Tyler Mulligan is a School of Government faculty member.
This post is part of a series that highlights approaches described in a School of Government web guide on asset-building tactics for individuals and communities on the economic margin.
When a household falls victim to a predatory financial product, such as a high-interest payday loan, a high-fee prepaid debit card, or a fraudulent reverse mortgage, there can be no doubt that the affected household suffers. The household’s purchasing power is reduced and the family’s financial stability is placed in jeopardy. But there is broader impact on the community, because others may depend on the financial participation of that household in the local economy, such as local businesses and charitable groups, to say nothing of close friends and family of the household.
Low-income persons are often targeted by purveyors of predatory financial products, so the aggregate wealth-draining effect of these products is particularly acute in low-income communities. Recognizing the need to protect community wealth and make residents more resistant to these products, some communities have stepped up their financial education efforts. The importance of financial education was explained in an earlier post. This post describes two creative approaches that communities have used to make financial education programs more accessible to vulnerable populations.
One approach involves bringing financial education to the workplace. Workplace financial education programs have been shown to have favorable effects on employee financial behavior and to increase savings among employees. In western North Carolina, OnTrack Financial Education and Counseling has employed a workplace-based approach to financial education. OnTrack has worked with local businesses to provide financial education to groups of employees on money management, savings, homebuyer education, and understanding credit and credit reports. Additionally, OnTrack offers individualized, one-on-one financial counseling sessions regarding budget and spending plans, debt reduction, and retirement planning.
A unique workplace-based approach has been used in California by Pacific Community Ventures (PCV), which invests in private companies that are aligned with its community development mission. For companies in which it has invested, PCV has offered a range of advisory services, one of which is conducting on-site financial education workshops for lower-wage employees. Some workshops have been conducted in partnership with local financial institutions in an effort to move the employees into mainstream financial institutions and away from more predatory and expensive financial transactions.
Another approach focuses on cultural groups that are particularly vulnerable to predatory financial products. For example, as part of its mission of improving the financial condition of the Latino community in North Carolina, Latino Community Credit Union (LCCU) has offered free bilingual financial education to community members. The workshop curriculum was specifically tailored to meet the needs of newly arrived Latino immigrants who are often unbanked and unfamiliar with the financial system in the United States. The curriculum employed a participatory learning model that has proven effective with Latinos called “popular education.” Covered topics include how to use a financial institution, budgeting and saving, using credit and credit cards, buying a car or house, and understanding taxes.
You can read about these and other programs designed to improve financial literacy in the asset-building guide here.