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Saving Patterns and Probability of … 14 is 0.67. Inspection of the graph in Figure 6, suggests that the probability of success at that rate will be less then 80%. In other words, current deposit ratios correspond to attrition rates in excess of 20%, which is in line with what UWGLA has experienced (24.2% in homeownership IDAs) in the past 4 years. In Figure 2, probability of success is plotted against the number of months in the program for two different groups of active savers in the homeownership IDAs; those with a more regular saving pattern (i.e., deposit ratio of 0.8- the upper curve) and savers with a less regular pattern (deposit ratio of 0.6). Among other things, this figure shows the importance of a longer saving period on the overall probability of success in the IDA program. More precisely, increasing the minimum saving period from 18 to 22 months could increase the chances of success by over 30%, when people are depositing the average amounts listed in Table 3. 5. Final Comments The findings from an analysis of saving patterns in UWGLA’s IDA program suggest that allowing for a longer saving period helps active participants reach their savings goals. A direct relationship between the length of the program and probability of success suggests, albeit in an indirect fashion, that there is no indication that longer saving periods can discourage savers and result in increased drop outs. Also, it can be shown that by maintaining a more regular saving pattern, participants could increase their chances of success in reaching the minimum IDA savings limit even if this does not amount to increases in average dollars deposited per month. This finding implicitly underlines the importance of personalized case management and financial 14
Saving Patterns and Probability of … 15 literacy training in IDA programs and lends evidence in support of the IDAs’ ability to encourage and promote savings. Finally, if there is a positive association between saving regularity and the probability of success, then providing additional incentives to reward regularity, would help reduce attrition rates across IDA programs. Based on this finding, UWGLA is exploring options to replace the current fixed match model with a different mechanism that will allow more flexibility in rewarding regularity based on a points system for match calculations. A similar pilot project will be launched in 2007 to evaluate the savings outcomes, where the number of deposits will directly influence the amount of the savings bonus each participant will be entitled to receive. References: 1. (2005), “Assets, An Update for Innovators”, CFED, Number 1, (http://www.cfed.org) 2. Greene, William H. (1991), Econometric Analysis, Maxwell Macmillan. 3. Grinstein-Weiss, M., Wagner, K., and Ssewamala, F. M., (2005), “Saving and Asset Accumulation among Low - Income Families with Children in IDAs”, Children and Youth Services Review, vol. 28, 2, pp. 193-211. 4. Horowitz, Joel L., and Savin, N. E., (2001) “Binary Response Models: Logits, Probits and Semiparametrics”, Journal of Economic Perspectives, vol. 15, No. 4, pp43-56. 5. Mills, Gregory, Rhiannon P., Larry O., and Donna D. (2004) “Evaluation of the American Dream Demonstration – Final Evaluation Report”, Abt Associates, Inc. (http://www.abtassociates.com/reports/Final_Eval_Rpt_8-19-04.pdf) 15
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