CFED Newsletter: February 2015
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 last week 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.
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!
Last Friday, a bipartisan group of more than 100 Capitol Hill staffers, reporters, advocates and nonprofit leaders came together to focus in on the politics, policy, research and real-life impact of the Earned Income Tax Credit (EITC) and Volunteer Income Tax Assistance (VITA) programs. The event, co-hosted on Capitol Hill by CFED and Tax Credits for Working Families, was headlined by two illustrious speakers, one a policymaker and the other an academic. First to speak was Senator Sherrod Brown (D-OH), a long-time advocate for both EITC and VITA, as well as low-income working Americans more generally. Senator Brown spoke about the impact that these programs have on working families in Ohio and throughout the country, and described some his proposals for expanding their reach.
Kathryn Edin, Professor at Johns Hopkins University, followed Senator Brown’s remarks with an illuminating presentation of some of the findings from her new book, It’s Not Like I’m Poor. Professor Edin and her co-authors spent years on their research, conducting in-depth interviews with over a hundred EITC recipients. The final product is a page-turner that is moving, insightful and prescriptive—with a set of federal policy reforms that could greatly expand the impact of tax-time programs for low-income working individuals and families. As Professor Edin and her colleagues demonstrate through stories and data in their book, the EITC is much more than an income-boosting program—it’s also a savings program, an investment program and an economic mobility program. As Edin and her co-authors put it, “The EITC not only eases the economic burdens of the working poor, but motivates asset building and debt reduction. It does so in a way earnings or other forms of income our families receive usually do not. As a result, the EITC is uniquely positioned to boost parent and child well-being.” In short, we should bring more recognition to the EITC for what it is: the largest asset-building program in the country.
Following Professor Edin’s remarks, Friday’s event continued with a panel discussion that brought several different perspectives to bear on EITC and VITA—those of researcher, service provider and program recipient. Professor Edin joined the panel along with:
- Chye-Ching Huang, Senior Tax Policy Analyst at the Center on Budget and Policy Priorities, a Washington, D.C.-based think tank.
- Barb Mantegani, Board Member and former President of Community Tax Aid, which runs VITA sites throughout the Washington, D.C. area.
- Laurie-Anne Sayles, former EITC recipient and Associate Investigator at the National Institutes of Health.
Greg Kauffman, former poverty policy journalist for The Nation and current Editor of TalkPoverty.Org, moderated the panel discussion on the politics surrounding EITC and VITA, and the audience questions that followed.
Several high-ranking Members of Congress have recently endorsed the EITC, including Representative Paul Ryan (R-WI), Chair of the House Ways & Means Committee, and House Speaker John Boehner (R-OH). While the path forward for EITC and VITA reform remains unclear, the energy in the room on Friday was palpable. These programs are having an enormous impact on the lives of low- and moderate-income families, and there is a significant opportunity for the assets field to develop and advocate for thoughtful reform. We hope that this event is one step in that direction.
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.
Webinar: Talking with Taxpayers
Tuesday, February 10 | 1-2 pm EST | Register here.
Webinar: Financial Capability Programs Serving Native Communities
Thursday, February 12 | 2-3 pm EST | Register here.