Personal savings rates have plummeted, especially for the poor. Most Americans have less than $1,000 in savings for emergencies. So we shouldn't expect people who have an income hovering around the poverty line to have the funds to rent a truck, drive to an economically robust area (invariably with a higher cost of living), and put down the money for rent and a security deposit on a place to live. And that's if they can pass the credit check most landlords require without having a job. The other option for those frozen out of a lease is a week-to-week motel stay, which is even more expensive.

Then there's the matter that we don't make many social services--things like Medicaid, housing assistance, and unemployment benefits--portable across state or, in some cases, county lines. Many states have different eligibility requirements that present hardships for those who fall into the gaps, especially given the differences between states participating in Obamacare's Medicaid expansion and those that aren't. Re-enrolling for benefits and risking gaps in coverage aren't tenable while unemployed; it prevents families from taking those potentially beneficial risks, especially if they have children. Moving to new cities without childcare figured out adds a similar burden.

This is a result of policy: We've made the safety net increasingly individual, and poorer Americans can't save because their wages have been stagnant for decades. Moreover, as our safety net has become more rooted in families taking care of one another, it has become harder to leave. (Twice as many adults live in homes with multiple generations today than in the 1980s, according to Pew Research.) Without long-term care possibilities, many families get locked into staying put for the sake of their parents.

You can overlay any number of explanations on top of this: Inequality, an aging population, aid programs too tied to geography, or the high cost of housing in economic boom areas. But you cannot deny that the barrier to moving for poor families is a financial issue, not a moral failing. Nobody is shrugging and accepting that no jobs are available anywhere, as Drum would have it. It's just that the people who need jobs have no access to them. This creates an inequality feedback loop. If only those with a bigger personal safety net can get to the areas where jobs are plentiful, it leaves behind those locked into more desperate towns, ensuring that they have bleaker futures. The good news is we can design policies to counteract that inequity.

At the moment we have trade adjustment assistance (TAA) for workers who lose their jobs to foreign trade. But it's mostly limited to skill gathering. (Relocation assistance to get people into better job markets is part of TAA, but it's very limited and only available for a segment of the population.) Enrico Moretti of the University of California, Berkeley, and Eli Lehrer and Lori Sanders of the R Street Institute have proposed broader grants to better allow for greater mobility for all Americans, rich or poor. This means unemployment benefits that scale up for higher cost of living, or expenses related to relocating and undertaking a job search. And as Moretti points out, lowering the population in economically stressed communities would help those who stay better access jobs because of reduced competition.

If we recognize the benefits to mobility, we should be more attuned to the barriers we place on it. Rather than condemning families for their laziness, we could condemn the policies that lock them in place, and work to change them.



Like all businesses, women-owned businesses face unique challenges, and in today's economic environment, acquiring capital to operate and grow their businesses can be one of them.

Here are five key financial tips to help women entrepreneurs build their credit profiles and obtain the financing they need to grow their businesses:

Get to know your lender

Establishing a relationship with a banker is the first step to helping you get credit-ready because a banker can help identify financial solutions that meet your business needs and work with you to determine your long-term business goals. Bankers have experience working with a variety of businesses, so they can be your best resource when it comes to business financing. Once you have established a working relationship with a banker, it's important to keep them informed as your business and financing needs change.

Build a strong credit profile

Good credit is one of a business owner's most valuable assets. As more women follow the path of entrepreneurship, it's important that good personal financial habits transfer over to their businesses. When applying for financing, lenders will look beyond just the credit score to understand if your business is thriving; they'll also review your debt-to-income ratio, and whether you have a history of on-time payments.

Explore financing options

According to the National Association of Women Business Owners, the major sources of funding that women business owners rely on are personal savings, reinvested business earnings, lines of credit, equity financing and venture capital. Business owners have many financing options to consider these days. If a conventional business loan or government-guaranteed loan doesn't meet your specific needs, you may want to explore a SBA 7(a) loan. Talk with your banker about which credit option is best for your business.



Next month will see a revolution in how your bank and building society accounts are taxed. Until now, your account provider has automatically whipped 20% from the interest earned on savings accounts and passed the money to the taxman. But from 6 April this decades-old system will be swept away, and all the interest earned on your savings will be paid out in full, without any tax deducted.

What's more, the government is introducing a personal savings allowance of up to £1,000 a year in interest, which means the vast majority of people won't have to pay tax on their savings income. In the past, the cash Isa sheltered your savings from tax - but now people are asking if there is any point in having an Isa any more.

The new tax system works like this: if you are a basic rate taxpayer - ie you earn less than £43,000 a year - then you will be allowed to earn up to £1,000 in interest without having to pay tax or declare it on a tax form. If you earn more than £1,000 in interest then your bank or building society will contact HMRC, which will tax the money by making a downward adjustment to your annual tax code.

But it's difficult to earn more than £1,000 in interest with rates at rock-bottom lows. If, for example, you put your savings into the current best easy access account, the Freedom Savings Account from RCI Bank, the interest rate is only 1.55%, which means you would need to have £64,516 in savings to bust the £1,000 annual interest limit. The cash Isas from the big banks pay even less: Barclays, for example, pays just 0.8% on its variable rate Isa. A Barclays customer would need to have more than £125,000 in their savings account to produce an interest income of more than £1,000.

