The Federal Reserve bank recently released its tri-annual Survey of Consumer Finances.  In addition to providing a multitude of economic metrics, the report highlights some important effects of the recession.

Incomes are down in some disturbing ways, according to the report.  Median family incomes fell by $3,800 over the Survey’s three year span.  Income inequality declined, though mostly because of a loss of income from high earners rather than lower earners earning more.  Additionally, median income for households age 65-74 rose, while mean income for that age dropped, signaling increased retirement insecurity as more older people reenter the workforce.

Some of the survey’s most powerful findings involve the nation’s troubling credit markets. Median net worth declined dramatically by almost $50,000 from 2007-2010, and most of that decline can be attributed to a decline in housing values.   Meanwhile, college debt burdens have increased during this period, and while families are saving more in the survey, much of this savings is meant to guard against crises like foreclosure or job loss.  These trends jeopardize the average family’s ability to meet long term goals.

In general, the report’s findings underscore a lack of confidence felt throughout the economy.  The average family has been hit with a one-two punch of declining incomes and declining home values.  This effects the capacity of average families to achieve long term goals like saving for retirement or sending children to college.

Illinois follows many of the trends the Survey of Consumer Finances highlighted nationally. Median incomes fell in Illinois by about $4,500 between 2007 and 2010.  Home values are down dramatically in this state falling by 17.2 percent between the first quarter of 2007 and the second quarter of 2011.  Illinois also ranks 20th in the amount of student debt the average college student carries at $23,885 for private and public non-profit colleges.

The current minimum wage of $8.25 an hour, or $16,500 a year, is keeping workers in poverty and forces them to depend on public assistance to make ends meet. The proposed Illinois Minimum Wage Bill (SB 1565) calls for increasing the minimum wage by 50 cents an hour plus inflation every year for over four years until it reaches $10.65 an hour.

Expanding access to automatic savings plans are effective ways to address the problems these recent reports underscore.  A recent study by the Urban Institute projects that automatic IRAs can increase retirement income for people born between 1987 and 1996 who would not otherwise have access to retirement plans by up to 10%.  College savings plans can also help families meet long term goals.  Studies show that college savings plans have the potential to reduce average after graduation debt among other effects.  These are measure that families could take today to ensure they meet long term goals.

IABG works to increase access to these tools, including advocating for:

1. Automatic IRAs
2. Universal Children’s Savings Accounts for College
3. Alternative Small Dollar Loans
4. Credit Building Products
5. Safe banking products

In times of economic crisis, it is important that families have access to structured savings opportunities so they can continue to meet long term goals. Learn more about IABG’s policy work.

Tom Skelton is a guest blogger for IABG. Tom previously worked on financial security issues as an Americorp VISTA at the Land of Lincoln Legal Assistance Foundation

When I was young, I wanted to be a nurse just like my Mum. If that didn’t work out, I wanted to be a superhero vet that saved every cat in the world. I knew that to do either of those things, I would need to go to college. I also knew that I was lucky enough to have a college savings account supporting those dreams.

According to Creating a Financial Stake in College, a series of reports by Dr. William Elliott III, college-bound identity begins as early as the fifth grade. However, every 22 seconds a child in the U.S. falls out of the college pipeline – giving up their dreams of becoming an engineer, teacher, or a superhero vet.

A college savings account in a child’s name could be a huge motivator. Children that know someone is saving for their future are six times more likely to go to college, regardless of their parent’s income, race, or educational attainment.

Last week, the U.S. Department of Education announced they will invest 8.7 million dollars in a children’s savings account demonstration project through the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP). The funds will be awarded to GEAR UP partners in a number of states. The goal is to offer 10,000 students a savings account. The students will be automatically enrolled in the accounts, with a $200 initial federal deposit. The students will also have access to a match of up to $10 every month.

Illinois is one of twenty-some states that have a GEAR UP program and may be eligible to receive a grant. Chicago GEAR UP works in schools across the city to help students, and parents, prepare for college, both academically and financially.

In addition to this movement at the federal level, IABG continues to work to make universal children’s savings accounts (CSAs) a reality in Illinois. Since the release of recommendations from the Illinois Children’s Savings Account Task Force, we have developed a plan for what a successful, universal, CSA program could look like in the state. Meanwhile, our coalition is working with our partners to increase access to and strengthen the state’s current 529 program with the hope of introducing state legislation next year.

As tuition increases and enrollment and completion rates among low-income students decreases, now is the time to innovatively address the achievement gap. We need to change our children’s expectations about their future. They should have a reason to hope for their own future – to know that being a superhero vet or a nurse is an attainable dream. Universal Children’s Savings Accounts in Illinois can give that hope to kids across the state.

The Department of Education is sill finalizing the guidelines for the GEAR UP demonstration project. IABG will be responding to their request for public comments on their proposed demonstration. We welcome your feedback as we finalize our comments.