Reflections on the Historical Roots of the Racial Wealth Gap
By Alicia Atkinson on 02/27/2015 @ 04:30 PM
“Two-hundred fifty years of slavery. Ninety years of Jim Crow. Sixty years of separate but equal. Thirty-five years of racist housing policy. Until we reckon with our compounding moral debts, America will never be whole.” – Ta-Nehis Coates, June 2014
Probably like many people who work in the beltway, my family has no idea what I do for a living. My mom still calls me when she hears the word “policy” when listening to NPR in the morning in an attempt to assure herself that my job really does exist. Despite public policy’s omnipresence in our lives--from workplace safety to transportation to banking regulations--people, like my mom, often don’t know the impact of that policy has on our lives daily.
Unless an issue has captured America’s attention policy tends to be relatively behind-the-scenes. CFED’s policy team focuses on various, and sometimes invisible policy levers that build assets, such as savings or higher education or purchasing a house. We do this partly by looking at the tax system or the workforce development system to see how we can leverage different mechanisms that can help people to save and invest in key asset-building purchases in order to become financially stable.
While we tend to focus on the present, we heavily invested in reversing some of the detrimental policies that actively worked against certain people, specifically people of color, to build assets and wealth. The repercussions of these historical policies can still be seen today with communities of color having lower homeownership rates, lower access to tax-deferred retirement accounts, higher student debt, lower inheritances and lower-overall wealth. The result: a new report from the Urban Institute shows that white families have around 12 times the wealth of African- American families and 10 times the wealth of Hispanic families.
What were some of these historical policies that contribute to this unacceptable wealth-gap today? In Ta-Nehisi Coates June 2014 article, “The Case for Reparations,” he chronicles some of these historical events that actively disenfranchised black households, leaving them out of key income and wealth building opportunities. These span from times in slavery to present day and include:
- Wage-theft: As slaves, African- Americans missed out on years of income and wealth building. Their labor was free and many white Americans accumulated massive amounts of wealth off this free labor. For example, “in 1860 there were more millionaires per capita in the Mississippi Valley than anywhere else in the country.” Even after African-Americans were “freed” legally from slavery, they were forced to work on the same land and continued to undergo substantial wage-theft.
- Housing: For 30 years, households of color were cut out of the legitimate home-mortgage market, partly due to the Federal Housing Authorities active redlining of certain communities, and forced to work with contract sellers. Contract sellers demanded a hefty downpayment and high monthly payments, but gave households no equity until the entire house was paid off. If residents missed one payment, they were evicted and did not see any money returned to them. Today, households of color, particularly black households, continue to face barriers to homeownership. Recent research showed that an application from a black mortgage applicant was 2.4 times more likely to be denied compared to an application from a white applicant.
- Property Values: For black households that were able to find a way to purchase a home in a racist housing system, many were often forced into certain communities and if they were able to purchase in mostly-white community than they experienced white flight, which dramatically decreased their property values. What was one of the repercussions of this? Research showed that black families making $100,000 typically live in neighborhoods inhabited by white families making $30,000.
- Education: The G.I. bill that was a key source of assistance to many veterans, completely failed black veterans. Researchers have stated that the racism in the VA offices pretty much made this bill obsolete to black veterans returning from war.
- Retirement: Historically and presently, households of color have hit barriers to accessing key retirement benefits. In 1935, 65% of African Americans nationally were ineligible for social security. Many households of color are still missing out on retirement opportunities, and research has shown that they are less likely to have access to tax-deferred retirement accounts, the main source of retirement income now-a-days.
- Health Care: The recent passing of the ACA expanded health care coverage for millions of individuals. However, many southern, and former confederate states, have refused to expand Medicaid, creating a hole in coverage for many impoverished individuals.
Each minority group in the United States has undergone their share of wealth depleting policies or lack of policy, such as internment for the Japanese, massive land theft from Native Americans or the large rates of wage theft for immigrants who struggle to find formal employment, that has contributed to having lower-wealth and less financial security overall.
While policy can seem like a foreign or often invisible thing to many, the implications and impact of it are real and can have a lasting effect. Policy is not just about influencing lives now but also for righting the wrongs of history. The racial wealth gap is one of those wrongs that policy actively contributed to in the past, and in the present, and policymakers, practitioners and advocates should be focused on reversing policy’s detrimental impact. Despite broad and deep notions that we all have succeeded without assistance, history demonstrates that policy has assisted some while actively prohibiting others from building wealth and assets.
As we near the end of Black History month and ask how policy can improve economic opportunity, we must not forget about the past and the influence it had on the state of households now, especially households of color. It’s time we start acknowledging the long-term outcomes of these detrimental policies and put closing the racial wealth gap at the top of our policy agendas.
Asset Building News Round Up: February 27, 2015
Posted on 02/27/2015 @ 02:00 PM
Color of Wealth Summit
Center for Global Policy Solutions, April 29-30, 2015, Washington D.C.
The summit seeks to engage Members of Congress, Congressional staff, the media, and the public in a dialogue about the racial wealth gap, its effect on marginalized households, its impact on the U.S. economy, and solutions for closing the gap. Registration now open!
From the Motley Fool: Tax-advantaged plans are popular ways to save for retirement. However, rules for these plans can change, and one recent proposal from President Obama is getting a lot of attention. Read more here.
From the CSRWire: The Financial Solutions Lab at the Center for Financial Services Innovation (CFSI) with founding partner JPMorgan Chase & Co. today announced a $3 million competition for technology innovators working to address consumer financial challenges. This cross-sector initiative will identify technology-enabled financial solutions and provide winners with direct and indirect support to test and expand the availability of their products and services to consumers. Read more here.
From the Baltimore Sun: More than 1 million working Maryland residents have virtually no retirement savings, contributing to a looming public calamity that report released Tuesday called a "silver tsunami." Read more here.
From Forbes: Wall Street Journal reporter Rolfe Winkler asked a colleague an interesting question on Twitter last week: “Do Fed policy discussions ever address record income inequality that is a direct result of asset prices they’re inflating?” The question has a curious context these days. Income inequality has suddenly become all the rage on both sides of the traditional political divide. Read more here.
CFED Story Bank Updates
Here are three great stories highlighting the power of college savings and the 1:1 Fund.
From Kindergarden to College: Imelda and Elias Paredes have big dreams for their two kids, Samuel and Cesia. Elias explains, “We want them to go to college because we didn’t go ourselves.” Read more here.
From Nevada College Kick Start: Jazlynn Torres, a kindergartener at Silver Lake Elementary School in Reno, Nevada, has an unusual favorite subject: “learning!” Her aunt, Marissa Torres, describes Jazlynn as a “very energetic child” who loves to swim, dance, and rhyme (her favorite rhyme is "cat and bat"). Read more here.
From Children’s Aid Society: Miguel plans to be a zoologist when he grows up, although with his recent savings success he might want to consider a career change to fundraiser! After receiving a college savings account through The Children's Aid Society’s (CAS) College Savers Program, Miguel launched his own fundraising campaign. Read more here.
Newly Released Regulations Provide Clarity for Financial Institutions Developing Youth Savings Programs
By Leigh Tivol on 02/27/2015 @ 10:00 AM
Wednesday, the Financial Literacy Education Commission (FLEC) convened to discuss youth savings programs, bringing together experts from both the practice and policy realms to discuss opportunities and barriers to bringing children’s savings initiatives to scale. Key themes from the discussion included:
- Leveraging teachable moments: Practitioners and policymakers agree that embedding savings into platforms like school-based banks and youth employment initiatives creates powerful integration points to leverage as younger kids first begin to handle money and older youth experience receiving their first paycheck.
- Hands-on components help lessons “stick”: Research has shown that pairing financial education with real-life savings opportunities, such as opening a bank account has a longer-term effect.
