The Common Sense Solution Keeping Dollars in the Hands of the Poor

It’s often been said that it’s expensive to be poor.
Take for example, a problem faced by social service aid recipients in Alameda County, Calif., who receive their benefits through an electronic benefits transfer (EBT) card. The piece of plastic works like a debit card, but when cardholders use it at a bank outside their own network, they’re charged a transaction fee. Given that low-income people often have trouble finding transportation to get where they need to go (an in-network bank, for instance), it’s a sad reality that EBT card users in Alameda County racked up $60,000 in ATM fees in 2012; statewide, the cost was a staggering $19 million.
So in an effort to keep benefits in the hands of low-income families, Alameda County is setting up no-fee ATMs just where EBT card users need them: in the lobbies of social service offices.
Andrea Luqetta of the California Reinvestment Coalition, a nonprofit that advocates for better financial services for low-income people, tells the Contra Costa Times, “Alameda County supervisors have shown incredible leadership with this. Other counties have taken creative steps, but this is the most creative and practical we’ve seen, and it’s the right thing to do.”
County Social Services Agency spokeswoman Sylvia Soublet agrees, “Paying a few dollars each time you use your card might not seem like a lot. But over the course of a year that can add up to a lot of money.”
Advocates of the program add that the no-fee ATMs will be a tool to help EBT cardholders gain financial literacy.
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For Military Families Having Money Troubles, These Organizations Offer a Helping Hand

While military members are busy serving their country, their financial situation can spin out of control. Frequent deployments and moves often wreak havoc on the finances of military families — driving them deep in debt. In fact, according to a 2012 Department of Defense study, 27 percent of military families have more than $10,000 in credit card debt, compared to 16 percent of all Americans.
Besides debt, military families are prone to fall victim to scams. Case in point: The Consumer Financial Protection Bureau (CFPB) received more than 14,000 complaints from military members about fraud related to credit cards, mortgages and loans between 2011 and 2014. And sadly, the number of such complaints increased an astonishing 148 percent between 2012 and 2013.
So it’s no real surprise that the National Foundation for Credit Counseling (NFCC) found that 55 percent of the military families it surveyed feel unprepared to deal with a financial emergency. Additionally, they learned that 60 percent have turned to non-traditional lenders — such as payday loans — for temporary help, making them particularly vulnerable to abuse.
Holly Petraeus, assistant director of service-member affairs at CFPB, visited Indianapolis this month to talk about the financial problems military families face, including illegal foreclosures while soldiers are serving overseas and aggressive collection tactics. “You think you have to be strong, so you don’t want to ask for help,” she said.
The NFCC is eager to assist military families struggling with finances too, which is why they’re offering the Sharpen Your Financial Focus program to coincide with Military Consumer Protection Day on July 16.
The program includes a personal financial review for military members, a group workshop on topics such as building wealth, smart spending and buying a home, plus access to an online personal finance tool, MyMoneyCheckUp.
NFCC spokesperson Gail Cunningham said in a press release, “Stressful situations can result in poor choices, with decisions often made out of desperation. To avoid this, servicemembers should take advantage of the opportunity to improve their financial skills, thus putting themselves in a better position to face any unplanned financial circumstance that comes their way.”
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With School Debt Skyrocketing, This College is Using Email to Teach Their Students Financial Literacy

