New Programs Target People On Financial Fringe

New Programs Target People On Financial Fringe

May 15, 2002
The Philadelphia Inquirer
by Jeff Gelles

John Caskey has spent a career studying the financial habits of the poor, so it was fitting that he set the stage yesterday for a discussion of two new and practical programs designed to bring lower-income consumers back from the financial fringe.

Both are in the start-up phase, but both have shown great promise in other cities that have tried them. The prospect of bringing them here drew 80 people from community and financial institutions to the Federal Reserve Bank of Philadelphia to hear how they work.

One is "America Saves," which began two years ago as "Cleveland Saves" and will get some sort of local name here, too. It's a mix of financial education and "social marketing" - something akin to a public-health campaign - designed to promote financial literacy along with the benefits of building even a very small nest egg. The other, "Get Checking," aims at helping people on the fringe get access to mainstream bank accounts and learn how to manage them. Its special target is those closed out of checking accounts because they've mishandled them before, who can get a second chance if they pass a short course on the nitty-gritty of bank accounts.

Both programs start from a premise highlighted by Caskey's research: Though we're all at risk of financial setbacks and even outright frauds, the poor suffer them much more than the rest of us, and have a tougher time recovering.

But both go a step beyond the usual answers, and turn to something that many low-income people are skeptical of: encouraging them to save, and to manage their money with accounts in banks and credit unions.

Caskey, a Swarthmore College economist, says low-income consumers face a Catch-22. They need financial services, but they often pay more for less. So they struggle that much harder to keep their families afloat, and are swamped by waters the rest of us could navigate.

A great many things cost more if you're poor, from groceries to insurance to credit. And a fundamental problem - which effectively raises the price of everything else - is the cost of cashing checks and paying bills without a bank account.

So what's the answer? About five years ago, Caskey and Stephen Brobeck, executive director of the Consumer Federation of America, began talking about the importance of understanding low-income consumers and developing a new approach that emphasized something other than keeping them barely afloat.

Their talks, and Brobeck's discussions with others who shared his concerns, led to a Ford Foundation grant, and the development of America Saves' first pilot, Cleveland Saves.

Brobeck says poorer consumers face "a deadly combination of pessimism and marketplace temptation": They don't believe they can build wealth - wealth is about as foreign a term as they can imagine. At the same time, they're constantly tempted by offers of credit and by the things money, or credit, can buy.

In two years, Cleveland Saves has begun turning that around. About 2,000 people have attended its workshops, and 80 percent have taken the next step: enrolling in a program that provides financial coaching and helps them develop a plan. The ultimate goal is regular, automatic savings.

Similar programs have been started in several other cities, and Brobeck was here yesterday - at a conference aptly titled "Building Wealth, Not Debt" - to encourage Philadelphia's fledgling effort, spearheaded by the conference's cosponsor, the Consumer Credit Counseling Service of Delaware Valley.

Patty Hasson, president of the nonprofit counseling agency, says her hope is to bring banks, community groups, labor organizations and others into a broad-based coalition behind a social goal that will help everyone. The more people save, even in small amounts, the more they're able to avoid personal disasters that have broader social impact.

If your car breaks down and you have money in the bank to cover a repair, you don't have to miss work, your son can get to the doctor, and you have one less reason to miss a conference at your daughter's school.

Encouraging low-income people to save is no panacea. Caskey mentions increasing the Earned Income Tax Credit and enacting national health insurance as two other valuable policy prescriptions. But Caskey's not holding his breath till those things happen, and neither am I.

Meanwhile, there's no reason to keep people on the financial fringe if programs like America Saves can help.

Contact Jeff Gelles at 215-854-4558 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Consumer Watch appears Sundays, Wednesdays and Saturdays.