Less than a month into the new year, the Corporation for Enterprise Development (CEFD) released its 2012 Assets and Opportunity Scorecard, an eye-opening report on low-income families’ finances. The findings were shocking: 43 per cent of US households (127 million people) are liquid asset poor, meaning if that if they suffered a steep drop in income like losing their job, they’d easily fall behind on payments and need to apply for public assistance such as food stamps or shelter. (See why 2.9 million New Yorkers are having difficultly affording food.)
That’s not to say all these families are unemployed, however. Though the jobs outlook stinks, many of these families are among the “working poor,” or those living check-to-check and never pulling ahead. Think of them like the unbanked: They’re wary of banks, confused about their situation and unsure of how to start saving.
And they’re likely turning to payday lenders, mortgage services and other nonbank services for a short-term fix, noted Alexander Eichler in the Huffington Post. Despite the Consumer Financial Protection Bureau cracking down on these shady services, nearly 20 million consumers rely on payday loans, which slap hefty finance charges on transactions—about $15 to $20 for every $100 borrowed, says the CFPB.
The lack of a safety net is most common among Americans of colour. The CEFD found 65 per cent of their households were liquid asset poor versus 34 per cent of white households.
The situation is dire down South, where typically unbanked states like Mississippi and Alabama are seeing 46.5 per cent and 41.8 per cent of their households fall into asset poverty, respectively. For whites the number was cut in half: 21.7 per cent and 15.3 per cent, respectively.
To counter these issues, the CEFD proposes all 50 states and the District of Columbia take action by imposing income tax thresholds for single-parent head of households and incentivizing accountholders to put more away by having the opportunity to win prizes when they make deposits.
To view the full interactive Assets & Opportunity Scorecard report, visit assetsandopportunity.org.
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