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United Way of Southeast Louisiana Financial Stability—Eliminating Poverty Presented by: Odessa Adams-Payne Educational Session Financial Asset Building “With income we get by, but with financial assets we get ahead.” Ray Boshara --Vice President of New America Foundation “Few people have ever spent their way out of poverty. Those who escape do so through saving and investing for the long-term.” Michael Sherraden --Center for Social Development, Washington University Definitions Income Poverty Rate—percentage of households with income below the poverty threshold. ($11,490) Asset Poverty Rate—percentage of households without sufficient net worth to live at the poverty level for 3 in the absence of income. Liquid Asset Poverty Rate—percentage of households without liquid assets (bank accounts, other financial assets) to live at the poverty rate for 3 months in the absence of income. Level of assets needed to live at the poverty level for 3 months varies by family size. For example, a family of four would need at least $4,632. Louisiana Profile Income Poverty Rate 19.7% Asset Poverty Rate 26.1% Liquid Asset Poverty 47.4% Louisiana Ranks 50th in Income Poverty Rate United Way of Southeast Louisiana Asset Poverty Louisiana Profile Percentage of Asset Poverty 19.7% 47.4% 26.1% Income Poverty Asset Poverty Liquid Asset Poverty 2 in 3 Households of Color are Liquid Asset Poor; Source: CFED—Assets & Opportunity Scorecard—January, 2013 5 Comparison of Louisiana & United States 47.4% 50 45 40 35 30 25 20 15 10 5 0 43.9% 26.1% 26.0% 19.7% 14.6% Louisiana United Way of SELA United States Income Poverty Asset Poverty Liquid Asset Poverty Net Worth Comparison $110,973 120000 100000 80000 60000 40000 20000 $10,825 0 Household of Color United Way of SELA White Households United States MORE THAN $90,000 $55,465 - $90,000 $34,837 -$55,464 5.1% 83% EARN 11.5% LESS THAN 18.9% $55K a year $18,181 - $34,836 LESS THAN $18,181 United Way of SELA 28% 36.5% Households with Savings 69.2% United Way of SELA 58.9% Louisiana United States Unbanked and Underbanked 20.1% United States 8.2% Underbanked - Ranked #47 Unbanked - Ranked 45th 27.2% Louisiana 11.5% 0 United Way of SELA 10 20 30 Low Wage Jobs 35.00% 32.2% 30.00% 25.00% 21.5% 20.00% 15.00% 10.00% 5.00% 0.00% Louisiana United Way of SELA United States Average Annual Salaries $48,500 $48,043 $48,000 $47,500 $47,000 $46,500 $46,000 $45,500 $45,516 $45,000 $44,500 $44,000 Louisiana United Way of SELA United States Retirement Plan Participation 44.6% 46 44 42 40 39.9% 38 36 34 Louisiana United Way of SELA United States Asset Poverty Consumers with Subprime Credit 56.4% United Way of SELA 65% Louisiana United States Households with Savings 69.2% United Way of SELA 58.9% Louisiana United States Education 100 90 85.9% 82.5% 80 70 60 High School Dilpoma 50 2 Yr. College Degree 40 30 20 4 Yr. College Degree 36.3% 28.5% 26.3% 21.1% 10 0 Louisiana United Way of SELA United States Health Care Uninsured Rate 19.9% 20.00% 19.50% 19.00% 18.50% 17.3% 18.00% 17.50% 17.00% 16.50% 16.00% Louisiana United Way of SELA United States Social and Economic Indicators for UWSELA, LA and USA United Way of Southeast Louisiana: Social and Economic Indicators Location or Service Area % of Children (0% Pop. In % Pop. with % Pop. Teen Birth # of Persons 17) living in Poverty Unemployment no High with 2 year % Pop. Rate (per Total Pop. below 100% households with (100 Rate School college Uninsured 1,000 FPL income below FPL) Diploma degree births) 200% FPL United Way SE LA Service Area 1,185,004 212,887 Louisiana 4,356,062 800,705 United States 298,780,000 42,739,924 Source: American Community Survey, 2007-2011 United Way of SELA 17.97 18.38 14.30 26.02 26.26 19.96 7.36 7.08 7.35 16.31 18.40 14.61 30.76 30.51 35.79 17.80 17.18 15.22 44.78 50.80 37.10 Footprint of UWSELA Service Area and LA United Way of SELA Building Assets Six Core Asset Building Strategies FINANCIAL EDUCATION Free financial education curricula can help families make informed money management decisions. GETTING BANKED Bank accounts enable families to reduce reliance on check-cashers and other high-cost ‘fringe’ financial services. BORROWING / DEBT MANAGEMENT Families often need assistance to establish a positive credit history, repair their credit, and get out of debt. 20 IDAs ACF’s Assets for Independence (AFI) provides grants for matched savings accounts, which can be used to acquire lifelong assets PUBLIC BENEFITS Low-income families for eligible for federal and state benefit programs that can extend the reach of their income TAX CREDITS & FAX PREPARATION Low-income families can access thousands of dollars in tax credits Household Financial Security Framework LEARN build financial skills and human capital Assets can increase earning capacity EARN income public benefits SAVE for emergencies & the future INVEST in assets that will generate wealth & income PROTECT gains made through insurance & avoiding predatory lending *CFED—Why Assets Matter—2011 21 Implications for Policy Reinstate funding for the Individual Development Account Program. Allow at least 20% of the funding to be used to administer the program. Increase Louisiana’s Earned Income Tax Credit. Currently it is only 3.5% of the federal credit. Louisiana does not provide state support for IDAs. The state should provide at least $500 in funding per low income resident, designate a strong steward to administer the program, allow 20% of funding to be used for administrative costs; and ensure that funding is stable over time. United Way of SELA Policy Implications Cont. Provide protection from Predatory Short-Term Loans—protect consumers from predatory payday lending, the rate cap is 574% APR; protect consumers against predatory short-term installment loans, the cap is 81% APR; include protection for predatory lending in basic consumer protection laws. Make Financial Education should mandatory early childhood education, elementary, middle, and high school. Currently it’s optional. United Way of SELA Contact Information: Odessa Adams-Payne [email protected] (504) 827-6822 United Way of SELA Thank You!