Encouraging Renters To Save

Drawing on the most successful elements of previous efforts is the key to designing strong and effective renter savings programs, explains David M. Abromowitz and Sarah Edelman.

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idea light bulbWhen it comes to building wealth, renting in general tends not to be a good strategy for saving. Renter households in the United States have a median net worth—the total value of what a household owns, minus what it owes—of about $5,100. By contrast, households that own homes have a median net worth of more than $170,000. Even renters with incomes comparable to their homeowner counterparts make fewer financial investments and have significantly less wealth.

In the wake of the housing crisis and subsequent recession, more people are renting rather than owing homes. In many jurisdictions, renting is even more expensive than owning. Yet when a homeowner remits a monthly mortgage payment to their lender, a portion of that payment builds equity in the home, which belongs to the homeowner. When a renter pays monthly rent to a landlord, that money is gone for good. The absence of this “forced savings” of a mortgage payment is one of the reasons renting families have only a small fraction of the savings cushion available to most homeowners.

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