“I don’t plan. I just hope.” These six words describe the challenges facing individuals and families who live in financial deserts across our country. Unfortunately, in these communities, families find themselves unable to plan for their financial futures, trapped in a cycle of living paycheck to paycheck, and one emergency away from being unable to meet their most basic financial needs.
This is one of the reasons why the Morgan State University School of Community Health and Policy (MSU SCHP), in partnership with the A. Philip Randolph Institute and with support from the community empowerment program Master Your Card, recently conducted a study that sought to gain an understanding of financial deserts and the experiences of those who live within them. This striking admission – “I don’t plan. I just hope” – is how one study participant described their financial health.
The research shows that a combination of access and attitudes contributes to financial deserts. While a lack of access to physical services such as banks plays a role, individuals’ previous experiences with financial institutions and emotions about their current circumstances are even greater contributors. With an overriding sense of vulnerability, these communities focus on achieving financial stability, rather than growth or progress. Because of these factors, communities create their own systems to meet their financial needs.
Think about it this way – financial deserts are much like traditional deserts. While there may appear to be no viable activity, closer inspection reveals an active ecosystem, just not what many of us might be able to recognize without a guide to show us.
Alternative financial services, such as check cashers and payday lenders, are prevalent in financial desert communities. In fact, the Federal Deposit Insurance Corporation found that more than 57 percent of U.S. households without a bank account rely on these services. And they are costly – the average financially underserved family spends nearly 10 percent of their income on the associated fees and interest.
While the MSU SCHP study found that individuals in financial deserts do see the utility of alternative financial services, those with the very least should not have to spend the most to access their money. We have an opportunity – an obligation even – to help these individuals understand that there are more efficient and less expensive options available.
One of those options is electronic payment technology, especially prepaid and payroll cards that don’t require traditional banking relationships. Paired with informed educational outreach, this technology can make a huge difference to someone who previously managed his or her money in paper and cash. For instance, instead of paying to cash a paycheck, workers can have it deposited on a payroll or prepaid card. Then instead of purchasing money orders to pay bills, they can use their card to pay them online. As simple as it sounds, these tools translate into real money saved.
However, while these tools are widely available, the study noted that cultural change is a greater barrier than product availability and access. To overcome that barrier, we need to reach out to communities with partners they trust and who understand their needs and concerns. In turn, these partners can empower communities with tools and education that fit their culture, thus guiding them on their journey toward financial stability.
In my years working with the labor community, I have seen the power of hope to lift up communities confronting financial challenges. But when it comes to charting paths toward brighter futures, even hope has its limits. Fortunately, where hope falls short from lifting up those facing financial hardship, support from communities can be a powerful force of empowerment.
Today’s technology offers us an opportunity to put these individuals on stronger financial footing, allowing them to plan their financial futures with more than just hope. By connecting with these communities and arming them with the right information and tools, we will be well on our way to greening financial deserts and bringing greater financial empowerment to all.
Clayola Brown is president of the A. Philip Randolph Institute and a member of the Master Your Card African American Advisory Board.