Quarterly newsletter #12 is even later than usual, but there’s a good reason for that. The CT Asset Building Collaborative (CABC) steering committee spent some time revisiting the organization’s work, and came up with this results statement for the organization: “CABC is a cross-sector network committed to promoting financial stability and security for all Connecticut residents.” We will be updating our website in the next few weeks to reflect this new, more focused vision. Also, we put together a white paper for the Lamont transition team. Take a look and tell us what you think.
We are working on peer learning sessions and would love YOUR thoughts and what topics would be of interest. Please email Joy Duva at email@example.com with your ideas. Also, we’re always interested in feedback from our members and readers of this newsletter about how CABC could be more useful to your work. Don’t hesitate to be in touch. Feedback on the newsletter specifically should be sent to me directly, at firstname.lastname@example.org.
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Now, on to news you can use and research that matters!
A peer learning session will take place sometime in late spring. Send us your ideas for topics!
New Haven Financial Empowerment updates
The New Haven Financial Empowerment project continues to support residents' financial stability through providing one-on-one financial counseling at the Financial Empowerment Center (FEC). New Haven BankOn promotes safe and affordable accounts at the four local banks that have an approved BankOn account, and works with other local banks and credit unions to develop similar accounts. For more about the national BankOn program see here or contact Samantha Savvidou at email@example.com.
Partners Wanted: Help Tell the ALICE Saves Story
Join Connecticut United Ways in promoting ALICE Saves, the new program helping Connecticut’s working families develop a lifelong savings habit. The United Ways are looking for partners willing to tell the ALICE Saves story to their constituents. Through ALICE Saves, families have access to two valuable financial stability tools: SaverLife, a savings product from the California-based nonprofit EARN that actually pays people to save, and Trusted Advisor, a program operated by the New York-based Neighborhood Trust Financial Partners that offers free financial counseling. This is the first time that these two products have been offered together. Partnering is easy! Just email Josh Miller, AmeriCorps VISTA at The United Way of Connecticut, at firstname.lastname@example.org. Once partners sign on to promote ALICE Saves, they will receive access to marketing materials and outcome reports.
Local resource information
Research that Matters
The scorecard is out (and things aren’t great).
The 2019 Prosperity Now Scorecard shows that we are still in trouble. Despite an uptick in the economy, millions of American families are just one financial setback from serious hardship, particularly families of color – nearly 2/3 of Black and Latino households lack savings to weather a financial shock, compared to less than 1/3 of White households. Connecticut is doing better, on average, than other states, but we remain deeply unequal, including a huge racial gap; for example, while 76% of Whites in Connecticut own homes, only 34% of Latino and 40% of Black households do. Another great resource lets you see how the country as a whole is doing, then dive down into state level data. The roots of such disparities may be historical, but they are perpetuated today through ongoing policies that continue to discriminate and fail to address historical inequities. This report recommends “designing solutions that prioritize the most vulnerable, creating outsize benefits that cascade up and out to society as a whole”. I couldn’t agree more. As they put it, we need to take advantage of the curb-cut effect - “when we create the circumstances that allow those who have been left behind to participate and contribute fully — everyone wins”.
Americans are struggling to keep the lights on...
Many people in financial hardship can’t keep up with their utility bills. One third of low-income American households receiving LIHEAP funds to help pay their utility bills receive shut-off notices, leading to serious financial stress including cutting back on food and medicines. Fifteen percent have their heat and light shut off before receiving help, and 1/4 keep their homes uncomfortably cold in order to reduce bills. A significant proportion of payday loans are taken to pay for utility bills; thus it’s not just a matter of not being able to pay the bills, people also fall into unaffordable debt in their efforts to keep the lights and heat on.
and many are getting a smaller refund this year.
Most of us know how important tax time is for people who get a refund. Disbursing credits through refunds is not the perfect way to help people or redistribute wealth (see here for a slightly out of date but very valuable critique), but it’s as good a method as we have in the United States for now. Unfortunately, new tax laws mean that some people are getting smaller refunds. According to some experts, this is great, as it means that people are withholding less, thus getting higher monthly payments via their salary. Clearly, those people don’t understand the value of commitment mechanisms such as withholding for low-income families.
We know that there's a lot wrong. But we also know what can be done to create change. See below for some concrete ideas:
Put money in the hands of poor families
...through food stamps, housing vouchers, or cash. A cross-partisan, evidence-based report from the National Academy of Sciences, offers four potential solutions to child poverty in the United States. See this summary, and a short and easy to read article about it here. And guess what are the most effective solutions? More money for poor families, either in the form of higher SNAP payments, more housing vouchers, and/or an allowance for families with children. The solutions are costly, but much, much less than the cost of child poverty due to worsened lifetime health, increased crime, and lower adult earnings. On that subject, here’s an interview with Raj Chetty, economics professor at Harvard University, speaking about the importance of place-based investments to address poverty and inequality.
