Video: Leveraging tax time savings

Dean Estrella: I'm from Momentum, and for those of you that aren't familiar, I've just a really quick slide here just to talk about – about our journey to starting this new program called Tax Time Savings. And so we're a non-profit organization in Calgary working with people on low incomes, and we've had a Financial Literacy Department since 1999. And since then we've also had matched savings programs, or IDA programs, for those of you that are familiar with the term. And since then we've always been thinking about how can we scale our programming, how can we leverage our stable programming of matched savings.

In 2007 we started doing a train-the-trainer of financial literacy, and so since then we've trained 180 organizations in Alberta, BC and Saskatchewan to do their own financial literacy programming. And then just three years ago we launched our own capacity-building program for other organizations in Calgary to do their own matched savings programs. And so matched savings programs are quite resource-intensive. It takes a lot of time from a facilitator's perspective. It also takes a lot of money to provide for the resources of the matching dollars. And so since 2015 there's actually now 12 organizations in Calgary facilitating matched savings programs, so we're pretty impressed that Momentum is no longer the only one, and that was kind of our goal.

And so in just the beginning of this year we launched something called Tax Time Savings. So let me just ask people who filed their taxes in 2018. Probably 99 percent of us, right? Who of us got a refund? OK. And out of those, who saved money from their refund? So a portion of us. OK. So the program that this is really taking that idea of a lot of people will receive a refund at their tax time, and how can they leverage some of that money and put it into a savings account. Because we know so many Canadians don't have an emergency savings. This is something that we started thinking about in 2016. We'd heard about it from the CFE Fund in New York, which I'll reference in a second here. But we thought is there an opportunity here in Canada as well to – to launch a similar program around helping low-income Calgarians that file their taxes, one, to incentive their fi—the tax filing, and, two, to save a portion of their taxes – or of their refund.

So how does the program work? Well, essentially, the way it works is through our tax clinics that are run in Calgary, we're doing it through three pilot agencies right now. And these are the CVITPs. And so you attend the tax clinic. It's free to attend the tax clinic, as you probably know. And if you're going to get a refund of at least $200, and if you are below LICO, you can then deposit your refund of at least $200 to $1000 into a dedicated ATB financial savings account. You leave the money in the savings account for one year, and then one year later, May 1st of this coming year, you're going to be matched at 50 percent. So that's a match of up to a maximum of $500.

So it's a pretty simple matched savings program, much different from our traditional IDA programs, where there's in-class based and it takes a lot longer. And so our goal was to scale something where we would have more people join the program with a lot less resources.

Just some additional program details that we infused into there is we didn't want to walk away completely from not having any financial education. And so there's a bonus for people, if they attend five financial literacy classes, that they would get an extra hundred dollars. And there's two different savings milestones. And so in the US model, there's just a one-time, lump-sum deposit. Here we wanted to make sure that people still have an opportunity to keep saving. And so we gave people up until October 31st to top up to the maximum of a thousand dollars or more into the savings account if they wanted to. If people want to access their money, they're able to, but then they just risk losing the matching dollars.

And unlike our traditional matched savings program, there's no formal asset purchase that people would need to purchase. And so in a traditional matched savings program, people would need to use that money towards education or towards a down payment on a home or otherwise. And here the money's just simply given, although throughout the year we're providing a lot of nudging through e-mail, through text messages, through one-on-one instances if they're coming in one-on-one, to talk about what could they potentially do with that $1500 potentially at the end of the year, so that they would use it wisely.

Just really want to quickly mention that it is a collaboration. ATB Financial is our banking partner as well as an investor in the program. And it's done through our collaborative, and so again, we would need all of our different partners to do this.

So leveraging research, I used a lot of research from the Save USA model. And so for three years they piloted this in four different cities, and then – with some of these questions here. So the same kind of question of can tax filers with low incomes be encouraged to save as a first step towards longer-term financial stability. And they basically said yes. About 70 percent of people that went through the program actually succeeded in the program. And in a control group, 30 percent saved more than the other.

