School principals, not formulas, should decide how to spend education dollars
How are we funding financial capability?
As an advocate of tax and financial literacy for low- to moderate-income residents, I often hear funders and donors from large corporations suggest that all my clients need are budgeting classes in order to get out of poverty. If only that were the case; then the countrywide debate on poverty would be moot. My typical client is 42 years old with a minimum of two jobs and two kids, earning $24,000 or less per year, living in Dallas, Texas.
The average rent for a two-bedroom apartment is $1,200 according to the Opportunity Atlas, anecdotally, that amount is low. The issues facing our families are multifaceted and stem from systematic issues: denial of access to loans, credit opportunities, education and employment. Many low- to moderate-income earners have a better grasp of their day-to-day finances than earners making over $100K because they know that the financial penalty for poverty leads to NSF overdraft fees from their financial institutions.
From the time that we are born to the time that we die, money is a part of our lives; however, the United States treats financial literacy/education like the fancy dishes that are kept locked away in a cabinet until the holidays. Everyone needs access to money in order to survive and pay for housing, food and security. According to Maslow's Hierarchy of Needs, when humans feel safe and secure in their housing, food, water and hygiene, they are capable of moving beyond survival mode. When a person moves from survival to thriving, they have the bandwidth to expand their financial capability in other areas of financial management like life insurance, savings and estate planning.
Traditional financial literacy provides basic workshop programs on budgeting, understanding the differences between needs versus wants and banking information. These workshops are administered in classroom settings with 5 to 50 people, and are usually provided by a banking institution through the Community Reinvestment Act (CRA) established in 1977. The CRA was founded to incentivize financial institutions to provide information to consumers to help them understand credit and banking. However, research has shown that a better way to improve the foundations of finance in an individual's life is through financial coaching.
Financial coaching focuses on creating a client that is resourceful and whole as the expert of his or her own life and finances. Financial coaching is a collaborative effort where trust is established and has been very effective in helping guide clients to their self-defined financial goals. As with everything in life, in order to become good at something, a person needs guidance and practice in a safe environment.
Nonprofits from around the country have adopted the financial coaching model and have seen great success with families increasing their financial literacy knowledge, increasing savings and reducing debt. However, support for this evidenced-based program is still a hard sell for many funders.
With hundreds of nonprofits in North Texas working on financial capability, the amount of donation dollars keeps shrinking causing nonprofits to cut back on widely needed services. Shrinking donation dollars lead to less qualified staff members and program opportunities to cover the need within the community.
The number of nonprofits continue to expand on a monthly basis and funders are now looking at collective impact and large models to move the needle forward; therefore, larger nonprofits are able to be highly competitive and compete for more dollars, leaving smaller organizations to struggle.
Additionally, we must address the nonprofit Diversity Gap. Studies have shown that for the past 15 years, less than 20 percent of nonprofit executives are people of color. On the funding side of the aisle, the diversity rate is even less with 92 percent of foundation CEO/Presidents being white. In order to serve majority-minority communities, diversity must infuse the organization to gain trust and credibility within the community.
Forty percent of American households are liquid asset poor, meaning they do not have the means in case of an emergency to be able to sustain themselves or their families for any period. The American Dream that has been mass marketed to generations ranging from GIs to millennials has vastly evolved to an idea that can be completely out of touch for more than half of the US working population.
Rising housing prices, a decrease in labor and service positions that pay a living wage, individuals patterned behavior in utilizing money, educational, and policy barriers have created the largest race wealth opportunity gap of our time. Yet, the nonprofit world is slowly recognizing their own diversity and funding issues.
The need for funding financial coaching and literacy programs is increasing because the gaps in race and wealth disparities will only further divide this country. Poverty is an issue that has plagued humans since the advent of bartering and utilization of trade commerce for labor, but we must see with new lenses how our current trajectory of funding is antiquated and must be revamped as communities of color are demanding diversity among executives and staff members.
Amanda Arizola is the assistant director of the Dallas Community Tax Centers, a program of Foundation Communities, that provides VITA services to the Dallas/Fort Worth Metroplex. She is a Public Voices fellow of the OpEd Project.