Strengthening the ability of all families to manage their finances and marshal available resources is critical to achieving an equitable recovery from COVID-19.
So, as we close out Financial Capability Month, it’s worth recognizing the pressing need for expanded access to community-based financial education and coaching in this environment. The pandemic’s disproportionate impact on Black, Latino, Indigenous, disabled, and immigrant communities has exacerbated existing inequities, with tens of millions of households still experiencing extreme financial distress, even amid national relief efforts.
Even before the pandemic, 40 percent of Americans could not withstand an emergency expense of $400 or more, according to the Federal Reserve. The lack of savings is especially problematic for the 63 million unbanked and underbanked adults in the United States, which includes close to half of all Black (47 percent) and Latino households (43 percent), and the 45 million people who are considered to be “credit invisible” or have un-scorable credit files. Without access to affordable credit, they may turn to predatory financial products for assistance, which trap borrowers in debt cycles that lower credit scores and make it even more difficult to access traditional banking products.
Expanded federal investments in one-on-one financial coaching would help ensure historically underserved populations move beyond these long-standing challenges. According to an evaluation by the Consumer Financial Protection Bureau (CFPB), financial coaching helps participants improve their financial behaviors, build savings, manage debt, and reduce financial stress. Financial coaching programs also increase banking and public-benefit participation and expand access to responsible lending products. Integrated approaches focused on building credit and savings alongside income increase household economic resiliency by increasing their ability to save for emergencies and long-term financial goals, establish or build a positive credit history, and access affordable lending products.
Read the full article about financial coaching and equitable recovery by Michelle Harati at LISC.
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