Policy & Practice June 2015

FINANCIAL CAPABILITY continued from page 11

As families struggle with various financial challenges, policymakers and practitioners need to provide new, meaningful solutions that increase overall financial well- being. The social service system provides the scale and the opportunity to expand the access to and the skills and knowledge about our financial system.

providing financial capability services to their participants or clients. The guide includes a series of tools to guide management staff in a practical way through the decision-making and design process (See Figure 2). Part of this design process could involve expanding partnerships with employers and banking institutions located in the community. Both institu- tions could play a key role in serving financially vulnerable families in their communities. As individuals and families interact with different institu- tions during a financial crisis, whether it is an employer, a social service agency, a nonprofit organization, or other community partner, there is a way to ensure that they have the resources and support they need to secure various aspects of their financial futures. Youth Example: My Path My Path provides a suite of finan- cial services targeting participants of various youth employment and youth development programs who are earning their first paychecks. Using a hands-on, experiential approach with an emphasis on peer learning and support, the program helps youth develop healthy financial habits and behaviors. The program also uses the principles of behavioral economics, such as auto- matic deposits and the use of incentives and prizes to encourage savings. In 2011, My Path tested this suite of services for low-income youth participating in the Mayor’s Youth Employment and Education Program (MYEEP). 2 Of the 280 participating youth, 31 percent lived in households with annual incomes between $10,001 and $30,000. A little more than half of the youth came from households that were utilizing public assistance, such as Temporary Assistance for Needy Families (TANF) or Medicaid. In total, 280 savings accounts were opened. For 60 percent of these youth, this account was the first they owned. At the end of the six-month pilot period, 247 youth had saved an average of $735 in their accounts. The My Path program receives both state and private dollars

and leverages an existing workforce program in California. Adult Example: Accessing Financial Capability Outcomes (AFCO) Pilot The AFCO research pilot 3 paired access to a basic checking account with an average of one to two hours of financial counseling for a population of adults who were transitioning off of public benefits in New York City. All 1,034 participants were offered safe, affordable bank accounts with direct deposit, and half were offered free one-on-one counseling with trained providers through New York City’s Financial Empowerment Centers. Overall, participants who received the one-on-one financial counseling were more likely to stay current on debt payments at the 6- and 12-month follow-ups. Moreover, the results dem- onstrated that integrating access to accounts into the transitional workforce program dramatically increased the banked status of the entire population. The AFCO pilot demonstrated a suc- cessful combination of services that was delivered through a partnership between a local workforce program, a banking institution, and a state finan- cial empowerment agency. Social Service Agencies Can Create Pathways to Careers and Financial Stability With middle-class and working families’ wages stagnant or dropping (average annual pay was $49,808 in 2013; $203 less than in 2012) and many jobs lacking important benefits such as health insurance, retirement accounts, paid sick leave, and paid

vacation, a job often is not enough to reach financial well-being and get ahead. As families struggle with various financial challenges, poli- cymakers and practitioners need to provide new, meaningful solutions that increase overall financial well-being. The social service system provides the scale and the opportunity to expand the access to and the skills and knowl- financial capability is a practice that holds promise for social service orga- nizations—both to create pathways to careers and financial stability for their clients, and to remove financial barriers that may be getting in the way of achieving their existing program- matic goals. Reference Notes 1. Sendhil Mullainathan and Eldar Shafir, Scarcity: Why Having Too Little Means So Much (New York: Henry Holt, 2013). 2. Vernon Loke, Margaret Libby and Laura Choi, MY Path: An Innovative Initiative to Increase Financial Capability Among Economically Vulnerable Youth, Mission SF Community Financial Center (San Francisco, CA: MissionSF, 2011), http:// csd.wustl.edu/Publications/Documents/ RB12-44.pdf. 3. Kasey Wiedrich, Nathalie Gons, J. Michael Collins and Anita Drever, Financial Counseling & Access for the Financially Vulnerable: Findings from the Assessing Financial Capability Outcomes (AFCO) Adult Pilot (Washington, DC: CFED, 2014), http://www.treasury.gov/resource- center/financial-education/Documents/ Financial%20Counseling%20and%20 Access%20for%20the%20Financially%20 edge about our financial system. Integrating services that build

Vulnerable%20-%20Findings%20 from%20the%20Assessing%20 Financial%20Capability%20O- utcomes%20%E2%80%A6.pdf.

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