When most students take out loan after loan to pay for college, they probably have no idea how much higher ed is actually costing them. Well, until the bills start to arrive four years later.
A college education is expensive but it’s unfair to allow students who aren’t even in their 20s to make such a large financial decision — especially if they don’t understand how to handle money. In a 2012 study, about 29,000 American 15-year-olds took a test that measured their ability to manage money and make sound financial decisions, and only one in 10 earned a top score. Meanwhile, 17.8 percent didn’t even have what is considered a basic understanding of financial literacy.
This is very expensive problem — and one of the reasons why the national student loan crisis has ballooned to a staggering $1.2 trillion. (On average, student loan debt is $29,400 per borrower.)
However, one school has come up with a brilliant — and surprisingly simple — solution. Since the 2012-2013 school year, Indiana University has sent students across its seven campuses a few letters via email about the loans they’ll be taking out for the next year, Bloomberg reports.
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The idea is this: If you warn a student once in awhile about how much he or she owes, they’ll realize the financial commitment they’ve made, and perhaps learn how to borrow more responsibly.
Nursing student Natalie Cahill, 22, decided to search for more scholarships after seeing her debt letter from the school. “When you take out loans for the year, you just see a smaller number than the grand total,” Cahill told Bloomberg. “Seeing the letter definitely put things into perspective.”
So far, the plan to boost financial literacy is working wonderfully. Federal Stafford loan disbursements to the university have reportedly dropped 11 percent, or $31 million, compared to the national 2 percent drop.
“We are having more contact with the student where they can say ‘I don’t want this,’ or ‘I want less,’” Jim Kennedy, the associate vice president and director of financial aid Indiana told Bloomberg. “If they know at all times their debt, and the repayment, it helps with a lot of planning.”
Until financial literacy 101 hits every college campus, Indiana’s efforts to teach its students fiscal responsibility gets an A+ from us.
DON’T MISS: Ask the Experts: How Can We Keep From Drowning in College Debt?

Could Mentors Be the Key to Lifting Families Out of Poverty?

Countless programs have perfected the mentoring model between kids and adults. But what about a mentoring program for all adults?
For more than a decade, the nonprofit Circles USA has proved that mentors can help low-income adults thrive. Scott Miller started the organization (which pairs those struggling with poverty with higher-income coaches) back in 2000 as, according to the website, “a way to increase the capacities of communities to address poverty.” There are now local Circles branches in 23 states.
The mentors help guide their mentees through such important tasks as polishing a resume, negotiating debt repayments, setting up a bill-paying system, finding a job, and ensuring good childcare. Each week, participants meet together for support and to discuss life strategies.
Cynthia Bowers interviewed Miller in 2011 for CBS News. “If you’re in poverty in this country, it is just a day-to-day grind to get things done,” Miller said. “So very intelligent, very emotionally capable people are stuck in this cycle of non-stop problem solving. And so people coming along and lifting some of that burden is huge.”
But easing that burden is difficult. While Bowers noted that the drop out rate for the program is high — 58 percent — those who do stay involved in Circles reap big rewards: “Our research now shows that their income is going up on average 48 percent. Their assets are going up by 115 percent and their welfare is going down by 36 percent.”
In December, the Circles program in Coshocton, Ohio graduated its first class of leaders who will guide their own Circles groups. One of the new leaders is Larry Stottsberry, who told Mark Fortune of the Coshocton Beacon, “Being a veteran, being out of the military, and thinking you can be successful, sometimes you get down in a rut, something had to bring me out of it. This group brought me out…This is more about showing people that are struggling that you care about them when you are together. It’s more about helping each other out even if you don’t have anything to help them out with. It’s like my mom and dad always said, ‘Even though you don’t get anything for Christmas, it’s being there and sharing love.'”
With generous people like Larry Stottsberry signing on to help those less fortunate then themselves every year, the circle of success is bound to continue.
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Can Comic Books Help Spread Public Safety Messages?

