Can Personal Financial Management
Education Promote Asset Accumulation by
the Poor?
John P. Caskey
I. Introduction
Millions of low- and moderate-income American households live from
paycheck to paycheck with no, or almost no, financial savings. They are in a
precarious financial situation. They have no savings to fall back on if they
experience an unexpected decline in income or an unexpected expense.
Furthermore, many of these households are ineligible for traditional sources of credit
because they have a history of failing to meet financial obligations in a timely
manner. This is not surprising. They are living with no financial margin of safety
and frequently must trade off one pressing payment obligation against another.
Individuals who live from paycheck to paycheck with impaired credit
histories incur a number of costs. Frequently, they obtain their payment services
from check cashing outlets where they pay more for these services than individuals
who are able to maintain bank accounts. If they need short term loans to bridge
periodic financial crises or to meet expenditure needs, they face the embarrassment
and censure associated with turning to family or friends or they have to patronize
high-cost lenders or turn to equally high-cost alternatives, such as rent-to-own stores
(Caskey, 2005). Finally, living with no financial margin of safety is stressful, and
this in itself can take a severe toll (Caskey, 1997).
A wide variety of organizations have instituted programs to teach personal
financial management (PFM) skills in an effort to help such LMI households
improve their credit histories and build savings. This paper addresses the question:
Is this an effective approach to the problem? In brief, the conclusion is that we don’t
know. Several high quality studies provide evidence that suggests that PFM
education can help LMI households to build savings or improve credit histories. But,
I argue, the evidence so far is only suggestive. Given the prominence of PFM
educational initiatives, there is a pressing need to begin to build a stronger case that
they are indeed effective.
In addition to PFM programs, there are numerous other wealth-building
initiatives targeting LMI households. Many focus on making homeownership
accessible to LMI households or on raising their incomes by improving job skills. 本文来自辣.文,论-文·网原文请找腾讯752018766
Others use "individual development accounts," (IDAs) which offer dollar matches
for the financial savings of lower-income households. In order to receive the match,
IDAs typically require that the households leave their funds in a special deposit
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