by James A. Bacon
Most anti-poverty programs are double-edged swords. They alleviate the symptoms of poverty — insufficient money for housing, food, health care — but do nothing to induce poor people to change their behavior and improve their condition. But this program is different: With funding from the the Cities for Financial Empowerment Fund (CFE), the City of Richmond will start providing free, professional, one-on-one financial counseling as a public service to residents.
“Financial empowerment is necessary to build an equitable economic environment,” said Mayor Levar Stoney in a press release. “This opportunity for one-on-one counseling will give residents the power to make informed financial choices with confidence.”
Bacon’s translation: Rather than treating poor people as passive victims, the financial counseling program will explain how they can take control over their financial destinies by taking modest, achievable steps. The program teaches, dare I say it, personal responsibility.
According to the CFE website, financial empowerment spans four key disciplines:
Asset building. Weathering financial shocks and setbacks while saving for the future is a critical step toward financial security.
Banking access. Accessing a safe, affordable account is key to joining the financial mainstream and keeping earnings secure by saving.
Consumer financial protection. Cities have unique, powerful opportunities to protect residents and their assets from predatory practices.
Financial education and counseling. Professional financial counseling and coaching can tangibly improve household financial stability, especially when integrated into social services.
One reason (not the only reason, but one reason) poor people are poor is that they frequently make poor financial decisions. The unwillingness or inability to save allows them no resiliency in the face of life’s inevitable financial setbacks. They run up debt on their credit cards, which charge high fees and interest rates. When they max out their cards, they resort to “alternative” lenders who charge even higher fees and interest rates. They get their cars repossessed, get evicted from their apartments, lose utility deposits, and pay all manner of late fees. Trapped in a cycle of debt, many poor people dedicate much of their limited income to keeping creditors at bay.
Virginians graduating from high school for many years now have been required to take online financial education classes. I’m not sure how much they learn. How much does the typical 17-year-old care about anything beyond scraping together enough cash to pay for the next concert or date night? By contrast, the City of Richmond’s program will reach adults and address real, immediate needs, not theoretical needs in the distant future. The people availing themselves of the service will be motivated to learn.
It’s important to maintain realistic expectations about what a program like this can accomplish. Still, we can legitimately refer to it as an “anti-poverty” program as opposed to a “poverty-perpetuation” program.