Revamp retirement so it works for us all
Our retirement system is in crisis. More than 55 million Americans don't have a workplace retirement plan, ¾ worry that they won’t be able to retire comfortably, and older Americans are twice as likely to be poor as older people in other developed countries. The Aspen Institute and Common Wealth have joined forces to propose a new form of retirement benefit that is based on work affiliation, but not tied to a specific job or employer. The intention is both to supplement the single- employer-based system and to complement the growing movement to establish state- facilitated retirement savings program.
Don’t get rid of paper or brick and mortar please
Many of us manage our finances mostly digitally now – we receive bills and pay them online, and check our statements online. It may seem like a no-brainer – it’s more convenient, can be done in real time, and saves on paper waste – but a new study finds that taking away the paper option may be problematic. People don’t always pay as close attention to a digital notification, and some struggle to effectively keep records of what has and hasn’t been paid. People without reliable internet access are obviously disadvantaged – see here for a map of internet access in your area - as are people without printers, particularly people who regularly have to produce financial documentation for benefits eligibility. There are some fintech developments aimed specifically at low-income people which we should be excited about, but we shouldn’t lose sight of the exclusionary risks of digital. The tendency of banks to close down branches in low income areas is also a big concern for similar reasons.
Pay attention to fintech and who it’s working for
Talking of digital, online banking continues to develop rapidly. Most fintech companies looking to move directly into banking, start by offering savings and checking accounts, relying on interchange fees to cover their costs (such fees are rising by the way), and see lending as something down the road. Affirm, however, started as a lender, and is only now offering a savings account. No-one really knows how banking will change as a result of fintech – I certainly don’t. But it’s clear that banking in five or ten years time will be very different from what it is now. Our job in the asset-building world is to pay close attention to ensure that whatever happens, banking services for low-income and other vulnerable Americans get better, not worse. The no-to-low fees charged by fintech companies are promising, but they’ll be looking for new income sources down the road and, as discussed above, the digital only format is problematic, as is the lack of face-to-face customer service.
And if you offer a digital payment platform, have mechanisms in place to help consumers avoid scams
Scams these days can be so convincing that almost anyone can be taken in, but the elderly, those with cognitive challenges and even those who are just tired, stressed and busy are most vulnerable. A new FTC report finds a large increase in imposter scams. While digital payment systems make life more convenient for some, they also make it easier to succumb to such scams and send money to the fraudsters. Payment systems like Venmo and Zelle must be sure to put mechanisms in place to protect consumers.
Do NOT make it harder to access healthcare.
The Affordable Care Act (ACA) really is good for financial well-being (just in case you didn’t know that already). In the last newsletter I mentioned research showing that the ACA has resulted in improved financial health – here’s some more evidence of the positive impact of the ACA on people’s financial lives, showing that people living in states with the ACA, are less likely to fall behind on their rent. All the more need to be worried about states which now tie work requirements to Medicaid eligibility. This is particularly concerning for the large numbers of Medicaid recipients who do actually work, but because their hours vary so much from week to week, they would fail to consistently meet the required 20 hour per week threshold.
Be critical of philanthropy even if it feels weird
Many of us rely on philanthropy to support our work, and some of us may even be rich enough to consider ourselves philanthropists. But what are the downsides of relying on philanthropy for asset building work? Anand Giridharadas’ new book, Winners Take All; the Elite Charade of Changing the World, argues that the generosity of the very wealthy obscures the deeper injustices that enable some to become very wealthy and others to remain very poor. Even if you don’t have the time or inclination to read the whole book, take a look at this short interview with the author. Rob Reich wrote a similar book, drawing specific attention to how he argues philanthropy damages democracy. And here’s a critique of those critiques of philanthropy, just to keep things balanced and fair.
Do not charge higher fees to consumers because your funder wants you to
You may have heard the scandal a couple of years ago about the high fees that students receiving financial aid had to pay on the prepaid cards onto which their funds were loaded. We now know that the highest fees of all were charged by colleges that were receiving funding from the banks that stood to benefit from those fee payments. It's disturbing that the CFPB, which did the research about this, suppressed the findings and only revealed them due to a FOIA request.
Advocate for a higher minimum wage
Debate rages about whether a minimum wage would be good for the economy (put money in the hands of low-income people who’ll then spend it and generate growth) or bad (stifle small business growth due to higher labor costs and increase unemployment). Recent research finds that found an increase in the minimum wage leads to increased earnings and does NOT lead to less low wage jobs.
Read good books.
I already mentioned Anand Giridharadas’, Winners Take All; the Elite Charade of Changing the World. Another good one for history buffs is City of Debtors; A Century of Fringe Finance by Anne Fleming. It tells the story of high cost credit through the 20th century using the example of New York City, and is humbling to those of us who think we know how to fix the problem. A key takeaway (for me) was how important it is to recognize that the demand for high cost credit is directly correlated with labor laws and welfare provision; either we help poor people be able to afford the basics of life, or they have to borrow to make ends meet.