Do Welfare and IDA Program Policies Affect Asset Holdings?

Restrictive asset limits in means-tested programs may unintentionally discourage families from saving. This brief presents an empirical analysis of how asset tests affect families' asset holdings. The findings suggest that more lenient asset tests and more generous IDA program rules can lead families to increase their asset holdings. Relaxed vehicle asset limits, for example, are associated with increased vehicle ownership. Since people often need a reliable car to get to work, this finding suggests that exempting at least one vehicle in all states may increase employment and job stability among low-income families. The findings also suggest that restrictions on withdrawals and incentives built into restricted asset accounts and IDA programs may provide families with motivation to build assets