The Inclusive Economy
How Financial Capability and Education Can Help Underserved Communities with Kate Mielitz
By Ariel Sankar-Bergmann on 03/10/2017 @ 10:00 AM
Kate Mielitz is a Ph.D. Candidate in the Personal Financial Planning Program at Kansas State University and an Accredited Financial Counselor (AFC®). Her research focuses on the financial education and capability of underserved populations, specifically individuals transitioning out of the criminal justice system. To better understand the banking and financial experiences of individuals in reentry, we interviewed Ms. Mielitz about a recent research project.
Tell us about your research design?
Sure. Let me give you a little background on how I began working on this issue. Previously, I worked as a financial educator in Georgia’s Transitional Center system. During this time, I spent a lot of time wondering “was I teaching the right thing?” and more importantly, “was I setting up participants so that they could be financially successful upon their return?” To try and help answer this question, I developed a curriculum and decided to evaluate the effectiveness of that curriculum with the participants in my classes. This process led me to want to do more research on the financial needs of inmates and individuals in reentry.
I approached this project in two distinct phases. During the first phase of the project, I wanted to understand if my curriculum was working for my students. The results from that phase of the project were encouraging because inmates who participated in my classes increased their financial knowledge and that increase was statistically significant. I knew though that we needed to get a better understanding of inmates’ general financial knowledge. This led to the second phase of my project where we developed a survey instrument based on the Jump$tart financial literacy survey and began to collect data from inmates who were 90 days from their parole or release date. In addition, we also conducted in-depth interviews with 40 former offenders so that we could really gain a complete picture of how former offenders understand their financial lives. I felt that using this mixed methods approach was important because it allowed us to capture the lived experiences of former offenders along with survey data that measured their understanding of specific financial topics.
What finding were the most surprising to you?
We surveyed 300 inmates who were still incarcerated and less than 60% of respondents were able to answer basic budgeting questions. Less than 50% of respondents were able to answer questions about secured and unsecured borrowing and less than 20% could tell which of the savings account options would be best for long-term savings. Surprisingly, we found that individuals who had more than one incarceration actually had higher financial knowledge but we are not sure what that is attributable to.
During the interviews, the theme of barriers emerged. I defined barrier as being something that inhibited action or change. One of the common barriers I saw was that participants were unable to open a bank account after they were released because the only form of identification they had was a corrections ID. This is a state ID so it’s unclear to me why banks won’t accept it but this creates a real problem for former offenders.
Respondents also lacked an understanding of credit and interest rates. For example, when I asked one respondent why he chose the bank that he chose, he mentioned that the bank was conveniently located and that it had low interest rates. When I probed further, it turned out the low interest rates were on the savings accounts that the bank offered.
Finally, the ways that banks communicate with former offenders can often be a challenge in and of itself. Respondents weren’t always clear about the policies of the bank and were uncomfortable with the ways that bank representatives communicated with them. Compounding this problem is the fact that many former offenders may have been incarcerated for years and during that time our banking system has changed drastically.
What are some of the implications of these findings for programs and policy makers?
From the perspective of the bank, I think they need to be paying more attention to the needs of former offenders. Most banks have a Community Reinvestment Action (CRA) service test and to pass this test they need to be prepared to meet the needs of the communities within their footprint, and that includes the needs of former offenders. Banks should consider offering some sort of non-sales based financial education curriculum, which could benefit the banks and former offenders and would be good for overall reentry policy.
In a broader sense, transitioning out of the criminal justice system and back into the financial world is a key component of helping former offenders have a successful reentry process. We know there is a link between financial knowledge and financial decision making. In order to help former offenders be successful with their own finances it’s critical to start thinking about how we can integrate successful financial education into reentry programs.
What are questions that you feel still need to be answered?
There are three questions that I’m interested in trying to better understand:
- We need to identify curriculums and test them in different geographic locations. We tested the curriculum that I created in a large southern state but it’s possible that curriculums will need to be changed and adapted depending on the population.
- We need more research to understand how money and financial behaviors are associated with recidivism. In particular, we need to understand the connection between financial strain, knowledge and recidivism.
- Finally, we just need better data on the general knowledge and needs of inmates and about how those needs vary at different periods of time in a person’s life.