By Heidi Goldberg.
In today’s complex financial and economic landscape, families in the lower and middle income brackets can easily find themselves standing on the precipice of financial disaster. A job loss, a home repair, an emergency room visit or other common but negative life occurrences can cause a family without a large nest egg to go into substantial debt, possibly losing their home in the process.
When this happens, cities also lose. When residents suffer from foreclosures, cities lose tax revenue and are often left to pick up the slack when a family cannot pay for health care, utilities or other needs.
Municipal governments have a stake in ensuring that families have access to economic opportunities and do not experience financial freefall following a major or even minor financial setback. Fortunately, innovative new strategies are popping up in city governments around the country that are creating pathways for families to have a more firm financial footing. Mayors and other city entities are stepping up to reach families in ways they had not previously.
In the past, city hall was rarely seen as a place residents could turn to if they had financial troubles. However, as San Francisco Treasurer José Cisneros has often pointed out, just as it has always been the responsibility of local officials to relay public health messages to their residents about the importance of vaccinations, shouldn’t they also have a similar responsibility to promote messages about the importance of public financial health?
A handful of cities have taken on the charge of providing residents with opportunities to build a stronger financial foothold. Cities are pioneering new ways to put more money in the pockets of low-income families, increase financial capability and expand access to safe and affordable financial products and wealth-building opportunities.
This includes financial fitness events that connect residents with financial counselors to help them manage their debt, offer access to public benefits such as SNAP or health insurance and provide free income tax filing assistance. Local leaders are also working to protect the assets that families have in order to become more financially stable.
Close to 100 cities have implemented a “Bank On” program to connect residents to mainstream bank accounts and financial education, as pioneered by the City of San Francisco. Mayors, councilmembers and treasurers in these cities have built relationships with local banks and credit unions to offer safe and affordable accounts to unbanked residents who have relied on high cost predatory financial services.
A handful of cities are doing even more to ensure financial stability. San Francisco is at it again, this time investing in children to give them opportunities to attain postsecondary education. In 2012, Treasurer Cisneros launched Kindergarten to College (K2C), which provides a college savings account with a $50 deposit for every child entering public kindergarten in the city.
Low- income children enrolled in the free lunch program receive an additional $50. Children receive financial education and families are encouraged through incentives to continue to save and deposit into the account. San Francisco has taken this step not only to invest in children and families but to invest in the city’s future. Promoting savings and educational attainment leads to a city where more residents are working, earning and contributing to the tax base.
So far there are 13,000 children with new savings accounts, and 12 percent of those families are contributing their own funds to the accounts. While criticism of these kinds of savings programs suggest that low-income families cannot or will not save, San Francisco has found that in some of the city’s highest poverty schools where 80 percent of children are receiving free or reduced meals, the savings rate is over 20 percent.
Other cities are following San Francisco’s lead. Several cities are currently planning to launch children’s savings accounts programs of their own, including large and small cities such as Los Angeles and Lansing, Michigan.
Another small group of cities is currently working with NLC to pilot test a new program model. This program connects residents in debt to the city’s public utility with financial counseling and incentives to not only pay back their utility debt but to address their broader debt and improve their overall financial wellbeing. This model is intended to bring rewards to both residents and cities – if successful, cities recoup lost revenue from lost payments and shut-off costs.
Since many of these municipal financial inclusion programs are still new, it is difficult to assess their true impact just yet. However, early observations suggest there is tremendous promise for cities to step up and develop programs, policies and partnerships to financially empower their residents.
Local leaders have a crucial role to play in promoting the importance of strong family financial health and in creating opportunities for families to achieve and maintain financial stability. As the economic wellbeing of families improves, so does the economic well-being of the city, creating a true win-win situation.