July 24, 2018
Sorry for the late arrival of what was supposed to be the June newsletter. There has been so much going on that it can be overwhelming to decide what to share! Please read on to see the latest news regarding asset building around the state and beyond.
Local News and Events
Help Connecticut Residents Build Emergency Savings
Join the Connecticut United Ways to help working families increase their economic security by building a life-long habit of savings. SaverLife Connecticut combines an online goal-based savings program with 24 weeks of motivational digital financial coaching and a community of online resources. Aimed at low- to moderate-income working families, SaverLife is open to anyone aged 18 or older with a valid email address and savings account with online access. The 6-month program provides a $10 reward for every month that participants save at least $20.
Families with even $250 in savings are less likely to be evicted, miss a housing or utility payment, or receive public benefits. Contact your local United Way or email Donna Taglianetti at email@example.com to become a partner in this work. Partners will receive free marketing materials and access to regional reports on savings and changes in consumer behavior.
Learn from Earn
Talking of SaverLife, the organization that runs the program, EARN, is hosting a webinar on Wednesday 25th July, presenting findings from their research into the impact of tax refunds on spending habits and whether well-timed interventions could increase savings rates. They learned that people plan for their refunds months in advance of receiving any money, that how people save their refunds depends on their definition of “saving,” and that well-timed interventions can change what people do with their refunds. Register here for this important event.
Jump$tart Financial Literacy Summit
Mark your calendars for the next Financial Literacy Summit sponsored by Connecticut Jump$tart which will be held on Monday, October 22nd at the Sheraton South Hartford from 8 am until 2 pm. When more information is available it will be posted on the Connecticut Jump$tart Coalition website and also on Facebook and Twitter.
Upcoming Regional CABC Meeting
And another exciting event soon after that - mark your calendars (and RSVP now) for the Greater Waterbury Regional Meeting on November 8th. The meeting will be at Naugatuck Valley Community College from 8:30am to 12:30pm. There will be presentations on Savings and Banking, Working Cities Challenge and Financial Empowerment Centers, as well as networking and discussion. The meeting is sponsored in partnership with the United Way of Greater Waterbury.
News you can use and Research that matters
Measuring Financial Health
Anyone interested in measuring and tracking client financial health should take a look at the Center for Financial Services Innovation's (CFSI) recently released Financial Health score toolkit. Two other good tools are the Consumer Financial Protection Bureau's financial well-being questionnaire, and the University of Wisconsin-Madison Center for Financial Security Financial Capability scale. It's nice that we now have a choice between quick and simple ways to measure the impact of our work.
Things aren’t great but they might be getting better
According to the Federal Reserve, the number of unbanked Americans fell from 8% in 2015 to 5% in 2017, and the number of underbanked Americans — those with a bank account but who also use alternative financial services such as money orders or check cashing — fell from 21% to 18%. The number of U.S. households who report they are “doing okay” or “living comfortably” is up by more than 10 percentage points from 2013, and 59% said they could cover a $400 emergency expense in cash, up 9 points from the previous survey.
...but we should still be concerned about the cost of living and debt
Debt continues to burden people, sometimes due to rising housing costs. The Urban Institute's fantastic Debt in America: An Interactive Map now contains data about student loans as well as medical debt and overall debt in collections. Also, remember that debt isn’t only made up of unpaid loans. There’s also ‘non-loan debt’ – unpaid bills, fines and fees. People who can’t pay their traffic related fees may end up losing their drivers licenses. Women unable to pay bail or other costs related to incarceration may find themselves vulnerable to human traffickers, who lend or give them the money they need, but then demand payment through prostitution. I recently wrote a paper about the difficulty of finding out about the types of debt that predominantly burdens low-income people and people of color.
Prepaid card overdrafts
Overdrafts are a type of debt, and an expensive one at that. Some people use prepaid cards to avoid the risk of paying the high price of going overdrawn. But, some prepaid cards are now offering overdrafts. While it can be tempting to have a cushion when you need to spend more than you have, the cost can be very high. Prepaid card overdraft are cheaper than banks – at only $15 per transaction, and limited to four a month. But that’s still a high price to pay to manage a short term cashflow problem.
Does being banked really make a difference?
It probably does, but simply having a bank account doesn’t always fix somebody’s financial problems. This is a question being debated globally. Research from India, where many more people have bank accounts than used to shows that having a bank account doesn’t necessarily mean that it is well used, and using it doesn’t necessarily lead to positive outcomes. Just something to keep an eye on as the rate of Americans with bank accounts improves.
And might fintech take over anyway?
Some say that banks’ days are numbered with the rise of fintech, but this report from the World Bank suggests that banks will have a role for a long time to come.
...or will post-offices play a role in the future of banking?
Kirsten Gillebrand and others would seem to think so. She recently presented a bill to establish basic banking services including money transfer services and small dollar loans at post offices around the country. Here’s a related idea that would see the post-office offering an account to everyone in the country. Just to be balanced, here’s an article which disagrees entirely with the idea.
Public Investment for the Public Good
See this article on the need for public investment in child care, arguing that the cost of childcare must be subsidized, particularly for low-income workers who need care for their children. This argument can be made for a range of essential services – perhaps also financial services? Like high quality childcare, shouldn’t everyone have access to high quality financial services, regardless of ability to pay? Public investment to make that happen could pay off in terms of a stronger economy overall.
A cashless society?
If everyone had a bank account or a prepaid card, would we even need cash anymore? Some think the days of cash are numbered, and some establishments no longer accept it. But others argue that refusing to take cash constitutes discrimination, given the high numbers of people only use cash. A Washington DC council member is introducing the Cashless Retailers Prohibition Act to prevent such discrimination. Data from the Federal Reserve suggests that the idea that people are using less and less cash is all wrong anyway, and there's evidence that using cash helps us budget better.
Even community banks discriminate
There may be good reasons for people not to want a bank account. A disturbing report finds that small, community banks systematically discriminate against people of color. Banks in majority Black or Hispanic areas charge more for opening and maintaining accounts, further intensifying existing racial disparities in income and wealth.
CFPB Consumer Advisory Council Disbanded?
While there's clearly a need for a watchdog, it seems like the CFPB is no longer interested in listening to consumer voices, given that interim Director Mulvaney fired his consumer advisory council. This article suggests that the financial empowerment work taking place at the municipal level in many cities, including in Connecticut, can complement regulatory and enforcement consumer protection work, and may provide models for state and federal action.