Houston we have an asset building problem. As the city continues to have the highest level of income inequality in Texas, more and more residents are falling behind in asset building - from having emergency savings on-hand to saving for retirement. Asked what they would do if they faced an emergency expense of $400, one-third of Harris County respondents to the Houston Area Survey published in 2021 said they would have to borrow the funds or would not have access to that kind of money. Almost half of African Americans and Hispanics in Houston responded they were in this situation, confirming that vulnerable communities have less financial resiliency and less access to financial resources before, during, or after economic hardships and disaster, let alone any savings for retirement or to weather a future shock.
Coupled with, most workers over age 40 don’t have sufficient retirement savings and aren’t setting aside enough to catch up, according to a survey from the Insured Retirement Institute.
What we also know to be true, strategies solely focused on workforce development or small business development without asset and wealth building may move families out of poverty, but it will not make them financially secure and change the trajectory of generational poverty. What’s more, the pandemic highlighted longstanding and systemic racial inequities in access to employment, family wealth-building, and savings to cover emergencies. Vulnerable communities in particular have less financial resiliency and less access to financial resources before, during, or after economic hardships and disaster, let alone any savings for retirement or to weather a future shock.
With funding from Wells Fargo, in 2021 LISC sought to further our commitment to closing the asset building gap by investing in savings products and asset-building strategies that worked in parallel with our workforce and small business development efforts.
LISC Houston’s Financial Opportunity Centers™ (FOC) partners – The Alliance, Chinese Community Center, Volunteers of American Texas, and Wesley Community Center – each launched a customized matched savings program with the goals to increase emergency savings, increase mid-term savings, attaining good credit to help with savings goals, and have an “on-ramp” to longer-term savings and asset building such as retirement and other investments. With a program term of August 2021 – November 2022, and an eventual six-month extension until May 31, 2023, each FOC made the program their own based on knowledge of populations they serve. The goals were to promote savings to better meet emergency needs, increase mid-term savings, credit-building, and attaining good credit to help with savings goals, and have an “on-ramp” to longer-term savings and asset building.
A total of 81 clients saved $300 - $2,000, with the average final amount of individual emergency savings around $1,000.
ABOUT EACH SAVINGS PROGRAM
The Alliance
Served traditionally underserved populations, immigrants, refugees, women, and people of color who have little credit history, and the program built on the existing Emergency Savings IDA offered at the FOC.
Used the Wells Fargo program to expand eligibility so that more clients have access to ways to increase savings, build credit and work toward financial resiliency.
The Alliance already had a framework in place, so funds that would otherwise be needed for startup costs were able to go directly to more clients for short-term savings.
The Alliance was also able to, through the Wells Fargo bonus innovation grant, launch an Entrepreneurship IDA in Spring 2023, complementing the work already being done through The Alliance Entrepreneurship Program and The Community Cloth.
Clients saved a total of $500 within a 6–12-month period. Matched 1:1 for a total of $1,000.
Chinese Community Center (CCC)
Served youth, parents, seniors, and students and the program, specifically people who are employed but do not have the means to afford some necessities or are struggling to make ends meet, including new immigrants who have limited English and unfamiliarity with or distrust of the American financial and credit systems, and a lack of credit history and safeguarded emergency savings.
The program helps clients build short-term savings that will provide greater financial resilience, help clients build credit for more long-term savings goals, improve financial behaviors, and take advantage of one-on-one coaching.
CCC also established a Lending Circle, a culturally sensitive financial product which gathers participants for group lending; each participant pays into the Lending Circle (with their payment reported to the credit bureaus), and each month one participant receives a loan of an agreed-upon amount.
Match client deposits $500 with $100 match to open savings account.
Volunteers of America, Texas
Served a specific cohort of clients called Savvy Savers - clients who are unbanked/underbanked or unemployed with passive income yet have a specified savings goal - and the program credited graduates with a match at the end of the program; the cohort had the option to roll over all or a portion of their savings for another match for the extension term.
Participation in program activities is essential, along with submitting monthly bank statements to remain eligible. Incentives included specific discussion frameworks and a celebratory event to recognize those who successfully completed the program. Savvy Saver participants experience decreased debt and increase in overall savings; clients can apply their financial education and assess where they can make better financial decisions.
After the initial period and rollover, clients have the option to then roll their money into a long-term investment strategy such as retirement plan or real estate. A financial coach works diligently with clients to discuss updates and savings, keeping them motivated and connected with goals.