- School-based initiatives require strong partnerships and buy-in: Panelists reflected on the importance of relationship-building when it comes to engaging schools, financial institutions and others to provide robust programs for students. This work takes champions at each stage – and while that’s not always easy, it’s essential.
The conversation was particularly timely given an important set of newly released regulatory guidance for financial institutions interested in providing products to be used in youth savings programs. The guidance provides much-needed clarity on the rules about opening savings accounts in the context of youth savings programs and, we hope, will make it much easier for financial institutions to offer savings products that both meet the needs of young savers and allow program administrators to open and manage large numbers of accounts with ease. The guidance was a joint effort of multiple regulatory institutions, including the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FRB), the National Credit Union Administration NCUA) and the Office of the Comptroller of the Currency (OCC).
CFED helps our partners across the country design and launch a wide range of child savings initiatives – and our experience has been that it’s often a significant challenge to find savings products that include all the necessary features for efficient program administration, such as the ability to open accounts automatically for large numbers of kids. We’re delighted to see this new guidance come to light and are hopeful that it will be a powerful new tool in bringing the fast-growing youth savings field to even greater scale.
Consumer Financial Protection Bureau Research Works to Define Financial Well-Being
By Emily Hoagland and Kasey Wiedrich on 02/25/2015 @ 01:30 PM
Last week, the Consumer Financial Protection Bureau (CFPB) released Financial Well-Being: The Goal of Financial Education. In this groundbreaking research, the CFPB partnered with CFED—which led a team of external researchers from the University of Wisconsin-Madison Center for Financial Security, the Urban Institute, ICF International and Vector Psychometrics—to develop a definition of financial well-being and explore the factors that contribute to it in order to gain a better understanding how people develop financial capability.
The CFPB—like CFED and many of our partners—has long been interested in determining how people gain financial literacy and what role financial capability plays in financial well-being. Having some savings and a reliable income are important factors in achieving positive financial well-being, but clearly do not tell the whole story. To identify the other important pieces, the team of researchers performed an extensive literature review and then went out into the field to interview consumers and practitioners from across the country about their financial lives—the financial outcomes they’d achieved and the approaches they’d used to achieve them.
What emerged from this research was a nuanced and complex definition of financial well-being, comprised of four major elements:
- Feeling in control of finances. Experiencing a high level of financial well-being means feeling like day-to-day and month-to-month finances are under control—major expenses are covered, bills get paid on time and there is no need to worry about having enough money to get by.
- Having the capacity to absorb a financial shock. Life can be unpredictable, but there is always the chance that something will happen that will have a negative financial impact. Having a safety net of social resources, savings and insurance products helps mitigate unexpected financial upsets.
- Being on track to meet financial goals. Even without a detailed financial plan, having set financial goals (such as buying a house or saving every month) and being on track to meet them likely translates into higher levels of financial well-being.
- Having the flexibility to make choices that allow for life to be enjoyed. People with high levels of financial well-being have the financial freedom to make choices that allow them to enjoy life. This flexibility means going on vacation or splurging once in a while –spending some money on “wants” instead of just on “needs.”
Along with developing the above definition, this work also examined what factors influence financial well-being and found that there are particular types of knowledge, behavior and personal traits that seem to help people achieve higher levels of financial well-being. These include:
- Performing financial research, planning and goal-setting and habitually living within one’s means.
- Knowing how to find and process financial information and how to execute financial decisions.
- Having an internal frame of reference, and a tendency to plan ahead.
- Believing in one’s own ability to affect financial outcomes and persevering even when encountering obstacles.
Taken together, these findings represent a significant step forward for those seeking to improve the financial well-being of vulnerable Americans. Having established an understanding of what financial well-being is, the CFPB research now enables us to examine what set of approaches can boost financial well-being. CFED is grateful for the CFPB’s commitment to this research, as well as for the opportunity to partner with them and the rest of the team who brought this research to life.
Factory-Built Housing Course at Kansas City NeighborWorks Training Institute
By Megan Neff, Guest Contributor on 02/24/2015 @ 03:30 PM
Are you going to the NeighborWorks Training Institute in Kansas City this May? If you are, don’t miss Next Step’s new and improved course, CP135: Successful Construction Using Factory-Built Homes.
This two-day course will be taught May 7-8 by Amy Barnard, Next Step Marketing & Operations Specialist, and George Porter, President of Manufactured Housing Resources and Field Construction Consultant at Next Step.
In the course, you’ll get hooked up with tools designed specifically to assist nonprofits with the factory-built housing construction process. We’ll cover steps from home ordering to planning to turn key completion of manufactured and modular homes. You will leave equipped to translate your site-built construction expertise into supervising successful construction using factory-built homes.
This class is open to all, and is highly recommended for those considering applying to the Next Step Network and current Next Step Network Members. Register online at nw.org/onlinereg
NeighborWorks Training Institutes offer training, certification, networking opportunities and other resources to professionals who work in community development and affordable housing. Want to get a taste of NeighborWorks training to see if it’s right for you? Check out this NTI Minute, a one-minute highlight videos that gives you a taste of what NeighborWorks has to offer in the field of affordable housing development: https://www.youtube.com/watch?v=QhjtPKst_Sw
- NeighborWorks Organization (NWO) Slot Registration Deadline: March
- Early Bird Registration Deadline for Non-NWOs: March 23
- Pre-registration for Non-NWOs & NWOs Opting to Pay-Own-Expense: April 13
CFSI, JPMorgan Chase & Co. Launch Financial Solutions Lab
By Sean Luechtefeld on 02/24/2015 @ 12:00 PM
EDITOR’S NOTE: We’re pleased to share this announcement from our friends at the Center for Financial Services Innovation and JPMorgan Chase & Co. The Financial Solutions Lab is an important step toward addressing the cash flow challenges facing consumers. We’re proud to support the Financial Solutions Lab, the Advisory Council for which CFED President Andrea Levere is a member.
The Financial Solutions Lab at the Center for Financial Services Innovation (CFSI) with founding partner JPMorgan Chase & Co. today announced a $3 million competition for technology innovators working to address consumer financial challenges. This cross-sector initiative will identify technology-enabled financial solutions and provide winners with direct and indirect support to test and expand the availability of their products and services to consumers.
The challenge, opening today, will be the first in a series and invites innovators to submit financial product and service solutions that help households better manage their finances on a tight budget. Vulnerable consumers can get caught in a cycle of debt when relying on alternative services, like payday lenders or check cashing institutions, while trying to make ends meet in the days between when income comes in and bills are due. CFSI has identified the timing mismatch between household income and expenses as one of the greatest financial challenges facing low- to moderate-income families.
In fact, CFSI’s 2013 Financially Underserved Market Size Report found that Americans spent $36.5 billion in one year on credit and transaction products to address this challenge. Additionally, over one hundred million Americans struggle with balancing their household finances and forty-three percent of Americans struggle to pay their bills.
“Millions of Americans are struggling to make ends meet often juggling uneven income and unpredictable expenses,” said Jennifer Tescher, CEO of CFSI. “Through the Financial Solutions Lab we want to identify and support innovators who are working to meet consumer needs with meaningful, scalable solutions. The Lab will help build the next generation of financial products and services to improve consumer financial health.”
From February 24 until April 7, 2015, the Financial Solutions Lab will accept applications from innovative entrepreneurs and nonprofit organizations competing to receive up to $250,000 in capital, along with national partnership opportunities, industry expertise, mentorship, and cutting-edge consumer and design insights necessary to power the next generation of leading financial services innovations. Solutions from approximately eight winning organizations will embrace consumer-friendly design, promote consumer success, build trust, and create opportunity in order to generate mutual benefit for providers and consumers.
mutual benefit for providers and consumers. Winners will be selected by an expert, cross-sector group including leaders from JPMorgan Chase, CFSI, and strategic partners in human-centered design, behavioral economics, community outreach and for-profit entrepreneurship. Winners will be announced at CFSI’s Emerge Conference on June 11th.
