The Earned Income Tax Credit (EITC) and the Child Tax Credit are important tools for lifting families out of poverty, and can be a catalyst for workers to achieve economic security. Families who qualify for the EITC have a higher chance of being unbanked – not having a bank account – or underbanked – using a bank account in a limited capacity. These workers are less able to save money and build assets through car loans, home mortgages, and college and retirement savings.
The Boston Federal Reserve notes, “While income is what families use to cover daily living expenses, assets are what families use to move ahead directly and develop knowledge, skills, social networks and community. Assets make it possible to manage financial hardship, plan for the future, and provide opportunity to the next generation.” Recent data find that 40 percent of all households are liquid asset-poor, which means they lack resources to live for three months at the federal poverty line. Research shows lower-wage workers recognize the importance of saving, yet many families struggle to set money aside when they have to meet day-to-day needs.
Tax Credit Outreach Campaigns can help workers understand the link between tax credit refunds, asset development, and financial goals.