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Strengthening the Financial Future of Families, Communities and the Nation WHAT STRENGTHENING THE FINANCIAL FUTURE OF FAMILIES, COMMUNITIES IT’S AND THE NATION WORTH Federal Reserve Bank of San Francisco & Corporation for Enterprise Development FEDERAL RESERVE BANK OF SAN FRANCISCO 101 Market Street San Francisco, CA 94105 CFED 1200 G Street NW, Suite 400 Washington, DC 20005 Editors This book is dedicated to Robert Friedman whose unwavering belief in the capacity of every person to create his or her economic Laura Choi future — if given access to the necessary tools and resources — has David Erickson inspired the growth of a field dedicated to expanding economic Kate Griffin security and opportunity. Andrea Levere Ellen Seidman Copyright © 2015. Federal Reserve Bank of San Francisco and CFED. This book may be reproduced in whole or in part provided that it is: 1 For noncommercial, personal, or educational purposes only (i.e., not for private gain), and 2 Appropriately credited to its author or authors, the Federal Reserve Bank of San Francisco, and CFED. The views expressed herein do not necessarily reflect the views of the Federal Reserve Bank of San Francisco, the Federal Reserve System, or CFED. ISBN 978-0-692-53170-9 Library of Congress Control Number: 2015951667 Printed in the United States of America TABLE OF CONTENTS 2 WHY FINANCIAL WELL-BEING MATTERS FOR ALL The Economy, the Financial Services System and Community 72 Financial Vulnerability is a Problem: An Economist’s View Jared Bernstein, Center on Budget and Policy Priorities 85 We Are in This Together: Bipartisan Solutions to Preserve the American Dream Phil English, Arent Fox LLP Jeremie Greer, CFED 93 Reestablishing Trust: An Essential First Step for 1 Acknowledgements Financial Institutions 5 Foreword Cathie Mahon, National Federation of Community Development Credit Unions Janet Yellen, Board of Governors of the Federal Reserve System 99 Consumer Protection Drives Financial Health 9 Introduction Raj Date, Fenway Summer LLC 105 Race, Place, and Financial Security: Building Equitable WHERE WE ARE: UNDERSTANDING THE FINANCIAL Communities of Opportunity 1 LIVES OF AMERICA’S HOUSEHOLDS Angela Glover Blackwell, PolicyLink 13 How the Road to Financial Security is Paved with 113 Stable Housing, Stable Families: Thinking beyond Financial Capability Homeownership Andrea Levere and Leigh Tivol, CFED Rick Lazio, Jones Walker LLP 33 The Future of Building Wealth: Can Financial Capability 127 Starting at Home: Housing-based Approaches to Overcome Demographic Destiny? Financial Stability Ray Boshara, Federal Reserve Bank of St. Louis Paul Weech, NeighborWorks America 53 The Real Financial Lives of Americans Employment and Business Jennifer Tescher and Rachel Schneider, Center for Financial Services Innovation 134 Making Work Pay: Building Financial Health Improves Employment Outcomes Michael Rubinger, Local Initiatives Support Corporation i 143 Thinking Outside the 401(k): Employer-Sponsored Financial Education Health Solutions Regis Mulot, Staples Inc. 210 Promoting Financial Health through Higher Education Sarah Bloom Raskin, U.S. Department of the Treasury 149 Empowering Entrepreneurs, Strengthening Communities Janie Barrera, LiftFund 215 A Lifecycle Approach to Putting Higher Education within Reach Health and Social Services Martha Kanter, New York University 156 Louisville’s “Culture of Compassion”: A Model for 227 When Colleges Get It Right, Students Succeed Community-based Financial Empowerment Regina Stanback Stroud, Skyline College Greg Fischer, City of Louisville WHO IS BEING AFFECTED? DEMOGRAPHICS 163 Financial Health is Public Health 3 AND FINANCIAL HEALTH Jason Q. Purnell, Washington University in St. Louis 235 Wealth and Generations 173 Treating Financial Well-being as a Public Health Issue: Phillip Longman, New America Lessons from Delaware Rita Landgraf, Delaware Department of Health and 251 African American Economic Inequality: A Twenty-First Social Services Century Challenge Dedrick Asante-Muhammad, National Association for the 179 Beyond Financial Education: Supporting Positive Financial Advancement of Colored People Behaviors through Financial Coaching J. Michael Collins, University of Wisconsin–Madison 261 Latinos in the Financial Shadows José A. Quiñonez, Mission Asset Fund 187 Breaking the Cycle of Mass Incarceration: A Strategy for Investing in Individuals, Families and Communities 271 The Lakota Funds Story: How Indian Country is Building Vivian Nixon, College and Community Fellowship Financial Capability Susan Sturm, Columbia Law School and Center for Elsie M. Meeks, Lakota Funds Institutional and Social Change 277 Financial Insecurity in Asian American Pacific Islander 197 Ending “Welfare As We Know It”: Redesigning Public Communities: An Untold Story of Racial Wealth