (Holden & Kuo, 1996; Wilmoth & Koso, 2002). Finally, marriage is associated with a higher probability of attaining affluence over the life course when compared with nonmarriage (Hirschl, Altobelli, & Rank, 2003). The limited accumulation of assets among unmarried families has been increasingly recognized as an important contributing factor to their high poverty rate. Lack of assets not only contributes to the low economic status of unmarried families but also restricts their economic mobility (Cho, 1999; Sherraden, 1991). In the last decade, the importance of assets and wealth accumulation as a development strategy is gaining ground in both academic and policy settings (Shapiro & Wolff, 2001; Sherraden). Theory and evidence indicate that accumulation of assets can promote economic and social development of individuals and families, which include personal well-being, economic security, family stability, and civic behavior (Scanlon & Page-Adams, 2001; Sherraden). Recently, a wide variety of public policies has been developed to promote asset ownership among low-income families. One such policy is the Individual Development Accounts. Individual Development Accounts are saving programs targeted to low-income people that provide incentives and an institutional structure for saving. Account holders receive matching funds as they save for assets that promote long-term well-being and financial self-sufficiency such as a home, postsecondary education, or a microenterprise. The purpose of this study is to examine and compare Individual Development Account savings performance and related factors of married and unmarried participants in Individual Development Account programs. As the first quantitative assessment of the savings patterns of married and unmarried low-income populations in a structured savings program, two main questions guide our analysis: (a) Is there a difference in Individual Development Account savings performances between married and unmarried participants? (b) What are the specific factors that are associated with Individual Development Account savings outcomes among these two groups? …