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Tax-time savings among low-income households in the $aveNYC program

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Tax-time savings programs help low- and moderate-income families save significantly more of their refunds than those who choose not to participate, finds an analysis of such a program called $aveNYC.The findings suggest that the overall effect of $aveNYC was positive and significant, demonstrating the potential of tax refunds to generate sustained savings that help households to be better off. 

The study, Tax-Time Savings Among Low-Income Households in the $aveNYC Program, was published in March in The Journal of Consumer Affairs. The study analyzed data from the 2008-10 tax seasons for $aveNYC, a New York City program that offered tax filers at selected Volunteer Income Tax Assistance sites the opportunity to open a savings account with their refund. If the participants left their savings in the account for one year, the program matched the funds. The savings generated were intended to help households manage unexpected expenses and become more economically secure.

After addressing sample imbalance and outliers, Grinstein-Weiss and co-authors found that $aveNYC participation was associated with an increased likelihood that an individual would have savings — with the likelihood of having at least enough savings to cover one month’s expenses. On average, $aveNYC participation was associated with about $300 in additional savings compared with the non-$aveNYC participants.

The study reports that 66 percent of program participants were able to maintain their savings for a year and receive the matching incentive.

Over the past five tax seasons, the Refund to Savings partners have begun to develop and integrate simple, behaviorally informed tax refund savings opportunities into tax filing software, giving millions of taxpayers the chance to save their refund. The initiative also incorporates rigorously designed research methodologies to compare interventions and to gather information on millions of low- and moderate-income tax payers.

Other authors on the $aveNYC study include Clinton Key, research manager at Pew Charitable Trusts; Jenna N. Tucker, enrollment research analyst with the University of Houston; and Krista Comer, project director at CSD.

Read the full study (*subscription required).

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