Household Financial Security Framework
Household Framework Components
The Framework describes the key variables, activities, conditions and supports that allow households to:
People need to have a wide range of knowledge and skills in order to successfully navigate job markets, manage their personal finances, and succeed in the labor, business and financial markets. They gain these skills through formal education (K-12, postsecondary education and beyond), financial education and counseling, and training on purchasing and maintaining assets (homeownership counseling or small business training).
Households obtain income generally through wages, business profits, investment income and public benefits. The ability to maximize their income depends on the quality of those opportunities, having access to the benefits for which the household qualifies, and the knowledge and skills to navigate and access available income opportunities. In order to consistently perform their jobs and operate their businesses, households also need access to reliable basic goods and services, such as food, housing, transportation, child care and medical care.
In order to save, households must have income left over after meeting basic consumption needs – such as food, housing, transportation, child care and medical care – and paying down debt. They also need the budgeting skills and financial knowledge necessary to manage their finances and credit and reduce debt. To convert that disposable income into savings, households must also have knowledge of and access to convenient, low-cost savings products and structures, such as transaction and savings vehicles, short-term credit products, and infrastructures like direct deposit and automatic enrollment in savings plans. These infrastructures can support continuous savings behavior, helping households grow savings over time.
Households typically invest and grow their wealth by leveraging their savings accumulated over time with debt financing and public incentives in order to purchase assets such as a home, higher education, financial investments, or a business startup or expansion. In addition to their own personal savings, their ability to make these asset purchases depends on the cost of the asset they are purchasing, their credit score and ability to access affordable financing, their access to public incentives (like down payment assistance, government loan guarantees, and tax benefits for homeowners and retirement savers), and training that supports specific asset investments, like homeownership counseling, business training, academic preparation, and investment advising and financial coaching.
Throughout the cycle, households need protection against loss of income or assets, extraordinary costs, and harmful, discriminatory or predatory external forces. Financial setbacks due to loss of income- or wealth-building assets can be significantly diminished or even avoided if households have access to adequate, affordable and fairly priced insurance products (such as health, unemployment, disability, property and life insurance), as well as consumer protections from discriminatory, deceptive or predatory financial products and practices, and asset preservation opportunities such as foreclosure prevention programs and counseling.