“The personal financial security of individuals impacts the financial health of their household, their community and the overall economy,” said Janis Bowdler, Head of Financial Capability at JPMorgan Chase & Co. “That is why JPMorgan Chase is committed to supporting innovators who share our goal of helping low- to moderate-income consumers better manage their daily financial lives, improve resiliency and promote economic security.” JPMorgan Chase’s support of the Financial Solutions Lab is a part of its broader commitment to helping people better understand and manage their finances to secure their futures.
Financial Solutions Lab Led by Experts in Finance, Technology, and Human-Centered Design
CFSI and JPMorgan Chase also today announced the Lab’s Advisory Council, a group of industry leaders from the financial services, technology, academia, and investment community who will provide overall strategic guidance and resources to Lab competition winners. In addition to the strategic direction they provide on the Lab, the Advisory Council will play an integral part in guiding the success of the winning innovations to ensure they meet the needs of consumers and can be made widely available. They include:
- Paul Breloff, Managing Director, Accion Venture Lab
- Kosta Peric, Deputy Director, Financial Services for the Poor, Bill and Melinda Gates Foundation
- Jennifer Tescher, President and CEO, CFSI
- Susan Ehrlich, Board of Directors, CFSI
- Arjan Schütte, Founder and Managing Partner, Core Innovation Capital
- Jonathan Mintz, Founding President and CEO, Cities for Financial Empowerment Fund
- Andrea Levere, President, Corporation for Enterprise Development
- Darren Walker, President, Ford Foundation
- Eldar Shafir, Scientific Director and Co-Founder, Ideas42
- Tim Brown, CEO, IDEO
- Barry Saik, SVP and GM, Consumer Ecosystem Group, Intuit
- Dalila Wilson-Scott, President, JPMorgan Chase Foundation
- Ben Knelman, CEO and Co-Founder, Juntos Finanzas
- Ben Jealous, Partner, Kapor Capital
- Ann Lamont, Managing Partner, Oak Investment Partners
- Chris Bishko, Partner, Omidyar Network
- Caribou Honig, Partner, QED Investors
- Cheryl Porro, SVP of Tech and Product, Salesforce Foundation
- Michael Barr, Professor of Law, University of Michigan
- Suzi Sosa, Founder and CEO, Verb
"We know that the challenges posed by financial insecurity can have a profound impact on individuals and families. I'm heartened by the Financial Solutions Lab's efforts to improve the financial health of low-income people and impressed that they have begun with a focus on household liquidity," said Eldar Shafir, the William Stewart Tod Professor of Psychology and Public Affairs at Princeton University and Scientific Director and Co-Founder of ideas42, a non-profit organization leading the applications of behavioral science to do social good and have impact at scale.
"The Financial Solutions Lab is a great example of the practical application of human-centered design to address the challenges everyday Americans face and to create real impact, “said Tim Brown, CEO, IDEO. “I'm honored to be a part of this cross-sector group of experts and I'm looking forward to working closely with the innovators who participate in the Lab.”
Why You Should Participate in America Saves Week
By Katie Bryan on 02/23/2015 @ 12:00 PM
America Saves Week, February 23 - 28, 2015, is an annual opportunity for organizations to promote good savings behavior and a chance for individuals to assess their own saving status.
Through partners like you, millions of individuals learn the importance of saving. We need your help to encourage more Americans to build wealth, not debt. Show your commitment to help others save by joining America Saves Week today. By joining America Saves Week you will be listed as a participating organization and will receive news and updates on America Saves Week.
Ready to Help Others Save?
How to Participate
From promoting the benefits of savings to employees - to offering incentives for people to open or add money to savings accounts - to holding workshops and developing new partnerships - there are so many ways to help people take financial action during the Week. Learn more about what your organization can do during the Week at the links below.
- Educators and Youth Organizations
- Financial Institutions
- Government Agencies
Questions about the Week?
Director, America Saves
Communications Director, America Saves
Asset Building News Round Up: February 20, 2015
By Paul Day on 02/20/2015 @ 03:00 PM
America Saves Week
February 23 – 28, 2015, The Consumer Federation of America
The week is an annual opportunity for organizations to promote good savings behavior and a chance for individuals to assess their own saving status. Over 800 organizations, from academic institutions and nonprofits to government agencies and financial institutions, have signed up to participate this year. Visit the America Saves website for more info and marketing materials.
THE END OF COLLEGE : Creating the Future of Learning and the University of Everywhere
Tuesday, March 3, 2015, New York, NY, New America
American higher education is in crisis. The price of college has grown astronomically, forcing students and parents to take out loans that now exceed $1.2 trillion in outstanding debt. Many of those loans are falling into default as graduates struggle to find good work. The latest research suggests that our vaunted universities are producing graduates who learn little while they're in school.
From Bloomberg: After years of avoiding confrontation, the U.S. labor movement is reasserting itself. From the ports of Los Angeles to the car plants of Detroit, unions are demanding payback for sacrifices they say helped revive the economy. Oil workers have walked off the job for higher wages and better working conditions. Dock workers have snarled West Coast ports. Personnel staffing oil terminals at the Port of Long Beach, California, are threatening to strike. In Detroit, union leaders girding for contract talks this year will push for the first raise veteran autoworkers have received in a decade. Read more here.
From The Hill: As part of its push for a federal minimum wage increase, the Economic Policy Institute (EPI) is pointing to stagnant wages in 2014, part of a 35-year trend, it says. Compared to 2007, hourly wages for Americans in 2014 were flat or had fallen, EPI said in a Thursday report. “The poor performance of American workers’ wages in recent decades — particularly their failure to grow at anywhere near the pace of overall productivity — is the country’s central economic challenge,” the report said. Read more here.
From the Las Vegas Review-Journal: Even as Americans acknowledge gains in racial equality, new research shows that by at least one measure — financial — the U.S. still has a long way to go. A recent Pew research study indicates that the financial gap between blacks and whites is the highest it’s been since 1989. In 2010, the median wealth of white households was eight times higher than blacks; now that figure has leapt to 17 times, the highest rate in two decades, according to Pew Research Center analysis of data from the Federal Reserve’s Survey of Consumer Finances. Read more here.
From Time: The American economy is by many measures well on the road to full recovery. And yet the middle class, which historically was the driver of economic growth, is falling behind. Based on an analysis of household incomes among America’s middle class, these are the states where the middle class is suffering the most. Read more here.
From the New York Times: When a woman calls Fidelity about her investments there, her questions are likely to be handled a bit differently from those asked by a man. Customer service representatives are more likely to chitchat to establish rapport. And they may frame the conversation around her longer-term goals or the important people in her life — perhaps a child with a college savings account, or an elderly parent. The representative may ask more open-ended questions. Read more here.
Concept Testing with Microbusiness Owners: Why and How?
By Lauren Williams on 02/19/2015 @ 05:30 PM
This blog post is part of a series focused on the Microbusiness Solutions Learning Cluster; a year-long engagement during which CFED will work closely with WESST, CAMBA and Northern Initiatives to understand a unique design challenge, create an intervention or programmatic tweak to address it and then pilot that intervention to assess its impact.
If you’re new to concept testing, here’s a crash course on what it is and why it matters for nonprofit service providers. Here’s the short version:
Concept tests are a type of market research that help organizations identify whether or not a potential customer likes an idea and if there are opportunities to improve it.
This is why we decided to kick off our Microbusiness Solutions Learning Cluster application process by running concept tests on all eight submissions. One of our scoring criteria for applicants required understanding how appealing each product or service is to microbusiness owners and whether opportunities to improve it align with the organization’s priorities. Not to mention, we knew the results would help inform potential improvements down the road. So, we partnered with EA Consultants to design and implement concept tests.