It’s a paradox of public safely: often those most in need of learning about health and safety risks and solutions are the most difficult to reach. They may not even be able to read.
The answer may be pictures — they’re worth 1,000 words, after all. Specifically, comic books, with easily understood drawings and messages that appeal across generations.
Enter Miguel Lopez and his wife, Helen Anaya, of Chandler, Ariz. Lopez used to work for a bank, and he remembered counterparts in Mexico using comic books to teach customers about saving and investing. The comics reached those who couldn’t read well.
Lopez and Anaya thought, why not bring this idea to the U.S.?
And so a genre that typically entertains kids and collectors may now reach a whole new audience — with some of the most important lessons of their lives.
The couple launched Storynamics in 2006, and they’ve hooked up with governments, schools, and other organizations to produce comic books about serious topics: hand washing, the West Nile Virus, water safety, diabetes, even how to deal with bat bites. The comics are printed in Spanish and English, with pictures to help reach those who struggle to read.
“One of the… significant challenges we are trying to address with the stories is literacy about health issues,” Lopez told Aaron Rop of AZCentral. “When you are not comfortable reading, you miss out on many things and many of those things are important to your health.”
Storynamics has produced and distributed over 240,000 comic books in 16 states. The comic book approach appeals to many local governments, because they can provide them to families via their children. Their appeal to kids is universal.
Among the project’s smart moves: the kids get the books in school, then bring them home and beg their parents to read. Few parents can resist their kid coming home excited about a gift from school, begging for Mom or Dad to tell a story.
“They go to their parents and they say, ‘Dad can you read this for me? Look at what they gave me at school’,” Lopez told Rop.
With the help of Storynamics comic books, soon it could be the kids helping their parents to eat right, exercise and get to bed early.
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Can a Credit Card Actually Help Borrowers Escape Debt?

Chances are, you’re well aware of the dark sides of a credit card: High interest charges, costly late fees, and difficult-to-understand disclosure statements. But for many low-income American families, credit cards are the only way that they can fund their life — using them to pay for food, transportation costs, and medical expenses. Before long, these expenditures (plus added interest charges) can balloon to several times their initial cost, leaving these people with a burden of debt that’s next-to-impossible to escape.
According to the Center for Responsible Lending, credit card debt in America has increased by $172 billion since 2000, now standing at a staggering $850 billion. Justine Zinkin, CEO of the non-profit Neighborhood Trust Financial Partners, doesn’t think it has to be this way. That’s why her organization launched the Trust Card, a credit card that helps users pay down their debt. “Once you are in debt, it’s hard to get out,” she told Pop!Tech.
Trust Card users must agree not only to consolidate all their credit-card debts onto the Trust Card, but also to not open any more high-interest credit cards. In exchange, they will receive consumer credit at a more reasonable interest rate than a typical credit card. Additionally, they will have the opportunity to meet with a Neighborhood Trust financial advisor to work out a payment plan. (Most agree to maintain their monthly payment, or even increase it, until their debt is eliminated.) Last year, the Trust Card began with 50 cardmembers. Thus far, all of them have met their payment obligations.
“Our goal is to launch enough cards in 2014 to confirm our hypothesis that when supported with financial counseling and fair alternatives, these cardholders can reduce or eliminate their credit-card debt, begin to build savings, and ultimately take advantage of other savings and credit programs offered by their banks,” says Zinkin.
While the credit card companies continue to reap huge profits — 5.4 percent compared with 1.2 percent for all commercial banks in 2012, according to the Federal Reserve — it’s good to know that someone is looking out for people who are struggling to free themselves from debt.
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Here’s How an Ancient Banking Technique Can Help America’s Poor

Have you ever heard of a money pool? Until now, we hadn’t either.
A money pool is a technique that people worldwide living in poverty (or close to it) have used for centuries to save for large expenses. Here’s the way it works: Each member of the pool contributes the same amount of cash each month. Then, they each take turns receiving the lump sum.
Francisco Cervera, a resident of Phoenix, saw the effectiveness of a money pool when funds were tight and he needed a computer for school. His mother saved for it by contributing to a money pool in San Diego that she ran (she was responsible for not only reminding people to pay, but collecting their contributions, too).
While money pools are a good idea since they provide access to savings for people who can’t use banks, Cervera thought they could be improved. So as an adult, he started eMoneyPool with his brother Luis. The online tool formalizes the money pool and provides guarantees for participants in case anyone misses a payment.
New users to eMoneyPool are limited to $100 contributions, and each savings group consists of five participants. The website verifies users’ identities, and even works to establish a credit history for them through their transactions — helping them work towards being able to use a more traditional financial institution in the future. “We are creating a bridge for our users to lending institutions, but we are doing it in a way that is comfortable and familiar to them, with money pools,” said Cervera told Pop! Tech.
“Saving money by yourself is a nice idea. But when you are living at the poverty level, everything is drawing on your cash,” said Cervera. “Money pools change the idea of saving because you are saving as a team…It changes the desire to save from a want to a need. People think, ‘Now I have to put that money away because the group is counting on me.'”
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Will This Oklahoma School Program Boost Our Economy?

