The Indiana assets & Opportunity Network was created to increase asset acquisition for low-wealth hoosiers and strengthen local economies through policy advocacy and capacity building in partnership with organizations and coalitions.
After the Great Recession, Indiana sought to prevent future catastrophes by mandating financial literacy instruction in schools. Is this a reasonable approach, and what policies can the state look at to ensure more Hoosiers have the information they need to make sound financial decisions?
A generation or two ago, many working families had fewer financial decisions to navigate. They received health insurance and pensions through their employers, and banks offered a more limited range of mortgage products. Within the changing world of both work and finance, more and more options have been placed in the hands of consumers who frequently struggled to assess them. When the mortgage crisis hit, household financial decision-making received a new level of scrutiny, and surveys uncovered that not only were many adults in the U.S. ill-equipped to make basic financial decisions, but they also believed they were more capable than their performance on test questions suggested. While personal finance education had been promoted for many years prior to the crisis, it received a boost through new federal programs and states requirements to add personal finance classes or content to the mandatory K-12 curriculum. The logic is certainly compelling: if well-educated about financial decision-making, individuals will be better equipped to navigate a world that increasingly places important financial decisions about things like insurance, borrowing, saving, and investing in the household’s hands. The key question is, does it work?
Replicating the I’ve Been Everywhere singer Johnny Cash, the 2016 Indiana Cohort of Your Money, Your Goals consisting of the Indiana Assets and Opportunity Network and Indiana Legal Services, Inc. has concluded its statewide Your Money, Your Goals road tour. Training sites included Crown Point, Fort Wayne, Evansville, Huntingburg, and six trainings in Indianapolis. In total, the cohort trained 177 individuals who will have the opportunity to bring back their new knowledge on the Your Money, Your Goals financial empowerment toolkit to their 71 unique organizations.
For centuries and in cultures spanning the globe, humans have practiced the concept of a “lending circle,” or short-term, interest-free loans among close associates to pay for emergencies, repairs, down payments, or even vacations. The concept is simple; a small group of people organize themselves and agree to contribute a predetermined but financially feasible amount of money into a collective pot every month. Each month, the pot is given to a different participant who has not yet received the pot until everyone has had a chance to collect. For example, five neighbors decide to contribute $100 a month and each month one of the neighbors receives $500. This continues for five months until the fifth neighbor receives $500. Although the success of lending circles hinges on every participant contributing their monthly obligation, the close social connection between neighbors along with the negative consequences to one’s relationship with their neighbors if they fail to make a payment reduces the risk of defaulted loans.
My work in financial empowerment began in a research coordination position I held in a university-affiliated research center. Through the promotion of externally-funded research and graduate student learning, research centers and institutes enhance opportunities to create synergies among faculty and students to pursue a wide range of scholarship. They are critical to the process of innovation, collaboration, and discovery in a research university, but for me, they altered the path of my life to move me away from a strictly academic career path out into the community. Our research center focused on the financial services sector – banking, insurance and securities – but we also had a thread of research based around what was originally called “financial literacy.” Through that academic, research-based focus on shifting personal money power and independence to individuals, I became more and more intrigued by the problem of poverty. British academics Richard Wilkinson and Kate Pickett published a book in 2009, entitled The Spirit Level: Why More Equal Societies Almost Always Do Better. Their argument is the essence of the idea that captured me: that “almost every social problem common in developed societies - reduced life expectancy, child mortality, drugs, crime, homicide rates, mental illness and obesity - has a single root cause: inequality.”
A recent study by CreditCards.com analyzed the readability of over 2,000 current credit card contracts banks offered and concluded that the majority of contracts are written at a reading level beyond the reading capability of the average American consumer. The study used the Flesch-Kincaid formula (commonly used to evaluate educational texts), which examines the number of syllables, words, and sentences in credit card contracts in order to determine the reading grade level necessary to comprehend the text. Through this method, the study found on average that the contracts are written at an 11th grade reading level which is far too complicated for the majority of American consumers who have a 9th grade or below reading comprehension level