Between November and December 2014, EA’s Mobile Data Unit interviewed 40 low- and moderate-income microbusiness owners with household incomes under $50,000 per year to test eight product or service concepts aimed at facilitating or strengthening their financial stability. Interviews were conducted in New York City; Torrington, CT; Baltimore, MD; Northfield, MN; Minneapolis-St. Paul, MN; and Northern Minnesota.
Interviewers presented three randomly assigned product cards to each respondent (in English or Spanish), asked open-ended questions about the products and offered respondents a cash incentive in exchange for their time. The product cards were designed to clearly and succinctly convey key information about the functional components of each product or service. Each respondent was then asked a series of questions designed to gauge their initial reactions, demand for the product and thoughts on some of the specific aspects of each product. All respondents were asked: Would you add or remove anything to/from this product? If so, what and why? Would you use this product? Why or why not?
Next week, we’ll share the results as we publish a research brief.
Technical Assistance Fund: Assets & Opportunity Network Leaders Share Tips and Resources on Financial Coaching
By Fran Rosebush on 02/19/2015 @ 10:00 AM
Assets & Opportunity Network members have increasingly expressed interest over the past year in learning more about effective financial coaching models and practices. The popularity of this longer-term, client-centered financial capability strategy has been growing among others in the field as well, which has led to more information and resources becoming available on the topic. As a core function of the Assets & Opportunity Network, we have been seeking opportunities to connect Network members to these resources and their peers facing similar questions. Last year, we held an informal, facilitated call (called a Virtual Coffee) with Network Leaders to discuss their common questions with each other, as well as share the resources they have found most useful. With support from the JPMorgan Chase Technical Assistance Fund, 16 Network Leaders came together for this call. Below are the tips and resources they shared.
Common question: How do others recruit financial coaches? What skill sets are most helpful?
Tips from Network peers:
Skills to look for when recruiting coaches
- Openness to learning coaching techniques and asking questions
- Ability to assess where a client is along the spectrum from crisis mode to thriving
- Ability to have empathy, turn off counseling mindset and use coaching method
- Strong listening skills
Where and how to recruit coaches
- Train frontline case managers and their supervisors at social service organizations to implement coaching approaches when appropriate
- Recruit from current staff, volunteers and former clients
- Be clear with roles in partnership when recruiting volunteers from financial institutions—it is important to not promote specific products and to always use a coaching method
Common question: What are the best ways to keep financial coaching clients engaged and committed?
Tips from Network peers:
- Integrate the financial coaching program to another financial capability program (e.g., IDAs, VITA services, credit counseling, lending circles, savings programs).
- Position the coach as a part of a support network available to the client.
- Emphasize the client’s responsibility in the partnership.
- Schedule follow-up appointments immediately (could also include a mid-point call to check-in).
- Use empathy skills during the coaching appointment.
- Incorporate accountability and support from peers in to group coaching models.
- Utilize online tools (e.g., MyBudgetCoach and The Change Machine) which can send reminders and be easily accessible.
Common question: How can I best collect data from financial coaching clients for outcome measures?
Tips from Network peers:
- Be conscientious about the burden or amount of the “ask” on clients to complete surveys and balance that with your needs to determine outcomes.
- Collect data on specific goals for coaching and the timeframe chosen to achieve those goals at the onset, which can help with measuring achievement as coaching progresses.
- Track confidence levels and how client’s confidence with different financial activities changes over time can be a helpful measure for outcomes.
- Look at formative evaluation (i.e., how are the sessions going?). Ask this at end of each session.
- Look at summative evaluation (i.e., after they end coaching, follow-up on how things are going now, touch base a month or two afterward, and look at outcome measures such as credit scores at this later time).
- Capture detailed notes during each session, then track overtime as client progresses.
Financial coaching information and resources shared on the call and afterward
- University of Wisconsin Center for Financial Security's Financial Coaching Website, which includes a Brief on Financial Coaching Training Programs and Curricula
- Financial Coaching Policy Proposal by CFED
- Financial Coaching: All You Need to Know but Were Afraid to Ask (presentation slides from the 2014 Assets Learning Conference)
- Scaling Financial Coaching: Critical Lessons and Effective Practices (a report by Citi Foundation and NeighborWorks America)
- The Midas Collaborative’s white paper on financial coaching and this workforce integration pilot report
This Virtual Coffee on financial coachng is one example of an opportunity within the Assets & Opportunity Network Learning Community, which aims to speed up diffusion of innovative financial security and asset-building approaches. The Assets & Opportunity Network includes many of the nation’s leading experts who are grounded in real world practice and policy on financial capability and asset-building issues, as well as others who have the interest, drive and passion to deepen and expand their impact, but who may be newer to the work. We are continuously exploring opportunities to connect and share among Network members. If you have an idea for a future learning opportunity for the Assets & Opportunity Network, share them with firstname.lastname@example.org.
Also in This Series
Advocates in Idaho Use New Assets & Opportunity Scorecard Data to Build the Case for Policy Reform
By Jennifer Medina on 02/18/2015 @ 12:00 PM
A variety of indicators—falling unemployment, an improving stock market and a stabilizing housing market—suggest that the economy is improving. Yet many Americans see little evidence of economic recovery in their own lives. The 2015 Assets & Opportunity Scorecard, released two weeks ago by CFED, sheds some light on this conundrum. The new data illustrate that many Americans are struggling in their abilities to control their finances, absorb a financial shock or be on track to meet their financial goals. These findings, detailed in CFED’s new report, Excluded from the Financial Mainstream, suggest that a comprehensive public policy response is needed in order to improve the financial well-being of American households.
Released annually, the Assets & Opportunity Scorecard is a powerful data tool CFED develops to empower advocates to advance asset-building policies in their states. With over 135 outcome and policy measures across five issue areas (Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Health Care and Education), the Scorecard can be leveraged by advocates to educate policymakers and other community leaders about the importance of strategies that help individuals and families get ahead.
We’re proud to work with state and local partners from the Assets & Opportunity Network who use the Scorecard as a powerful opportunity to engage policymakers and media around key asset-building issues facing their communities. This year, the Idaho Asset-Building Network, an Assets & Opportunity Network Leader, was the perfect example. With the 2015 legislative session in full swing, the Idaho Asset-Building Network hosted a press conference at the Idaho State Capitol and invited all state legislators and media outlets throughout the state to attend. The event resulted in a feature on the Boise evening news, as well as the expectation that several other media outlets will run a story about the Scorecard data and the Idaho Asset-Building Network.
The press conference—which was held in one of the committee hearing rooms at the State Capitol—shed light on the challenges facing Idahoans, and raised awareness about the Idaho Asset-Building Network’s mission to promote and strengthen asset-building programs and policies in the state. Christine Tiddens, Community Outreach Director at Catholic Charities of Idaho, and Jessica Sotelo, Executive Director at Partners for Prosperity, provided an overview of the new data in the Scorecard, focusing on how the state’s high liquid asset poverty rate, low annual pay and high percentage of low-wage jobs underscore the need for policies that help residents build financial security. They also talked about the Network’s goals of facilitating policy advocacy, building capacity for members and raising awareness about asset-building issues. Four members of the Network’s steering committee in addition to Christine and Jessica were present at the press conference: Todd Christianson with Debt Reduction Services, Val Brooks with Simplot Credit Union, Joyce Bailey with United Way of the Treasure Valley and Lauren Necochea with the Idaho Center for Fiscal Policy.
Reflecting on the day, Christine commented, “The event was a success! The Scorecard received a lot of attention and people had a lot of questions. The Idaho Asset-Building Network members were able to share their asset-building programs and services with legislators and the media.”