Inequality Assistance through the Lens of Financial Health and Lisa Hasegawa and Jane Duong, National Coalition for Economic Mobility Asian Pacific American Community Development Reggie Bicha and Keri Batchelder, Colorado Department of Human Services 285 Women and Wealth: How to Build It Heidi I. Hartmann, Institute for Women’s Policy Research ii What It's Worth: Strengthening the Financial Future of Families, Communities and the Nation iii 299 From Impulse Control to Interest Rates: Building Financial Capability in Children and Youth Elizabeth Odders-White and Charles Kalish, University of Wisconsin–Madison 309 The Upside of Aging: Maximizing Wisdom in Financial Decision Making Ted Beck, National Endowment for Financial Education WHAT TO DO NEXT: STRENGTHENING 4 THE FINANCIAL FUTURE 317 What It’s Worth: Building Bridges to Financial Health and Well-being Ellen Seidman, Urban Institute 333 SO WHAT? Keeping Our Eyes on the Prize Brandee McHale, Citi Foundation 343 Closing the Financial Capability Gap: A Call to Action for Private Markets Asheesh Advani, Junior Achievement Worldwide 355 Toward Productive Research Agendas in Financial Inclusion, Security, and Development Michael Sherraden and Margaret Sherraden, Washington University in St. Louis 371 Toward a New Business Model: Strengthening Families Helps to Strengthen Communities and the Nation Laura Choi and David Erickson, Federal Reserve Bank of San Francisco 383 Building the Opportunity Economy Robert Friedman, CFED iv What It's Worth: Strengthening the Financial Future of Families, Communities and the Nation Turner, Naomi Cytron, and Ian Galloway at the Federal Reserve Bank ACKNOWLEDGEMENTS of San Francisco. Daria Sheehan, Brandee McHale, and Kristen Scheyder at the Citi Foundation were with us from the start, shaping the ideas for what this book can and should be. We are also grateful to the board of CFED and to John Williams and Adrian Rodriguez of the Federal Reserve Bank of San Francisco for their What It’s Worth is a joint project of the Corporation for Enterprise ongoing engagement and support as we conceived of this book and Development (CFED) and the Federal Reserve Bank of San Francisco. brought it to life. This book would not have been possible without the support of the Citi Foundation, which provided CFED not only with the funding necessary to This book builds on two earlier volumes: Investing in What Works for work on this ambitious endeavor, but also thoughtful engagement on the America’s Communities, and What Counts: Harnessing Data for America’s content and how to leverage it for lasting impact in our collective work. Communities. Each are part of an important national conversation on addressing poverty and identifying solutions to intractable issues. We are We would like to thank our authors, each of whom brings a unique grateful to the Low Income Investment Fund and the Urban Institute for perspective to these topics that broadens our understanding of what their leadership in these earlier volumes and partnership in moving this financial health and well-being means for our nation. The members of work forward. our advisory committee—a diverse set of experts with varied views on the subjects we address—deserve special recognition for their guidance. Thanks, finally, to our readers for engaging in this conversation. We look Their early thoughts fundamentally shaped the direction we took with forward to building these bridges together. the book, encouraging us to capture both the systems at work and the Editors lives impacted. Special thanks go to Ray Boshara of the Federal Reserve Laura Choi Bank of St. Louis and Jennifer Tescher of the Center for Financial Services David Erickson Innovation for their leadership and editorial partnership as co-chairs of Kate Griffin the advisory committee. Andrea Levere Barbara Ray and her team at HiredPen, Inc. provided first-rate copy- Ellen Seidman editing and thoughtful nudges to make sure we didn’t get lost in our own jargon. Maya Kopytman and Melinda Sekela at C&G Partners, LLC designed a distinctive look for the book that perfectly captures our intent to build bridges across society to address financial health and well-being. Burness was invaluable in helping us to position the book for a wider audience and provide ways for readers to engage deeply with the ideas presented here. Many others worked hard to bring this book to fruition and helped inform this collection with thoughtful insights: Jennifer Brooks, Jeremie Greer, Leigh Tivol, Doug Ryan, Carl Rist, Ezra Levin, Harold Pettigrew, Kristin Lawton, Sean Luechtefeld, and Merrit Gillard at CFED; and Scott 1 What It's Worth: Strengthening the Financial Future of Families, Communities and the Nation Acknowledgments 2 Advisory Committee Lisa Forti Ray Boshara, Co-Chair Policy Director Senior
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