MAF Sponsors SB 455: CA Financial Empowerment Fund
In the U.S. there’s a wide array of financial products and services to help consumers build their financial lives. In addition to banks, there’s a whole Financial Planning and Advice industry to assist consumers in making sound financial decisions.
But for low-income Americans, access to this advice and support — service that could help them manage their complicated financial lives — is limited, at best.
In 2018, the U.S. spent $670 million in financial education programs for low-income consumers — an amount equal to a little over 1% of the Financial Planning and Advice industry’s total revenue that year ($57 billion). This gap in spending illustrates just how inadequately we support consumers that are financially vulnerable, marginalized and underserved by mainstream financial institutions and the advice industry.
The resources to provide higher quality financial support to these communities do exist. It’s just a matter of redistributing existing resources in a more effective way.
Mission Asset Fund (MAF) is sponsoring SB 455 in California to create a $1 million fund to support a statewide infrastructure of nonprofits delivering effective financial education and empowerment tools that help consumers improve their financial well-being.
SB 455 enables the state to play an active role in supporting effective financial education and empowerment tools. In fact, it would raise standards of how these efforts are designed and delivered by redirecting fine and penalty revenue collected through enforcement actions taken against payday and installment lenders. This is why it’s important more than ever before to build support for a statewide infrastructure that provides financial support for all communities, particularly for those often ignored by mainstream financial institutions.
Financial well-being is not a final destination, nor a singular goal that individuals need to reach. Rather, financial well-being is a continuous state of being. It’s about being able to meet all of our financial needs and obligations throughout the course of our lives. And to do so, we require effective tools and advice in navigating complicated financial systems.
Even when we think our financial lives are set, something out of our control can happen to shake our confidence and financial well-being. Take for example the financial health of federal workers who were forced from their jobs during the 5-week long government shutdown; 25% of which reported going to food banks to put food on the table and 42% of which took on new debt in order to meet their day-to-day expenses. The longest government shutdown ever laid bear this simple fact: even those with the most secure jobs are weeks away from being financially vulnerable.
SB 455 is momentous for MAF but it’s an even bigger moment for the financial security field. If passed, it will allow us to set high standards of how to design and deliver effective financial education.
MAF, like many nonprofits, provide effective financial products and services that are making a difference. In the past decade, we’ve learned that pairing safe and affordable products with financial education allows people to achieve impressive outcomes in their financial lives. When clients apply to our Lending Circles program they gain access to free online financial education courses, and 45% of first-time loan clients watch more than the minimum requirement. Lending Circles clients are then able to improve their credit scores by an average of 168 points, pay down high-cost debt by $1,000, and repay their loans at a 99.3% repayment rate. Many of our clients, like Boni (read his story here), are able to apply the concepts they learn online — whether it’s about credit or homebuying — to build their credit and expand their access to the financial services world.
As leaders in our field, we need to have an honest conversation about how we engage communities around financial education and empowerment.
Financial products and services have to be delivered effectively in order to have a positive transformational impact. We found that 91% of first-time MAF loan clients opted to learn about a product they already had. This indicates that people are hungry to learn more about the products they’re using and that financial education is a process of lifelong learning. People want to know how to use the products available to them so they can increase their financial well-being and we can support that need by offering relevant financial education programs. SB 455 would provide nonprofits at the forefront of creating pathways to financial empowerment the opportunity to build a collective power that leads to a positive change in how our financial systems function.
Everyone, both those that are included and excluded from the financial mainstream systems, has much to learn about financial products and services. Nothing about navigating complicated financial systems is intuitive. We need to think about how to deliver financial education effectively — in a way that motivates and uplifts the financial growth of all communities.
Financial well-being matters, for us and our communities. SB 455 will prioritize the financial health of consumers in California.
We should all be pushing for changes to make financial wellness a reality for all and SB 455 is a stepping stone to make it happen. MAF encourages you to start taking action in support of SB 455 by sharing new articles and blog posts (like this one) about the bill with your networks.