Prioritizing Asset Building Over Financial Capability
Getting money in the hands of hardworking households is the quickest and most direct way to ensure financial stability for all.
Hello Friends, how are you?
Today I want to take a walk down memory lane with you and discuss the slow transition when “asset building” programs morphed into “financial capability” programs. I think that it is time to bring asset building programs back.
Chapter One: Asset Building (My Dear Old Friend)
As regular readers know, I started my long-and-winding professional journey running an Individual Development Account (IDA) Program for refugees. Five years, 350 households, $2 million in assets generated. It was awesome, if I do say so myself.
So what made it so great?
In short, we trusted our participants to make choices that were best for themselves and their families.
For a more long-winded answer:
As we started our program, we looked at our target audience: Refugees who had arrived in the United States in the last five years who were residing in metro Boston. Since Boston is an expensive city, many refugee resettlement agencies (like the one I worked for, the International Institute) tended to resettle family units that contained as many people of working age as possible so that there were more workers to contribute to paying the rent and other household expenses.
IIB’s clients had come from a variety of life experiences, from highly educated professionals escaping persecution from their home country governments, to single moms from rural villages with young adult daughters (because their husbands and sons had been murdered). The one attribute that they had in common was the burning desire to make a life for themselves and their family members that was better than the one they had left.
So what was our role in this process of them becoming Americans? First and foremost, the Economic Development department’s job was to get our participants in the most stable financial situation possible. In administering this federally-funded matched savings program, participants could save for one (or more) of five allowable “assets”:
First home
New or expanded business
Post-secondary education
Car (to assist in getting to work)
Computer (to assist in accessing education)
Nice list, right? We felt pretty good about these options. And beyond the asset choices, the savings match was 2:1, meaning that individuals could earn a $2,000 match on $1,000 in savings, and families could earn a $4,000 match on $2,000 in savings.
Again, not bad in 2000, but this tidy sum all by itself was not going to fully finance homes, businesses, and college educations, so we knew that we had to layer in other resources that we sourced in the community, such as specialty first-time homebuyer mortgages, microloans, and educational grants.
So then what? We offered a monthly calendar of financial education modules that remained constant from month to month. Participants were required to attend each of the four modules, but it did not matter in which order they attended them. And they needed to have taken each module before exiting out of the program. They could choose to attend these four modules as close together – or as far apart – as their schedules allowed. Each module consisted of a “welcome to the financial systems of America” type of content, such as introduction to financial institutions, introduction to credit, introduction to taxes, and introduction to insurance.
Beyond that, participants were required to pursue one more avenue of education specific to their chosen asset, such as taking a homebuyer education class, meeting with a microenterprise counselor, or seeking information at the local higher education resource center.
And then, we got out of their way.
We trusted our participants to take a “choose your own adventure” stance to completing our program. They chose the asset goal that made the most sense for them. They chose the rate at which they saved. They completed their four educational modules at their own pace. And they took advantage of asset-specific resources in the community that helped them reach their goals in a more efficient and effective way.
Again, we trusted our participants to make the right choices for their lives, and we prioritized “asset building” over behavior change.
Chapter Two: Financial Capability (When You Take the “Asset” out of Asset Building)
Now I want to take describe what I see at the financial capability programs that I consult for today. And I want to be clear up front: These are hard-working staff at established agencies that are doing the best they can with limited resources.
Have I been clear?
Since their introduction in 1999, matched savings programs have been slowly stripped to the bone, as most funders (government and philanthropic) have decided that they are just too expensive to run. I mean, giving away $2,000 or $4,000 to hard-working households?! What? That’s crazy talk. Instead, they aim to do the most good for as many people possible, meaning that now no one is getting what they need.
So what I see nowadays is financial capability programs that offer a combination of financial education, counseling, and coaching. Some have links to financial products, homebuyer education, or workforce development. Some are co-located with other like-minded programs, and a few are even offered at affordable housing complexes so that assistance is literally steps away from the client’s door. But the one thing that is missing from the majority of these programs right now is…money.
When your bread-and-butter professional service is limited to information and support, it is really hard to get your participants to the next rung on the economic ladder (is it just me, or can you picture Sisyphus right now?).
Your clients might get referred to you or respond to your marketing efforts, and they may appear highly motivated when they first enter your services. But then reality sets in and the future does not appear as bright as it did in the beginning. And for programs that are more prescriptive in the service that they offer (mandatory attendance, sequential curriculum, required sessions of butt-in-seat, etc.), this leads to challenges with retention.
Does this sound familiar to you?
Please don’t get me wrong. I am not blaming anyone for a program that earnestly offers financial education, counseling, and coaching. Heck, I have worked for projects like this myself! What I am saying is that without a more significant contribution of money from funders (and what I mean by “money” is dollars that go directly into the hands of your participants), we are going to continue to perform this ineffective ritual of pushing the boulder up the hill.
Chapter Three: Instead of Boulders, Push Equitable Policies
So, Friends, after this glum assessment of where our field has slowly morphed in the past 20+ years, where do we go from here?
While I am not a public policy professional (thought I do send regular emails to my elected officials!) I want you to think about what you can do to promote polices at the local, state, and federal level that help hard-working households to build assets.
For inspiration check out these recent posts:
Closing The Racial Wealth Gap Supports Everyone
"Never Let a Good Crisis Go to Waste": 5 Steps Essential to Strengthening America's Working Families
A Welfare State Does Not Make You Lazy
And check out these active players:
Shout-out to a local organization that is promoting a progressive asset-building policy agenda, the Minnesota Asset Building Coalition.
Another go-to favorite is Prosperity Now’s Advocacy Page.