CFED is deeply grateful to Assets & Opportunity Network Leaders like Christine and Jessica for bringing the asset-building message to state lawmakers. We also extend our gratitude to the funders who make the Assets & Opportunity Scorecard possible, including the Ford Foundation, the Northwest Area Foundation, the Paul G. Allen Family Foundation, the Walter S. Johnson Foundation and the Surdna Foundation.
Bob Friedman On How the Asset Building Movement Got Its Mojo
By Bob Friedman on 02/17/2015 @ 11:00 AM
Editor's Note: CFED Founder Bob Friedman explains the history behind the asset building movement and how it mobilized financial support in this recent Inside Philanthropy article.
Back in 1978, with a promise of two grants for $25,000, one of which fell through, Bob Friedman set out to do something about assets and financial inclusion for the poor. He started the Corporation for Enterprise Development (CFED) which has gone on to become a leader in the asset building field. Now, 37 years later, the field has become a well-funded movement, and is poised for a new stage of growth.
But Friedman is not your typical policy entrepreneur. He's also hung around the funding side of things, and there, too, has helped advance the asset building cause.
"I was born lucky, and have majored in it ever since," he says. Friedman comes from the Levi Strauss family. His grandfather, Dan Koshland, Sr., worked for the family business all his life, rising to become CEO of the iconic jeans maker.
"I revered my grandfather," said Friedman."He could have established his own foundation, but he didn't. Instead, he established the San Francisco Foundation. He fundamentally believed in community. He was also one of those rare people who loved paying taxes. He said he figured if he was paying a lot of taxes, he must be doing pretty well."
Philanthropy related to the Levi Strauss company was part of the fabric of the family Friedman grew up in, and earlier in his career, he served as a board member both for the corporation and its foundation. Perhaps not surprisingly, the Levi Strauss Foundation has long been a funder of asset building work. In a recent year, for example, it gave out 22 grants in this area to fund initiatives both in the U.S. and abroad.
That grantmaking captures the diversity of the asset building movement, and the different ways that foundation dollars are being deployed to help poor people build wealth. For example, the foundation supported an effort by the Earned Assets Resource Network "to connect low-wage workers to the financial mainstream through direct deposit and electronic payroll" and also backed an effort for "financial literacy training, matched savings and micro-enterprise development program for workers in the apparel industry in Medellin, Colombia."
As well, Levis Strauss money has gone to build up the asset building movement as a whole, with grants for networking and capacity building to boost coordinated work at the local, state, and national level. Bolstering research on assets and wealth has been another priority of the foundation, which also funds in the areas of HIV, disaster relief, and worker rights. In 2013, the foundation gave away $6.4 million and reported assets of $66 million.
Friedman does not now sit on the board of the Levi Strauss Foundation, which has a professional staff. And he's shy about taking credit for Levi's strong asset building focus:
I wouldn't claim to have shaped it. I share a lot of the corporate and foundation values. I was proud of the company for integrating plants in the south way before it was common to do so, and for maintaining employees during the Great Depression even if it meant they were polishing the floors. I think that the foundation has been courageous in addressing issues of economic justice and opportunity and diversity.
That said, it was Friedman who brought the idea of focusing on asset building to the Levi Strauss Foundation, from his work at CFED. He recalled talking with Judy Belk, who was president of the Levi Strauss Foundation at the time (she is now CEO of the California Wellness Foundation) about what it was like for low-income people to buy a house, and how having parents who could loan you the money for a down payment was not usually an option. "I told her about IDA's (Individual Development Accounts) and asset building, and she immediately got it on a fundamental level."
Mainly, though, Friedman has been a grantseeker, and we asked him about starting CFED and where he got his funding. He acknowledged that many of the early years were filled with trial and error. "I must say, those first five years, I was wandering in the desert, learning how to do fundraising, trying to establish that we knew something, which basically we did by respecting innovation at the community level."
During the first 10 years, he recalled receiving one major grant from the Department of Labor, which had to be signed off by both a Democratic and Republican secretary of labor. As a testament to how asset building has attracted an unusual range of supporters, Stuart Butler at Heritage Foundation was instrumental in securing the second approval. Still, funds were scarce in those early days.
Friedman remembered the first major foundation grant, for $500,000, coming from the Ford Foundation's rural program in 1990. Later, in the mid-1990s, Ford would go all in for asset building in a way that transformed the field. Its new president at the time, Susan Berresford, made this a top foundation priority and, to lead this work, hired Melvin Oliver, a sociologist and co-author (with Tom Shapiro) of Black Wealth/White Wealth, one of the bibles of the asset building movement. Ford went on to spend millions to scale up the asset building field, most notably with a $50 million give to Self Help, the North Carolina credit union, which Friedman says helped prove that "low income people can be homeowners with 3 percent down payments and fixed thirty-year rate mortgages, and that they're a good bet."
Friedman expresses gratitude about Ford's leadership in this area, including that of Frank DeGiovanni, who still directs the foundation's asset building work. "They're huge," Friedman said emphatically, adding that Ford's embrace of assets represented a crucial move away from a "poverty" frame.
But make no mistake: Bob Friedman was developing this field long before America's then-biggest foundation came along and helped supersize it.
Another key pioneer, of course, was Michael Sherraden, the author of the seminal 1991 book, Assets and the Poor. No book has been more important to the asset building movement, and Friedman recalls being introduced to Sherraden when the book was still in draft form. Learning about Sherraden's ideas, and particularly his proposal for Individual Development Accounts, was pivotal.
Friedman described how he found in Sherraden's concept of the IDA the basic building block of a truly "democratic and inclusive human investment system." Plenty of funders turned out to be equally excited, and Friedman says the IDA concept was crucial in helping asset building get traction with top foundations.
The Joyce Foundation (Craig Kennedy, Debby Leff, Unmi Song with little-known board member Barack Obama) and Charles Stewart Mott (Jack Litzenberg, a giant, Benita Melton, Bill White and so many others) were there to back the first three IDA programs, where we didn't have any model; we had Sherraden's idea, but it seemed clear to me that unless we got stuff on the ground, the idea wouldn't go far and so the Joyce Foundation invested in these three nascent initiatives.
Then CFED joined with Sherraden and the Center for Social Development to launch the American Dream Demonstration and we got 12 major foundations to invest significantly led by Ford, Mott, MacArthur, Citigroup (first financial institution foundation to support us, thanks to Janet Thompson, Pam Flaherty, Brandee McHale, and Bob Annibale), FB Heron (which became the first to devote its whole mission to asset-building under the leadership of Sharon King), MacArthur, Kaufmann, Fannie Mae, Joyce, Levi Strauss, Rockefeller, Moriah, and Met Life.
That demonstration and that support really enabled us to develop the IDA field, and maybe it's because we didn't know what we didn't know but it seemed like every step was progress, and we did at the end of the day prove that low income people, with labor-intensive community programs, would save and build assets.
The rest is history, as they say. Asset building remains a major focus of many funders and the movement continues to gain steam.
As for Bob Friedman, he long ago decided to hand off the management of CFED to others but remains its board chair and general counsel—titles that don't capture what he really is: the godfather of one of the most significant policy movements of recent decades.
Asset Building News Round Up: February 13, 2015
By Paul Day on 02/13/2015 @ 12:30 PM
From Bloomberg Business: The House Ways and Means Committee voted to expand college savings tax incentives that President Barack Obama proposed limiting earlier this year. The bill would let people use so-called 529 accounts to buy computers as well as tuition, books and other expenses. It also would make it easier for people to put refunds from colleges back into tax-advantaged accounts without penalty. Read more here.
From Nonprofit Quarterly: Classic economics argues that raising the minimum wage always leads to greater unemployment, because at a higher wage price, there will be less demand for labor and therefore excess supply. I’d pay the kid next door $7 an hour to rake leaves so I can watch football, but if I have to pay him $10, I’ll just rent a leaf blower and do it myself. Walmart might not think greeting customers is worth more than $8 per hour, so if minimum wage goes to $9, the greeters lose their jobs. Read more here.
