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Why Do Assets Matter Today?

Since the time of Adam Smith, economists have recognized the important role that assets play in a capitalist economy. More recent scholarship[1] and community practice show that having even a small amount of assets – in the form of savings, home equity, business ownership, human capital – is critical to the well-being and future prospects of lower-income families. In a very real sense, it is assets that allow us to live in and for the future. Assets provide the reason to believe in a future, the confidence that we can shape it, the impetus to plan for it, and the investment to make it real. This is why Michael Sherraden calls assets “hope in concrete form." (1991).

Assets are as important for poor families as for the nonpoor. In fact, recent evaluations of asset-building programs are revealing the powerful effects of assets on low-income children, families, and neighborhoods.[2] These and similar studies show that with budget counseling and financial incentives, the poor can save. Furthermore, assets can

• Provide greater household stability.

• Create long-term thinking and planning.

• Lead to greater effort in maintaining assets.

• Lead to greater development of human capital.

• Provide a foundation for taking prudent risks.

• Increase personal efficacy and a sense of well-being.

• Increase social status and social “connectedness.”

• Increase community involvement and civic participation.

• Enhance the well-being and life chances of offspring.

  • [1] For an excellent compilation of the most recent research and thinking on the importance of asset for low-income families, see Thomas M. Shapiro and Edward N. Wolff, eds., Assets for the Poor (2001).
  • [2] For a thorough review of the research Hndings on asset-building initiatives, see Ray Boshara, Building Assets (2001).
 
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