Anyone who’s ever found it difficult to file their taxes or manage their bills will appreciate what Oklahoma’s schools will soon be doing. Starting this May, Sooner State students will learn skills that prepare them for financial responsibility.
As the NewsOK reports, following state state legislation passed in 2007, Oklahoma students “must demonstrate an understanding in banking, taxes, investing, loans, insurance, identity theft and eight other areas to graduate.” And teachers are required to certify students’ working knowledge in each area. The requirements will be implemented from the seventh through 12th grades and schools have the option of using curriculum provided by the state Education Department or whatever they choose, Amy Lee, the executive director of the Oklahoma Council on Economic Education told the publication.
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Oklahoma’s move to teach financial literacy sounds like a no-brainer if we want to prepare students with skills outside of reading, ‘riting, and ‘rithmetic. It’s also important to ensure that future generations avoid financial blunders when we’re still reeling from the 2008 economic crash—not to mention our ballooning student loan debt, which has surpassed $1 trillion.

What One Guy Did When He Saw Poor Families in His City Weren’t Getting a Fair Shake

Mark Koller didn’t like the way payday loans can send low-income families into a downward spiral of debt. In his state of Nebraska, payday lenders charge 400 percent interest annually on emergency loans, with an average repayment time of 212 days. The terms are terrible, but low-income people often have few other options when they’re in a bind. So Koller is helping to form the first credit union for low-income families in Lincoln, Nebraska, offering an alternative to the 44 payday lenders operating in the city. The bank will be called Community Hope Federal Credit Union, and it’s already assembled a board and received approval from the federal government to proceed. If Koller and his allies succeed, the institution will become one of 2,000 low-income credit unions in the nation.
Community Hope Federal Credit Union plans to offer loans of up to $5,000 for six months or a year. Patrons will be offered financial literacy education opportunities so they can learn how to make a budget, save, and work toward owning a home.
Koller, who will manage the credit union, is seeking donations to raise $300,000 in financial backing. As he told Nancy Hicks of Lincoln Star Journal, when people use payday loans, “It’s steep, pretty dicey, and you can fall pretty fast.” Here’s hoping the Community Hope Federal Credit Union will be offering a smarter alternative to low-income Lincoln families soon.
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Teaching High School Kids How Not to Lose a Fortune