From Forbes: There are many theories about the difficulties Social Security might face in the future and what to do about it. A new study from the Center for American Progress adds an ironic twist: income inequality is helping to undermine Social Security and threaten both the prospects of older people with low incomes and inadequate wealth and the financial security of many children and families. Read more here.
From Credit Union Insight: Even during the best of economic times, mid-sized credit unions struggle to expand. For such credit unions, spurts of high growth occur rarely and unpredictably, and they are difficult to sustain. During the worst of times when loan demand dips, smaller to mid-sized credit unions face an even steeper climb, while their larger counterparts have the scale to significantly leverage resources with strong bargaining power that enables the pursuit of growth strategies despite economic downturns. Read more here.
From New America: Tax time is often referred to as the “golden moment” for asset building and financial management due to the substantial infusion of resources many households receive in the form of tax refunds. For the tax preparation process to fulfill its potential as a delivery system for asset building resources, there need to be adequate protections in place to ensure its integrity. Read more here.
Assets & Opportunity Network Updates
From CASH Buffalo: Created in 2004, Creating Assets, Savings & Hope (CASH) Buffalo works to increase the financial stability of low-to-moderate income families in Buffalo and Erie County. Our coalition consists of over sixty member organizations, including foundations, banks, credit unions, nonprofits, faith-based and community groups, educational institutions, employers, and concerned citizens. Read more here.
From CFED: On Tuesday February 3, 2015, the Senate Finance Committee in Colorado voted against SB15-095, proposal that would have added protections for manufactured homeowners through a modernized dispute and oversight regime without compromising the rights of manufactured home community owners. Read more here.
CFED Story Bank Updates
From Prepare + Prosper: As a teacher's assistant and single mom, Stephanie has a lot on her plate, but tax time helps her to make it financially manageable. Free and expert help with taxes and finances--and the tax refunds she receives--are critical to her family’s continued success. Read more here.
Concept Testing for Product and Service Design: What Is It and Why Should You Care?
By Lauren Williams on 02/13/2015 @ 10:15 AM
This blog post is part of a series focused on the Microbusiness Solutions Learning Cluster, a year-long engagement during which CFED will work closely with WESST, CAMBA and Northern Initiatives to understand a unique design challenge, create an intervention or programmatic tweak to address it, and then pilot that intervention to assess its impact.
Have you ever wondered how companies decide how to package, name and introduce new products? How might McDonald’s decide the best way to introduce trendier, healthier menus or roll out a platform to customize their burgers and sandwiches Chipotle-style, for instance? How did Procter & Gamble decide to package, name and sell the Swiffer to life-long mop users? How do banks like Capital One decide to transform their digital banking experience? Chances are that each of these companies did some sort of early concept testing before making significant investments in further product testing or bringing these new offerings to market.
What is concept testing?
Concept testing is a category of market research activities that seeks to solicit public responses and feedback to ideas about a product or service before introducing it to market. Concept tests help organizations identify whether or not a potential customer likes an idea and if there are opportunities to improve it. The results of a concept test are typically used to reshape and refine ideas for the product or service to help ensure that the final version reflects the targeted markets’ preferences and appeals to them.
How does it work?
Concept testing usually involves showing a potential user a description, flier, brochure, storyboard, presentation or short video of the product or and gathering their reactions to it through a survey or in-person interview. These presentations of the idea will offer a basic description of the product, usually with a headline and some supportive explanation of how it works, and may include an illustration of the product or the steps a user would take to experience a service. Surveys or interviews will usually ask questions like:
- How interested are you in buying this product?
- What do you like about this product?
- What would you change about this product?
- How much would you be willing to pay for this product?
The responses to these questions tend to help companies improve their offerings by making sure they target the population segments to which they appeal most and include the most desirable features. It might also help them to generate new ideas for the product or service or determine how to price, advertise or promote the offering.
Why should you care about concept testing?
Usually, we hear about concept testing in the context of for-profit companies and their product design or market research processes. Companies may start by asking themselves how they can convert more potential customers into paying customers or how they can bring a new product to market in the most profitable way. Though their ultimate motivation may be profit-driven, the underlying value of concept testing is that it can drive profit by helping to improve products, clarify priorities and increase the extent to which products match up with market needs.
Since you’re reading this on CFED’s Inclusive Economy blog, chances are you’re a nonprofit practitioner, government agency staff, funder or some other stakeholder who cares about low- and moderate-income consumers. Your motivations may not be profit-driven, but you do (hopefully) care deeply about the quality of your product and service offerings, how useful and appealing they are to your customers, and how effectively they help your customer’s achieve their goals. There’s an unspoken tension between the nonprofit and government sectors and the types of research, development and design practices (from concept testing to rapid prototyping) often employed by for-profit companies. But, this shouldn’t be the case.
Investing in innovation or R&D can seem expensive and time consuming up front, and the value of the return on that investment is difficult to sell to government and philanthropic funders who often expect positive outcomes in return for their dollars. But, the reality is that these investments can also exponentially improve the quality, utility and reach of products and services in any market. That said, those in the business of serving low- and moderate-income communities should care about concept testing—and other methods for investing in well-designed products and services—because our customers deserve the best we can offer, and by making relatively small investments up front, we can make sure they get it.
Stay tuned! Next week, we’ll tell you what we learned when we worked with EA Consultants to conduct concept tests on the financial products, services and trainings offered by Learning Cluster applicants.
A Job is Not Enough: How Financial Capability Can Help People Gain and Maintain Employment
By Alicia Atkinson on 02/12/2015 @ 04:30 PM
Employment alone is not enough to guarantee financial well-being. Consistent and adequate income from a full-time job is likely to ease an individual’s immediate financial stress, but a job alone does not lead to long-term financial well-being. For this, households need to improve all areas of their balance sheet by increasing income and credit scores, building savings and assets, and decreasing expenses and debt.
Last year, we introduced the first of five-part federal policy publication series, Increasing Financial Well-Being through Integration, which will chronicle policy recommendations that have the potential to increase the impact of social service programs by boosting families’ overall economic outcomes and improving financial well-being.
Today, as part of this five-part series, we are releasing Increasing Financial Well-Being through Integration: Gaining and Retaining Employment, which lays out the arguments for why social service programs that are working on employment and career pathways should focus on the multiple dimensions of individuals’ financial lives. The brief provides policy recommendations for how the federal government can encourage the integration of financial capability services into the workforce development system and the workplace.
Workforce development programs and financial capability services share similar goals; both focus on ensuring individuals have the tools to participate in, contribute to and benefit from the mainstream economy. These services are strongly interrelated and become less effective when siloed. Many youth and adults come to workforce development programs not only struggling to find a job but also with other financial challenges. Financial capability services have a track record of increasing employment outcomes while addressing the other dimensions of an individual’s financial life. Evaluations have shown that by integrating financial capability services into employment services, job placement rates, number of hours worked, wages and job retention all tend to increase.
As families struggle with multiple financial challenges, policymakers and practitioners need to provide new, impactful solutions that can contribute to cultural shifts that make workforce development programs and the workplace not just about checking the employment box but about getting households financially stable.
Future briefs in this series will be released in the coming months and will cover the value of integrating financial capability services in order to boost other programmatic outcomes, including:
- Gaining housing stability.
- Reaching and succeeding in higher education.
- Improving health.
Stay tuned for these and other resources on integrating financial capability!
CFED Launches Microbusiness Solutions Learning Cluster
By Lauren Williams on 02/11/2015 @ 10:00 AM
It’s been a whirlwind year for CFED’s Entrepreneurship team. Last April, CFED published In Search of Solid Ground, an analysis of microbusiness owners’ greatest financial vulnerabilities. A few months later, we kicked off a Call for Solutions to inform our view of the gaps between the financial capability “pain points” experienced by microbusiness owners and the types of solutions in the marketplace to address them. In October, we invited the winners from this Call for Solutions to apply for the Microbusiness Solutions Learning Cluster, an initiative designed to help organizations design more powerful, user-focused products and services to enhance microbusiness owners’ financial capability.
