United Way of King County believes that helping low-income families weather financial shocks is a key to reducing homelessness and poverty. National research from the Pew Charitable Trust showed that 60 percent of households experienced a financial shock in the past 12 months. More than half of households struggled to make ends meet after their most serious financial shocks. On average, low-income households report usually spending $2,000 every year on these needs. This is particularly concerning because the Federal Reserve reports that a typical American household cannot raise $400 without borrowing money or selling possessions. Although families are always at risk of shocks — including job loss and unexpected medical care — personal savings and other resources can help them be more resilient when misfortune strikes
If low-income individuals are unable to come up with money needed to handle these financial crises, they often fall into payday loan cycles, rack up credit card debt, or engage in other predatory financial services.
Given the financial reality of low-income families and the average cost of financial shocks, more can and should be done to help build their financial stability and encourage savings. Savings has the immediate benefit of allowing low-income individuals to weather unexpected costs. Further, there is evidence that suggests that low-income individuals that save are more likely to exit poverty. This makes sense, as savings leads to longer-term asset building, engagement with mainstream financial services, and stronger credit scores
While individual agencies provide limited financial coaching to clients, our community doesn’t have a robust strategy for deploying and scaling best practices in this area. United Way of King County is proposing to empower 25 AmeriCorps members to deliver interventions that help low-income people improve their housing and financial stability. We will train and equip members to assist low-income families to get by (emergency financial assistance and income supports), get ahead (build savings), and stay ahead (improve credit and build assets). We have surveyed the best practices from across the country for delivering these interventions and are partnering with leaders in the Financial Empowerment sector to implement this project. AmeriCorps members will be trained to use a combination of behavioral economics and short-term financial coaching to deliver services in three locations:
- Coordinated Entry Regional Access Points Hubs: In July 2016, King County will open 5 Regional Access to Points for people experiencing homelessness. The RAP’s will be a single point of entry for people needing shelter or housing services. AmeriCorps members will add capacity to each site by providing access to financial resources and tools that will help people become housing ready.
- Volunteer Income Tax Assistance (VITA) sites run by United Way of King County (24 sites serve 22,000 low-income people annually): AmeriCorps members will be stationed at six of the highest performing sites to connect taxpayers with income supports, bank accounts, and help them develop savings plans. For low-income households saving a portion of their tax refund can offer the opportunity of creating an emergency fund or starting financial goals that are not attainable
during other parts of the year.
- Community college campuses (targeting low-income and non-traditional students): Increasing the number of students who complete certification, degree, and apprenticeship programs is a proven strategy for moving people out of poverty. Financial shocks are a key reason vulnerable low income students don’t complete certificate / credential / apprenticeship program. Few agencies have flexible resources to provide students with the resources they need. Our AmeriCorps members will be deployed to campuses to provide low income students with income supports and financial coaching