The Business of Giving
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Would you help a stranger save money?
Posted by Kristi Heim
The founders of a new Seattle non-profit called SaveTogether think so.
They are pairing low-wage workers in the U.S., many of them working moms, with people willing to help them save small amounts at a time to reach their goals of education, home ownership or opening a small business.
A saver starts with $25, a donor chips in $25 and a non-profit matches that with another $25, tripling the saver's original amount. So savers can earn two more dollars for every dollar they save.
The non-profit operates a Kiva-like online model, relying on the generosity of strangers to help people profiled on the site realize their dreams. Other Seattle-based efforts that build on Kiva's success with peer to peer online philanthropy include Vittana, a non-profit started by former Amazon employees that helps fund educational loans, and Jolkona and See Your Impact, which help young people get involved in philanthropy by making small donations and tracking their progress.
SaveTogether co-founder and CEO Dylan Higgins likens it to a 401(k) match for low-wage workers.
Convincing donors to help people they don't know save money could be a challenge, Higgins acknowledged. But it's about encouraging responsibility, he said.
"These people have already taken steps to better themselves and you are helping speed the process."
After law school at the University of Washington, Higgins worked as a fellow for microlending Web site Kiva in Ghana, where he got the inspiration for the project.
The Spokane native remembers being struck by the number of borrowers who had trouble finding a way to save, while at the same time he saw the economy in the U.S. on the verge of collapse because of an overindulgence in credit.
"I was amazed how these two apparently different worlds were reacting in a similar way," he said. "They both needed savings to come to the forefront again. It was an amazing epiphany for me. I studied economics as an undergrad and was always frustrated that Americans were poor savers."
SaveTogether aims to build on the success of Individual Development Accounts, matched savings accounts for working poor who are trying to buy their first home, pay for college or start a small business. IDAs are supported by organizations such as the Corporation for Enterprise Development (CFED) and are funded by government and private sources. Seed funding for SaveTogether came from CFED.
Recently I have been writing about new programs by the Gates Foundation and others that recognize savings as an essential part of financial well being and help people build assets. One study showed that low-income Americans who participated in matched savings programs weathered the recession relatively well. Almost none of them lost their homes.
The same study, while giving Washington state good marks overall, said the state could improve its low rates of micro enterprise and small business ownership by making capital more widely available through micro loan programs, restoring funding for Individual Development Accounts and training more entrepreneurs.
The non-profit is helping people such as Sandra, a single mother of five in San Francisco who runs her own salon and is saving to expand it; Andria, a 20-year-old who is the main breadwinner in her family and is saving for college tuition; and Raymond, a Native American father of two in Spokane who is saving to open a business.
Robert Friedman, CFED's founder and chairman, said he has witnessed matched savings programs change the lives of poor working families for almost 20 years. He now supports several of SaveTogether's featured savers. They are screened and selected by the partners, including Neighborhood Assets of Spokane and Opportunity Fund of San Francisco.
SaveTogether has tried to build in a kind of fraud-protection system. It collects the matched funds from donors, holding them until the saver reaches his or her goal. SaveTogether then disburses the funds to the local non-profit partner and they release the funds directly to the vendor. For example, the organization writes the check to the university, not the student, or to the mortgage company, not the home buyer. This ensures that the saver uses the matching funds for the specified purpose, Higgins said.
Higgins and his partners were looking to work with a non-profit in Seattle, such as Washington CASH, but the United Way of King County no longer administers the individual development account programs and has transferred the operation to the YMCA to help foster youth save.
"For all those other uses of matched savings for business, homeownership and education, it remains to be seen what kind of market we will have in King County," Higgins said.
For now SaveTogether is working with organizations in Spokane, Boston and the Bay Area and hopes to expand around the country and eventually overseas.
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