If you earn more than £43,000 a year it's a different story. Higher rate taxpayers are only allowed to earn £500 in interest over the year without having to pay tax. In the case of the RCI account, you will be taxed if you have more than £32,258 in savings. For people who are 45% taxpayers - earning more than £150,000 a year - there will be no personal savings allowance, and they will have to pay tax at 45% on any savings interest.

Susan Hannums, director at Savingschampion.co.uk, says savers should simply go for the best rates possible rather than focusing on whether or not the account is a tax-free Isa. "Savers will have greater flexibility as they will be able to choose from the very best savings accounts available to them, which could be a cash Isa, a normal savings account, or even a high interest current account."

Several current accounts pay much higher rates of interest than savings accounts. For example, TSB's current account pays 5% on balances up to £2,000, provided you pay in £500 a month and register for internet banking. You also get 5% cashback on the first £100 spent each month on your contactless debit card until the end of this year, as well as access to a regular savings account paying up to 5%.

If you have more to save, Santander's 123 account pays 3% on balances up to £20,000. There's a £5 monthly fee, but the account pays cashback on utility bills which should cancel this out.

Bear in mind, however, before turning your back on cash Isas for good, that when interest rates eventually start to rise, the amount you can save before you use up your savings allowance will fall. For example, if a basic rate taxpayer saves into an account paying 4.15%, they would only need to deposit £24,096 before they use up their personal allowance, or £12,948 if they are a higher rate taxpayer.

Charlotte Nelson of moneyfacts.co.uk says: "Isas should not be overlooked, particularly if you are able to save up to the Isa limit each year, as the cash saved within the Isa will be tax-free indefinitely. While most savers may not save enough to earn £1,000 in interest now, it is quite possible they could in future."

Martin Lewis of MoneySavingExpert reckons savers should not abandon Isas. "For most people it will still be best to put your money in a top cash Isa first, and then use the personal allowance after that. Money in a cash Isa is protected from tax year after year, so you can gradually protect more and more. So even if this isn't relevant now, if you later have larger savings or become a higher rate taxpayer then it is worth doing, just in case."



Do you understand the personal savings allowance?

Category: Savings

Updated: 09/03/2016
First Published: 09/03/2016

The personal savings allowance (PSA) comes into effect in just a months time. Itll see the first £1,000 in savings interest become completely tax-free (£500 for higher rate taxpayers), but the question is, do you understand it? If research from AA Financial Services is anything to go by, you could be at a loss.

Confusion reigns

The research found that 90% of savers questioned dont know what the allowance is, and 49% are struggling to decide where to put their savings after April. The choice between cash ISAs and savings accounts appears to be causing the most confusion, with many people wondering whether theyll still need an ISA when the PSA comes into force.

In fact, 16% said that theyll only pay into a traditional savings account from April, while 7% said theyll actively move money out of their ISA and into a savings account - but is this a wise move?

The personal savings allowance is good news for savers, but widespread confusion about what it means for peoples money risks undoing the benefits, said Michael Johnson, director of AA Financial Services. There will continue to be many differences between savings accounts and ISAs and the decision on what to do with your money isnt as simple as comparing rates between saving accounts and ISAs.

For starters, its important to think on a longer-term basis. Achieving £1,000 in savings interest may seem like an impossible task at present what with being rates so low, but what if they were to rise in the future?

If you had an easy access account with a typical rate of 1% youd need £100,000 in savings before any interest would be liable to tax, but if the rate went up to 3%, youd earn £3,000 on that same savings pot - and £2,000 of that would face a tax charge. Youll want to think about your future circumstances, too, as a pay rise could affect the value of your PSA: if you went into a higher tax bracket your PSA would fall to £500, which could have a knock-on effect on your tax liability.

Then theres the fact that any money saved in an ISA will be tax-free for life, but theres no guarantee of how long the PSA will last for, so you may miss out on building a tax-free pot if you disregard ISAs altogether. And what about the ability to inherit ISAs? It all needs to be thought about!

Relying on the PSA alone for your tax-free pot is a gamble, said Charlotte Nelson, finance expert at Moneyfacts. Eventually rates will go up, and the amount savers can save tax-free will subsequently diminish.

For this reason ISAs shouldnt be overlooked, particularly if you have larger amounts to save. In addition, ISAs can be passed on to spouses after death, which is worth contemplating when weighing up your long-term interests.

Provider uncertainty

However, it isnt just consumers who are confused by the whole thing - providers dont appear to be completely on the ball, either. Thereve been numerous reports of consumers trying to get clarification from their savings providers about what the changes will mean, only to be given vague details - and HMRC hasnt been much better.

As yet, there are no precise guidelines detailing how the changes will be implemented and how savers can avoid paying tax, and likewise, theres little to outline how those who earn interest above the PSA will need to pay their tax bill. However, its hoped that the move will be fairly painless - savers are being told that they wont need to do anything in order to claim their allowance - and hopefully, the vast majority of savers will be able to benefit.

Happily, all the confusion hasnt put savers off, either, with 23% of respondents to AAs research expecting it to be easier to save over the next few months, so why not take advantage? By comparing savings accounts now you can make sure youre getting the best possible deal in time for the new allowance, whether youre opting for a traditional savings account, a cash ISA, or a combination of the two.