Want People to Make Better Financial Choices? Give Them Better Financial Choices
When it comes to financial health, the choices you make are only as good as the choices you have
“The choices people make are the choices people have.”
I’ve been on a search to understand how the health field approaches behavior change, to find lessons for our financial work. In reading the remarkable story of Louisville, KY — and especially the personal story of Steve Tarver, CEO of the Louisville YMCA — this remark struck me.
While Steve wasn’t talking about financial health, I think his words are as true in our financial lives as they are anywhere else. When it comes to the ways in which people manage their money, the choices people make are only as good as the choices they have. I believe the challenge we face, then, is how we can change the choices people feel are available to them.
Last month, I had the pleasure of speaking from the mainstage at CFED’s Assets Learning Conference, which brought together 1,300 professionals and 350+ speakers to share ideas about how we can help people take control of their financial lives and build their financial well-being. I shared three lessons that we’ve learned over the past year as we’ve taken What It’s Worth on the road that will effectively change the choice for millions of financial vulnerable Americans.
Three Ideas to #ChangeTheChoice:
1: Creative partnerships expand the scale of our services.
To understand the potential of creative partnerships, think about Individual Development Accounts, or IDAs. These special savings accounts encourage people to save for a long-term investment, such as education or homeownership, by matching the deposits low-income savers make. About 97,000 people have opened an IDA over the past 15 years.
Empowering 97,000 low-income savers is no small feat. But annually, more than 10 million people enroll in community colleges. Imagine what it would be like if we could get them all IDAs. If we change the choices for community college students across the country by equipping them with an IDA, 10 million students take the first step on the pathway of lifelong financial well-being.
Financial coaching offers another opportunity to change the choice. The recent coaching census released by the Asset Funders Network and the Center for Financial Security at UW-Madison showed that financial coaches are reaching 10,000 clients a month — an amazing accomplishment. But why can’t we reach the 17 million families that are in the child support system? Think about it — you have a moment when families are sitting down and discussing cash flow, money is exchanging hands and budgets are changing anyway. What if we were able to deploy financial coaching within that system? We could change the choices for 17 million families.
Community tax preparation sites are another great example. Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs provided 3.7 million people free tax-preparation services last year. Some of those sites were located in federally qualified Community Health Centers — the frontline of primary and preventive care for low-income, un- and under-insured people. But something many people don’t realize is that these centers serve 24 million people a year on average. Imagine the potential: that’s one in 13 Americans. What would happen if every Community Health Center operated a VITA or TCE site? We would change the choice for 24 million taxpayers.
Here’s the bottom line: creative partnerships pay off, and we need more of them. Financial coaching, matched savings, community tax prep and a host of other programs could change and expand the choices people have when it comes to their financial lives if they could be offered through strategic and creative partnerships.
2: We need to show up when people are making choices.
Key life choices have many financial implications. We know this intuitively, but we sometimes take for granted just how significant these moments can be.
Consider a few examples. First, imagine the single mother making a choice to go back to school. She’s grappling with how she will pay for that degree or certificate, how she will pay for child care while she’s at school, and how she will get to school on time every day. It’s a great moment to engage with her on those issues to ensure that she’s well-situated for school and to ensure that an unexpected crisis won’t trip her up.
As another example, think about the entrepreneur patching together three different jobs to make ends meet — selling jewelry at farmers’ markets and on Etsy, driving for Uber on weekdays and waiting tables in between. She’s trying to manage three different income streams, which means there’s a clear opportunity to work with her to build her credit so she can qualify for a loan to open the jewelry storefront of her dreams. It’s a moment to help with insurance for when she’s sick. It’s a moment to help her build a nest egg for the future.
In other words, improving financial health means showing up when people are actively making choices in their financial lives to change the choices they have.
3: Trust is the key to truly changing the choices people have.
Money is one of the most deeply personal subjects in our lives. Like all of us, people search for information — sometimes online, but more often from people they trust. Friends, family members, neighbors or members of a faith community can all be trusted sources of financial information. But what happens when you don’t have a family member or friend to guide you through life’s tough financial choices? Where do you turn?
In these moments, we can be the trusted sources of financial information, and we can develop resources that help people cut through all of the financial noise and understand the choices before them. Two powerful examples illustrate how we can be trusted sources of financial information.
NAACP partnered with CFED on the African-American Financial Capability Initiative, which is supporting local leaders to collaborate on closing the racial wealth divide in communities across the Northwest. Through the Initiative, we’ve built the capacity of organizations serving low-income communities of color to better serve their communities, and as a result, these organizations can be the go-to resource for folks in the Northwest who might not otherwise have a trusted source of financial information.
Our partners at the National Disability Institute have created a Financial Education Toolkit which helps local partners identify strategies to serve people with disabilities and their families. The Toolkit enables partners to understand the financial challenges facing people with disabilities more deeply, and in turn, this resource can help chance the choice for folks who too often lack any meaningful choices when it comes to the financial marketplace.
Let’s #ChangeTheChoice
The reality is that across the country, organizations of all sizes in sectors from health to education to workforce development are integrating financial capability-boosting services into the systems where people are already confronting tough financial choices. By partnering together to meet these people where they are when financial issues are already top-of-mind, the choices people have can be fundamentally transformed.
These topics and a range of ideas like can be found in What It’s Worth and its accompanying resources, all of which are available for free. Download the free eBook and subscribe to updates at strongfinancialfuture.org and join the conversation by following @StrongFinFuture using #WhatItsWorth.
By Kate Griffin, Vice President for Programs, CFED