Today—thanks to the generous support of the Annie E. Casey Foundation, the Capital One Foundation, the ICE NYSE Foundation, the MasterCard Center for Inclusive Growth and the Prudential Foundation—we are excited to announce the launch of this learning cluster and highlight our three participants:
- CAMBA (Brooklyn, NY) offers Mobilize Your Business, a program that teaches low- and moderate-income microbusiness owners to use tablet-based technology to transform their cash-and-carry businesses into more formal, bankable businesses.
- Northern Initiatives (Marquette, MI) offers a standardized, scalable web-based training program and a system to assess and deliver training founded on the principles covered in FDIC’s Money Smart for Small Business curriculum.
- WESST (Albuquerque, NM) provides an in-person training program to microbusiness owners and is planning to expand access through an on-demand learning platform that teaches three core financial capacity building skills: building and understanding financial statements, cash flow analysis, and implementation and break-even analysis.
Throughout the year-long engagement, CFED will work closely with each organization to refine a unique design challenge, drill deeper using consumer insights research techniques, design an intervention or programmatic tweak to address the design challenge, and then pilot and assess the impact of the intervention. Each organization will receive a $25,000 subgrant and direct technical assistance from CFED to do this work – but just as importantly, the learning cluster will enable them to share their experiences, give and receive feedback and capitalize on one another’s strengths.
Along the way, we look forward to sharing the learning cluster’s progress as our participants gather new insights about their clients and refine their offerings to better meet their needs. The project kicked off with a virtual meeting in mid-January, and CFED staff will start making site visits to each participant in the coming weeks. Stay tuned for updates!
New Funding Opportunities from Bank On 2.0
Posted on 02/10/2015 @ 04:00 PM
Editor’s Note: We received this RFP from the Cities for Financial Empowerment Fund. Congrats to the first two winners and we encourage more innovative programs to apply!
The CFE Fund is excited to announce new Bank On 2.0 pilot funding updates: the selection of our first round of pilots, focusing on rural banking access, and the release of a second round omnibus Request for Proposals.
The Bank On 2.0 Innovation Fund, supported by JPMorgan Chase Foundation, is part of the CFE Fund's national efforts to leverage government programming, funding, and partnerships to ensure that everyone has access to safe and affordable financial products and services. This Innovation Fund supports the design and implementation of pilot programs and research that test new replicable methods of reaching underserved markets through local government infrastructure and leadership.
Round one pilot funding will support efforts to enhance banking access in rural populations. After receiving 22 impressive applications from across the country, we have selected Bank On Washington and Consumer Credit Counseling Service of the Savannah Area (CCCS) for grant support. Bank On Washington will partner with libraries to create financial hubs that connect rural residents and Native American communities to accounts; and CCCS will research and partner with local financial institutions to explore a replicable model for offering account access through trusted community partners in rural communities in Georgia and South Carolina, including through free financial counseling. We look forward to partnering with these two organizations and sharing the results of their work with you and the field.
In addition, we are also excited to release the Bank On 2.0 Innovation Fund's second round omnibus Request for Proposals. This round offers support for replicable research and programs aimed at increasing access to financial services in three distinct concentrations:
- populations with unique challenges,
- rent payment solutions, and
- direct deposit for individuals who receive regular non-employee payments from cities/local governments.
Applicants must be nonprofit organizations or state or local government agencies, with priority given to existing Bank On programs or coalitions. The RFP and application can be found here. The CFE Fund will hold an informational conference calls for interested applicants on Monday, February 23rd at 1pm ET; register for the call . Applications are due Friday, March 13th at 3pm ET. Please forward this RFP widely to your networks.
Ask the Taxpayer Opportunity Network: FAQs on the ACA and Taxes
By Cameron Parsons and Tara Straw on 02/10/2015 @ 01:00 PM
The ACA may not have been on the President’s mind this year, but for taxpayers and tax preparers, the new health care coverage requirement is front-and-center. This year is the first year that the ACA will affect 1040 returns. Though over three-quarters of Americans will just need to check a box to indicate that they had health coverage for all of 2014, those who purchased their coverage through the Marketplace—6.8 million during the second open enrollment period alone—face a more complicated return.
To help decipher the changes, the Taxpayer Opportunity Network invited Stefanie Costello of the U.S. Department of Health and Human Services and Tara Straw of the Center on Budget and Policy Priorities to present a webinar to the volunteer tax assistance community. The two provided an overview of the connection between the Health Insurance Marketplace and federal income taxes and presented a host of available resources.
As part of the Taxpayer Opportunity Network’s goal to share expertise with and between its members, we asked Tara Straw from the Center on Budget and Policy Priorities to share answers to the questions taxpayer’s ask most often. Below are Tara’s answers.
Q: Who needs coverage?
A: Minimal Essential Coverage (MEC) is required for just about everyone. But, many people can be exempt from the individual shared responsibility payment (ISRP). For a detailed explanation of the coverage exemptions, see Barbara DelBene’s Quality Solutions newsletter on the topic. To see if your plan meets MEC, see Pub 4012, ACA-4 and the 4491X update.
Q: Exemptions look complicated. Where do I start?
Q: I claim my brother’s girlfriend’s kids as my dependents. Who is responsible for their insurance coverage?
A: You are! The taxpayer is responsible for reporting the insurance coverage or exemption, or for paying the ISRP for everyone on their tax return.
Q: If someone misses the February 15 deadline to sign up for coverage, what is a solution for them so they can find coverage for the rest of the year? What is a solution if they do not qualify for an exemption?
A: If someone does not enroll in coverage during open enrollment, there are a few things to keep in mind. First, an eligible person can enroll in Medicaid at any time. Second, a person who is not Medicaid eligible may be eligible for a special enrollment period if a life event occurs, such as birth, marriage, less of a job or many others. If a person doesn’t enroll in coverage or qualify for an exemption, they will owe a penalty on their 2015 tax return.
Q: Does every taxpayer have to be processed thru the ACA Worksheet before their return is considered complete?
A: The ACA worksheet must be completed on every 2014 return except for someone claiming zero tax exemptions. That is, the ACA worksheet is not prepared if the person isn't claiming any dependents and is not claiming his or her own personal exemption. For example, a college student with income from a summer job who is claimed as a dependent by her parents does not need to address ACA issues on his return. When the box on the TaxWise Main Information Sheet is checked to indicate that she qualifies as someone's dependent, the TaxWise ACA worksheet will no longer be red—no longer a required form. For everybody else, the preparer needs to complete the ACA worksheet. (Tip of the hat to Barbara DelBene for these details.)
Q: Do taxpayers need to present verification of insurance coverage?
A: No! Many people won’t have proof of coverage and that’s fine. Preparers should ask whether each person on the tax return had coverage and use due diligence.
Q: Does a taxpayer need to show proof that they qualify for an exemption?
A: In general, no. Do not attach supporting statements to the tax return. However, if a taxpayer is audited, it’s helpful for the taxpayer to keep a record of any documents that support an exemption.
Q: Is it possible to claim two exemptions in one year? For example, could someone claim a short coverage gap exemption, and a hardship exemption?
A: Yes. Multiple exemptions may apply to the same person. (It is not necessary, however, to claim multiple exemptions for the same person in the same month.)
Q: If someone marks "pending" for an exemption application through the Marketplace, do they have to go back and amend the return once they have an ECN? What if they are denied the exemption?
A: If the exemption is granted, no follow-up is needed from the taxpayer. If the exemption is denied, the taxpayer should amend their tax return.