And as well, they provided this playbook. And I called them and I said, you know, I've been reading through all the research and I think it's so great, but we want to start, and so how I do this. And said here's a playbook, and it's a step-by-step guide that actually walked us through the whole entire process of how to start the program, which is amazing. And so I really want to quickly mention that we used these four guiding principles that are listed in the playbook to help us design the program as well. And so I'm not going to read them, but it was really great for us to say, as we're negotiating with the financial institution, as we're negotiating with the other partners in the – in the whole entire program, keeping in mind that all these things are to keep the program integral to what it's mean to be, and it's mean to be for low-income Calgarians. And so we didn't want to have, you know, banking products installed in there that weren't going to be beneficial, etcetera.

Another one that I want to mention is the refund-to-savings research that's happening in the United States. And they've been doing a lot of work on this for the last few years, and essentially have the same kind of question: Do loo—do low- to moderate-income households deposit their tax refund into savings vehicles? And again, yes. And they were able to see that people would save them for at least six months in this program. And then they also have this idea of behavioural economics. And so is there any kind of behavioural economics that can be infused into the program to help people save?

And so what they did here – and I don't know if you can see that very well, but they partnered with Turbo Tax, or with Inuit in the Turbo Tax software, to help people save with these simple, little things here. So I'll just read that out for you. It says why not save a little money? You can split your refund into a – I can't read it myself. You can split your refund into a… oh, you can all read it. Great. That's good. (Laughter). Better eyes than me. I just had laser eye surgery in March. Yeah, into – so you can put it into a savings account or you could put it into a savings bond. And if you – and then it gives you a percentage of how much you can actually save. They suggest saving 25 percent of your tax refund. And so then you can actually then put in your direct deposit details.

And so for those of you that know that, in Canada we don't have this same type of feature. We don't have two different deposit areas to do it. And so the splitting of the refund has been a great tool for people to utilize. And at the very bottom, you can see there you can either click continue or can – you can click I don't want to save right now.

And so we've also hired our own evaluator, an external evaluator, to – to kind of help mirror some of the things that Save USA has done as well. And as of October 31st, that cut-off point for people to top up their $1000, we just have these midpoint results so far. And so we don't have year-end results because we – we're not done through the program. So we've had 173 people sign up through the program through our three tax clinics in Calgary, which is not as high as we wanted to, but we're still quite happy with that. Out of those, 72 percent did a follow-through rate, meaning they actually walked into the ATB Bank Financial, into the ATB Bank, and they actually opened up their bank accounts. So that was a big hurdle for people. And then they had to wait for their refund and actually deposit the money into the ATB Financial Account. And so there was 129 people that opened accounts, and 125 actually followed through with their minimum $200 deposit. So that's the 97 percent success rate there.

And then – so since June 30th to October 31st, there – the collective saving balance has moved up from 46 percent. And so right now we have 125 savers with bank accounts collectively saving $130,000. And so we're pretty impressed with those results, seeing as though it's a pilot. And we just keep want to leveraging this.

I'd just like you to draw your attention to that quote there from someone that completed the intake survey, saying it gives me an opportunity to save for a family vacation, something our family has never experienced. And so I think that's something that we often take for granted, is that we can take vacations all the time. And I used to ask this when I used to run my own matched savings program. I'd come back at – in the holidays, after the holidays, in January, and say, like, oh, who went on vacation over the holidays. And, like, no one would raise their hand, and everyone would be like, oh, I was working my two jobs. And then there's me putting my foot in my mouth.

So what's happening next? So we want to obviously keep continuing on with our year one pilot, and we're going to go into year two. And we want to clean up some of our evaluation measures, we want to clean up some of the program improvements. But then lastly, we also want to explore some policy options. And I know FCAC has been working on some of these things as well, but work with different partners to see what kind of policy options we have. And so this idea of refund splitting is a really great idea that could be introduced in Canada, and so how can we do that? And number two, how can we, maybe at a systemic level, incentivize savings at tax time? And so, whether it's a matched savings program at a government level or other ideas, we'd like to explore those. That's all I've got. And there's my contact info if anyone needs it, but happy to discuss more. Thank you. (Applause).