Raise your hand if you remember that time the Kardashian sisters got sued for racking up $120,000 in charges on their employer’s credit card. No?
Well, for the high school students participating in the Chicago chapter of the financial-literacy program MoneyThink, the celebrity snafu serves as a teachable moment. In a seminar called The Good, the Bad and the Ugly of Plastic Money, a MoneyThink mentor uses the reality stars’ mishap to help teens understand how important it is to create a budget, especially to keep from spending money they don’t have.
The lesson seems fairly obvious: If you don’t want to end up in a financial hole, you should know how much money you’re earning, and not spend more than that. But “there’s a difference between knowing something and doing something,” notes Sarah Gordon, vice president of nonprofit investments at the Center for Financial Services Innovation (CFSI) in Chicago, MoneyThink’s biggest funder. Gordon also sits on MoneyThink’s board. “I know I shouldn’t eat bacon cheeseburgers, but sometimes I do. I shouldn’t speed when I drive my car, but sometimes I do.”
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The goal of MoneyThink is to close the knowing-versus-doing gap, and to teach young people, especially those who come from low-income backgrounds, a more sophisticated way to think about money. By all accounts, they need the help: According to a national report from the Financial Industry Regulatory Authority (FINRA), millennials aged 18 to 34 have significantly lower financial literacy than older cohorts. When asked five standard questions about personal finance, FINRA found in 2012 that millennials answered 2.3 questions correctly, compared with 3.3 of those 55 or older. A 2009 report from the National Endowment for Financial Education found that in a survey of about 2,000 college students, 73 percent had engaged in “risky financial behaviors,” like taking on additional debt after graduating from college when they were already sandbagged with hefty student loans.
“Every headline for the past five years has been talking about how broke our generation is, how the income gap and the wealth gap continue to grow, and how low- and middle-income Americans are becoming more and more marginalized,” says Ted Gonder, 23, a co-founder and executive director of MoneyThink.
The nonprofit, born in 2007, started as a mentorship program at the University of Chicago, whose home city has one of the highest rates of extreme poverty in the nation. Gonder and four of his fellow students started mentoring poor kids in the neighborhood, with the goal of increasing financial literacy. The program gained traction quickly, and before long the founders were at the helm of a nationwide student movement. There are now 30 MoneyThink chapters on college campuses in low-income areas in 10 states, including the University of Southern California in Los Angeles, Columbia University in New York City and Washington University in St. Louis. In 2012, President Obama recognized MoneyThink as a “champion of change,” and in October the program won $100,000 in funding through MassChallenge, the country’s largest business accelerator.
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Gonder buzzes with ambition and energy, his mop of brown hair never perfectly in place. In a sea of Gen Y’ers with a vision, his relentlessness stands out. “We’re on a hunt for the holy grail of youth financial-education effectiveness, and we won’t stop until every student in America enters adulthood with the knowledge, skills and tools to navigate real-life financial decisions on the pathway to prosperity,” he says.
MoneyThink is a modern-era money-management program; its curriculum goes beyond teaching students how to balance a monthly budget or checkbook (though they do that, too). The nonprofit focuses on value creation through entrepreneurship and personal branding. In program units titled Marketing Yourself, Networking, Jobs and Entrepreneurship, students create a resume and fill in a worksheet that helps them articulate their character assets and what skills they personally bring to the table. MoneyThink also strives to instill in students the confidence that they have the skills they need to succeed — confidence itself being a real asset in a marketplace that values self-promotion.
“What it takes to get and keep and create a job in the 21st century is vastly different than it was 100 years ago, 50 years ago or even 20 years ago,” says Gonder. “Even if you work for a big company or government, your job is not secure, and pensions are a thing of the past. Self-reliance has to be at the front of mind and the front of action.”
MoneyThink mentors, who are all college-age volunteers, make good use of current events, pop-culture case studies and technology (stay tuned for a MoneyThink smartphone app coming soon) to engage their 11th- and 12th-grade pupils. Classes are structured in a small group setting, with a 5-to-1 student-to-mentor ratio, where mentors can get to know students personally, and customize their lessons. The program lasts 21 weeks, allowing relationships of trust to form between the college and high school students. The fact that they’ve made it to their junior and senior years of high school in itself demonstrates that they have what it takes to succeed, explains Gonder.
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“I have a goal each day,” says Nnaji Iwunza, 19, a MoneyThink graduate from Chicago who, after being accepted to 21 universities, many on full scholarship, is currently attending Baldwin Wallace University and studying marketing. “I set myself a spending limit, and have goals for savings.”
Nnaji, who is also a forward for the university basketball team, says that most people refer to him as “Nnaji, the basketball player,” and requests of this reporter, “Can you please put ‘Nnaji, the student?’ ”
MoneyThink tallies between $300,000 and $500,000 in funding each year from CFSI and other firms, including Blackstone, Pimco, State Farm and Chase. The nonprofit has plans to become self-sustaining by creating a membership base of alumni who would pay for access to an internal professional leadership network, job board, events and the like. Gonder is also hoping to make the mobile app profitable, though he’s still trying to figure out how. He has ambitious goals to scale up in the meantime, aiming to establish MoneyThink chapters in every city in the United States by 2019.
CFSI’s Gordon thinks the program has potential to grow while keeping costs low. Financial coaching is expensive, but MoneyThink is driven by a volunteer movement of young people teaching other young people. That’s an infinite and renewable resource.
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