Q: I have a client who was covered for part of the year by Marketplace coverage with premium tax credits, then lost it due to their income dropping. How do we indicate that on their tax return?
A: If a person received premium tax credits in advance for any month (or bought coverage in the Marketplace and now wishes to claim PTC on the tax return), they must file a return and complete Form 8962. The information on the 1095-A can be put into Form 8962. If the taxpayer’s income fell below 100% of the poverty line, but received premium tax credits in advance because income was estimated to be between 100-400% of the poverty line, check “Yes” on Line 6 to indicate that an exception applies allowing the taxpayer to claim the credit with income below 100% of the poverty line.
Q: As a VITA tax preparer, will the IRS software "cue" us for each different thing we need to enter and the choices?
A: The ACA Worksheet in TaxWise can help remind the tax preparer which forms need to be completed. The ACA Worksheet asks whether a person had full-year coverage or whether they had an exemption (which makes Form 8965 required), received a premium tax credit (which makes for 8962 required) or must pay a penalty (calculated on the worksheet for months with no insurance and no exemption).
Q: For states with their own marketplace, will clients be able to download the 1095-A from the state website? How about DC?
A: State-based marketplaces vary in their delivery of Form1095-A. DC HealthLink will mail the 1095-A to enrollees and will make the form available electronically. For more information, visit https://dchealthlink.com/2014taxinfo.
Still have questions about the ACA? Check out the Quality Solutions newsletter and other ACA materials from the Taxpayer Opportunity Network. Also be sure to join the network to receive the latest updates, news and information to help you this tax season.
Ask the Assets & Opportunity Network: Network Ally Responds to Common Questions on Credit-Building, Part 1 of 4
By Dara Duguay, Guest Contributor and Fran Rosebush on 02/09/2015 @ 04:30 PM
There is a lot expertise in our field on financial security practices, policy and research. One of the key values of the Assets & Opportunity Network is to share this expertise with and between its members. As a part of our work to do so, we’re launching a new series called Ask the Assets & Opportunity Network, in which experts will be responding to common questions asked about their areas of work. There will be varying levels of questions we’ve heard from the field. If you have a question you’d like to see answered, email it to email@example.com.
For our first edition of Ask the Network, Credit Builders Alliance responded to frequently asked questions on credit. This is Part 1 of 4 with Credit Builders Alliance responding to common questions related to credit, credit-building and innovative solutions for increasing credit.
Network Ally Credit Builders Alliance Responds to Common Questions from the Field
Q: How are credit scores determined? How are FICO scores determined? And how are they different?
A: There is no single credit score. There are score modelers—who may be in house at the Credit Reporting Agencies (i.e., Experian, Equifax and TransUnion), but there are also independent third-party companies—such as Fair Isaac (FICO) and VantageScore. These score modelers also regularly update their risk models which results in numerous generations for each score. For example, the newest generation of FICO is FICO® Score 9 and VantageScore 3.0.
To add to the complexity, each score modeler may have many different scores—FICO has over 50 different scores alone. You may wonder why this is necessary. The answer is that those who request scores are diverse (i.e., insurance companies, mortgage lenders, auto lenders, credit card issuers); therefore, the corresponding scores are also diverse. This is because they are modeled according to the factors that each purchaser of a score deems important.
Even though each scoring model uses different algorithms to calculate their score, there are some generalities among the different factors that make up the score. The major categories are payment history, amount owed, percentage of available credit used, length of credit history, age of credit, types of credit and number of inquiries. Of all these categories, however, the one that is usually weighed the most heavily is “payment history.” Quite simply: Are bills paid on time?
Q: How often do credit companies update their reports?
A: Most creditors report their customers’ payment history to the major Credit Bureaus on a monthly basis, although some smaller creditors may not report as regularly or report to the Bureaus at all. Creditors are not required to report to the Bureaus. It is a totally voluntary system.
Q: If I believe there is an error on my credit report, what should I do?
A: If you believe there is incorrect information on your credit file, it is always a good idea to contact the creditor directly to discuss it. If it is a legitimate error, you should dispute it both with the original creditor and also with the Credit Bureau that contains the inaccuracy. One can request a free copy from each of the three major Credit Bureaus annually by going to www.annualcreditreport.com. Each report will include instructions on how to contact the Bureau to dispute anything you believe is inaccurate. You may submit disputes online, by telephone or by mail.
Q: Am I able to report payments to the credit bureaus directly? And if so, how would I do so?
A: No, the creditors are the ones who report to the bureaus. However, a major exception is with rent payments. There are third-party payments processors such as WilliamPaid and RentReporters who may report to Experian and/or TransUnion if the landlord agrees to accept the payment through the payment processing company. A future blog will discuss rent reporting in more detail. Stay tuned.
Q: What are the best ways for me to improve my score in the next six months?
A: CBA recommends concentrating on the greatest weighted factor in determining a credit score—one’s payment history. By paying your bills on time and avoiding late payments, your score can show the most improvement. If you consistently pay late, you may need to figure out why. Is it a cash flow problem (consider asking the creditor to change your due date to better align with your revenue stream) or is it a problem due to disorganization or procrastination? By discovering and putting a plan in place to avoid late payments, one will benefit by noticing an improvement in their credit score as these remedies are put into place.
Making Banking Work in Underserved Communities
By Bill Bynum, CFED Board Member on 02/09/2015 @ 09:45 AM
On Wednesday, February 4, 2015, I joined a panel of community development experts to discuss with FDIC Chairman Martin Gruenberg, Federal Reserve Bank Governor Jerome Powell and senior officials from the Office of the Comptroller of the Currency the importance of federal banking relations with regard to the expansion of bank deserts in low-income, rural and minority neighborhoods, and other issues that affect consumers and communities.
The context for my remarks are grounded in the Mid-South region of Arkansas, Louisiana, Mississippi and Tennessee—home to one out of four of the nation's persistent poverty counties (counties where the poverty rate has exceeded 20% for the last three decades). As is the case with many indices of economic and social well-being, communities of color are particularly affected. In 35 of the 39 counties in Arkansas, Louisiana and Mississippi where the African-American population exceeds 50%, the poverty rate has remained above 20% over the last 30 years. In these communities, access to financial services matters greatly.
After a job, a depository relationship may be the most important contributor to a person’s financial stability. Individuals with access to a bank have the means to save, build credit and secure financing for purchases such as a reliable vehicle, which is often necessary for work in rural areas, or for a home that helps them build net worth. Research has shown that when lower-income families have access to a bank account, they are more likely to own assets than families of similar means without a bank account. Finally, as CFED’s analysis has demonstrated, children with a college savings account, regardless of income, are more likely to enroll in and graduate from college than children who do not have an account. Unfortunately, since the recession, hundreds of banks have left low-income communities. Given these realities, I encouraged the regulators to use their authority to facilitate positive transitions for communities at risk of becoming bank deserts. Specific recommendations included placing significant weight to Community Reinvestment Act factors when analyzing potential bank closures and providing incentives for banks to invest in Community Development Financial Institutions (CDFIs) that preserve affordable services in underserved markets.
Related topics discussed by the panel included the role of mobile banking solutions that connect the underbanked to financial services, the proliferation of high cost payday lenders when banks exit a community, innovative ways to incentivize and leverage bank investment in community development, and the importance of modernizing the Community Reinvestment Act to reflect the reduced role of branch banking.
Partnerships between banks and CDFIs that serve minority and low-income populations present an important opportunity to preserve access to affordable financial services in distressed areas. The thoughtful interaction with regulators was an encouraging indication that the wellbeing of consumers and communities is an important consideration in their decisions. As the hearing demonstrated, many tools exist that can connect low-income communities to financial solutions—all we need now is the will.
Bill Bynum is CEO of HOPE and a member of CFED’s Board of Directors.
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