Financial Inclusion

Last Friday, I mentioned Justin Bieber's new prepaid card in the weekly news round up. This week, reality TV star Honey Boo Boo (Alana Thompson) is making headlines with news that her family has set up trust funds for their show earnings. TIME posted a piece yesterday with the snarky headline: Honey Boo Boo's Mom is Actually Doing Something Smart with Her Reality Show Money. (I know that sometimes journalists don't write their own headlines, but someone wrote this one.) The headline supposes that we should be surprised that a historically low-income family from rural Georgia would ever do something "smart" with an influx of cash. In fact, the way the headline frames the article sets us up not to explore the savings strategies this family is using, but instead to have a little "fun" at the expense of poor people. Not only are the assumptions that went into that headline wildly classist in nature, they also happen to be flat out wrong.

There's a myth (apparently all too common) that poor people can't save. Actually, they can and do. Decades of research from the asset building field (check out this 2011 Urban Institute paper for a sampling) show that while certainly a lower income can make saving harder, many individuals and families overcome low levels of earnings to put money away for a rainy day.

Editor’s Note: This post is part one in a series of four exploring research on the relationship between assets and children’s educational outcomes. Senior Research Fellow Willie Elliott is an Assistant Professor at the University of Kansas and Director of the Assets and Education Initiative (AEDI) at the School of Social Welfare.

Even casual observers are likely familiar with many of the challenges facing our higher education system:

• Education is the path to economic mobility, but rising college costs construct a high barrier.
• Families worry that high costs will make college attendance impossible, even while they sacrifice to save for higher education.
• Low expectations about college attainment may stunt students’ academic achievement, such that college is beyond reach even if they find a way to finance it.
• Once students manage to enroll in college, graduation rates are unacceptably low, reducing the likelihood that the U.S. will produce enough college graduates to meet future labor market demands.
• Even with high levels of effort and ability and a strong desire to attend college, many poor and minority children perceive college as out of reach. Seventy percent of low-income children in tenth grade plan to go to college, but only 54 percent actually enroll.

For years we've occasionally published a compendium of policy ideas from the asset building field. We call it The Assets Agenda, and that link will take you to the 2011 version, which includes more than 60 discrete policy ideas. One of those ideas calls for the creation of a "Financial Services Corps," a resource of non-biased experts to assist low- and moderate-income families in managing the complexities and stresses of modern financial life.

Asset building practitioners are regularly trying to make the case that saving can be fun. It's a tough sell. The Doorways to Dreams Fund (D2D Fund) is a big believer that harnessing the excitement behind lotteries, sweepstakes, and other competitions can help make saving more fun and more successful for individuals. Their work on prize-linked savings has shown that "'winning' is a powerful and motivating experience for savers and prospective savers." D2DFund is making some serious headway in making saving fun this year with a new tax-timed savings promotion called the SaveYourRefund Sweepstakes.  Here's how it works:

The SaveYourRefund Sweepstakes makes taxpayers a winner this tax season with chances to win $250 in weekly drawings or a grand prize of $25,000 by saving just $50 of their federal refund! Beginning February 1st, 2013 and running through April 15th, 2013, all U.S. Citizens and legal residents over age 18 that are due a federal tax refund can save a portion of that refund using IRS Form 8888 and enter the sweepstakes.

Just of few years ago, the FDIC seemed like a sleepy banking regulator hidden somewhere in Washington DC. Sure, we were all glad it was there to offer insurance on our bank deposits but you would be forgiven if you thought that was all it did.  The Great Recession and financial crisis of 2008 certainly changed all that. The elevated profile of the FDIC made Former Chair Sheila Bair a household name (at least in households tuning into current events).

Tucked away in the pages of the tax bill that averted the Fiscal Cliff (which Aleta Sprague reviewed here) is a crucial lifeline to struggling homeowners. Known as the Mortgage Debt Relief Act,  thousands of homeowners who go through a mortgage modification, short sale, or foreclosure correction will not owe federal taxes on that debt forgiveness. This is a big deal.

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include the fiscal cliff deal, financial products, housing, credit and debt.

Beginning in 1996, Ohio saw an explosion of payday lenders. Over time, this was recognized as a problem, as the short terms and high interest rates of payday loans were seen to create a trap for borrowers. So the state legislature passed a law imposing new lending regulations that would better protect borrowers. That law, the Short Term Loan Act, was endorsed by voters in a statewide referendum.

I'm just a bill, sitting on Capitol Hill, problem solved, right? Well, no.

Editor’s Note:This post was authored by Michael Chasnow. Michael is the Operations Manager for the 1:1 Fund, an online community, conceived and capitalized by CFED, that promotes educational opportunity for low-income students. He received an MBA and masters in urban planning from UNC-Chapel Hill.

Graduating college is a critical step for children from lower income families aspiring to join the middle class. According to 2012 Postsecondary Education Opportunity Research, only 10% of low-income children living in families in the bottom quartile of income (~$33,000 and below) graduate from college by their mid-20s. This low graduation rate severely limits their future opportunities. According to the U.S. Census Bureau, individuals with a college degree earn on average over $900K more in their lifetime than high school grads, and, as the Lumina Foundation argues, more college graduates in the work force also benefits the U.S. economy by helping to create jobs. Additionally, graduating college increases one’s chances of gaining employment (and thus building wealth), with college graduates’ unemployment rates at 3.8% and workers with high school degrees at 8.1% as of November 2012.

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include the social safety net, inequality and wealth gaps, housing, and financial institutions.