Client saves $1000 and gets a one-to-one match; then can invest that $2000 for another match. The resulting $4000 can be allocated (all or a part) into a long-term investment strategy.
Wesley Community Center
Served workforce clients and the program mirrored their workforce coaching model. Wesley created a cohort-based savings club, which met monthly to offer education and tools from the FOC and outside sources.
The FOC also provided incentives such as additional funds when a target goal is reached, as clients hit key savings goals. In addition to one-on-one meetings with the financial coach, clients could meet in monthly group sessions to learn from and support one another. Held a launch party at beginning, so clients could come to Wesley, make pledges, receive resources and ideas, and share, and hear presentations from community partners. At the end of the grant, they planned a saving club graduation party. They hired a coach to identify clients who are ready for the next steps and coach them on longer term savings and bigger purchases. Clients who reach savings goals are enrolled in a monthly raffle. At certain milestones there is an incentive payment of $50 to the client.
Under a different savings and credit-building product there was a 1:1 match.
Challenges & Benefits
Common challenges included clients needing to overcome the rise of monthly expenses; clients needing a bit of disposable income; lack of a savings account or ability to maintain one; not believing they could get the match with “no strings attached”; FOC difficulty if they don’t have a way to track or manage accounts. Also, some of the complementary products (Twin Accounts) were discontinued.
Some benefits for the clients were credit building and asset building; reinforcement of good savings behavior, reinforcing sound economic decisions through incentives (eg raffles for on-time deposits); introduction of clients to FinTech and recognizing benefits of FinTech; clients learn to maintain momentum by saving during unprecedented times; using short-term goals and successfully accomplishing them to lead to long-term goal setting and planning.
Benefits for the FOC include improved partnerships (for example banks provide information on using bank accounts and credit effectively to build good financial behaviors, financial literacy workshops, or additional financial products such as secured credit cards; other nonprofits to connect their clients with the FOC); increased client engagement and retention; create more client-specific marketing and better frame financial products; ability to reach many different populations at different stages of life and financial decisions.
Using lessons learned, the FOCs’ knowledge of communities they serve, and recognizing the short-, mid-, and long-term benefits resulting from matched savings ensures we will be ready to administer the next program when it arrives.
Client story:
Archana Shrestha came to The Alliance in January 2020 after migrating from Nepal with her husband. Her main goals were to find a career that aligned with her skills and eventually buy her first home in the US. In January 2020, Archana met with a Workforce Development Coach to explore different career pathways. Together, they outlined a plan for a career as a medical professional. Archana’s first step was to gain medical experience by becoming a Certified Nurse Assistant (CNA). In January 2020, Archana enrolled into a C.N.A course with The Alliance. After completing, Archana worked with her coach to develop her job readiness skills as well as update and tailor her resume to the healthcare field. Archana later upskilled by completing a Phlebotomy and EKG course with The Alliance. While Archana looked for work, she attended The Alliance’s weekly Job Readiness and Financial Literacy workshops to improve her soft skills and understanding of personal finance. Her goal was to proactively learn more about savings to prepare her for buying her future home. While Archana worked hard to find a job in the medical field, she still found it difficult to obtain employment. Enjoying the technical aspects of the EKG course, Archana decided to pivot and learn more about the IT field. In March 2022, Archana enrolled into The Alliance Computer Fundamentals course, and in June 2022 she enrolled into an C Sharp IT program. With a one-year-old child, Archana worked with her coach to update her resume and find a remote position in the IT field. By August 2022, Archana landed a remote position as an IT Quality Engineer making $48.00 an hour. After meeting her career goal and earning five times her previous income, Archana met with her Financial Coach in December 2022 to review her credit and increase her savings. In January 2023, Archana enrolled into The Alliance LISC/Wells Fargo Emergency Savings IDA program. It was important to Archana that she have an emergency savings fund, so that she would not use her home-buying savings, if an emergency were to occur. Archana has saved more than $424.00 towards her emergency savings fund. When she completes the IDA program in June 2023, she will be able to access the $500.00 match so that she will have $1,000.00 in emergency savings. Archana credits and thanks “The Alliance for all their support in what is only the beginning.” The Alliance plans to continue to work with and support Archana as she and her family buy their first home, reach new milestones, and strive towards financial freedom.
For more information contact Ellary Makuch at emakuch@lisc.org.