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learn$ave Project: Final ReportBox 1.1Proposed effects of assets▪▪A cushion in times of unexpected strain (such as job loss, environmentalcatastrophe, marital dissolution or critical illness).▪▪A platform for productive risk-taking (such as entrepreneurial endeavoursor temporarily leaving the workforce to return to school).▪▪Household stability by reducing financial strain.▪▪Well-being for dependent children by providing intergenerational transfersof wealth.▪▪Self-efficacy, hopefulness, and longer-term planning.▪▪Tending behaviours that take care of assets that are owned and valued,possibly including greater civic engagement, greater care to one’s primaryresidence or simply shaping values in favour of assets that are held overother forms of capital.▪▪Income for investment in new capital, creating a virtuous cycle of wealthcreation.it (Canadian Council on Learning, 2009). Low-skilledworkers with less formal education may have had negativeexperiences in school that lead them to carry beliefsthat more education is “not for” them. Finally, it alsoappears as though low-income earners differ from higherincomeearners in projecting returns on investments ineducation. Lower-income earners expect higher educationto be more costly than do higher-income earners,and also anticipate that increases in earnings after moreeducation will be much smaller (Usher, 2005).Can a matched savings instrument address the financialbarriers to higher education and also influence thenon-financial barriers (such as negative attitudes towardeducation or saving) that shape personal choices aboutwhether to invest in more human capital? Accordingto models developed by Michael Sherraden and others,assets play a key role in shaping a wide range of attitudesand behaviours (Sherraden, 1991). Traditionaleconomic theory views savings as stores of income leftover after current consumption that can then be usedfor future consumption. The primary issues from thisperspective are whether and how it is possible or evendesirable to influence people’s preferences to consumemore now or to save now and consume even more later.However, Sherraden’s model suggests that the presenceof, or access to, assets (in the form of human, physicaland financial capital) can have a number of benefits asdescribed in Box 1.1.While there may be certain advantages to savingsinstruments, as discussed earlier, these instruments arenot the only way to transfer or stimulate wealth. Directtransfers of lump sums that are not conditional on participantcontributions (such as the Canada Learning Bondand Disability Savings Bond) might result in increasedcapital without any savings at all. Similarly, gains madepassively as a result of market conditions (for examplerising housing or stock prices) can increase wealth withlittle or no effort on the part of the beneficiary. The theoryon asset effects does not necessarily differentiate how theassets are acquired or their value is raised. In this view,it may be simpler to not require participants to save atall but instead to just transfer an equivalent lump sum —e.g., as an education grant, scholarship or voucher.However, the act of saving, by making regular depositsinto a savings instrument, may be an important mechanismfor acquiring productive assets. Saving up smalleramounts towards a large goal may allow households,particularly those with less disposable income, to smooththe “lumpy” costs of a home or PSE over a period of time,making it more affordable to participate in a programusing ongoing income flows.More importantly, according to Sherraden, the veryact of saving becomes a self-reinforcing behaviour. In hismodel, saving increases the value of the desired savingsgoal, and the chances of attaining it, by requiring repeatedpersonal contributions. It also promotes self-efficacy,as measurable progress is made toward a valued goal.Finally, saving over a period of time, says Sherraden,sustains the longer-term thinking and planning that hebelieves are crucial to exits from cycles of poverty.Sherraden (1991) had proposed the use of arestricted savings account that he termed an “IndividualDevelopment Account” or IDA that embraces the aboveconcepts. He suggested that IDAs be used by policy-makers,as an addition to traditional income support policy,to provide a subsidized vehicle to enable low-income andlow-asset households to save and acquire certain productiveassets that might improve longer-term well-being.He argued that these “productive assets” might includehomeownership, small business development, highereducation for dependent children, and adult educationor training. Sherraden suggested that deposits into theIDA be matched from public funds or philanthropicsources at a relatively generous rate such as $3 for each$1 saved and that withdrawals of the matched funds berestricted to the above-mentioned menu of human capitalor tangible assets. He further proposed that financialeducation be delivered to accountholders to reduce therisk of hardship, for example, by teaching budgeting4 | Chapter 1 Social Research and Demonstration Corporation