Financial Inclusion

With the “golden age of behavioral research,” as New York Times columnist David Brooks recently described, comes a golden opportunity for the asset building and financial inclusion fields.  Indeed, the latest breakthroughs in social science and behavioral research beg – or perhaps even force – us to think differently about poverty reduction and the policies and mechanisms that can enable it.

Two days ago, the NY Times published an op-ed describing how the economic recession has called attention to the U.S.’s general neglect of infrastructure development. The op-ed contends that in recent years, the U.S. has made relatively few investments in infrastructure ranging from transportation to energy and that this has implications for the country’s long-term sustainability and growth. Support is made for S.652 Building and Upgrading Infrastructure for Long-Term Development which would create the American Infrastructure Financing Authority (AIFA), recently proposed into Congress with bipartisan support and intended to spur infrastructure development vital to the country’s future. AIFA would invest private capital into grants and loans for long-term and financially sustainable projects related to infrastructure development. I think the interesting parts of the op-ed, though, are the ideas that infrastructure is a worthy investment for long-term sustainability and growth and that widespread investment in infrastructure could be reminiscent of Roosevelt’s New Deal. And especially how these ideas might relate to children's savings.

Stress sucks. The American Psychological Association (APA) reports that a majority of American adults are stressed out with nearly a quarter experiencing extreme levels of stress. Seventy-six percent (76%) of adults claim that money is a source of their stress. Sixty-five percent (65%) say the economy is a source of their stress. Fifty-two percent (52%) say that housing costs are a source of their stress.

We've talked a lot about Sheila Bair in the past few years.We've hosted her at New America.

Low personal savings rates are just one of the ways in which the recent and pervasive Great Recession has highlighted the financial fragility of families, especially among lower-income Americans. Hopefully you were fortunate to join us on Wednesday for a convening of leading experts to discuss the road from financial fragility to financial stability. Entitled Rebuilding the Road to Financial Stability, the convening highlighted potholes along this road by citing evidence for just how financially fragile lower-income Americans are, introducing strategies to repair existing potholes, and suggesting ways in which we can build upon repairs to maintain the road.

Or, such is the distillation of the comments made yesterday at the event "Rebuilding the Road to Financial Stability" (co-sponsored by the Congressional Savings and Ownership Caucus and the Center for Financial Security at the University of Wisconsin-Madison) made by Federal Reserve Governor Sarah Bloom Raskin.

At our event today on "Rebuilding the Road to Financial Stability" (co-sponsored by the Congressional Savings and Ownership Caucus and the Center for Financial Security at the University of Wisconsin-Madison) Federal Reserve Governor Sarah Bloom Raskin delivered a speech about her vision of economic inclusion.

We'll have the video of this up before too long, but I wanted to note that Governor's speech was as explicit a defense of an active, effective regulatory body for financial products as I have heard in some time. She echoed arguments that we have made previously about the symbiotic relationship between healthy consumers and healthy markets. It is a speech worth listening to.

iMarket News concurs with my take, but Bloomberg News thinks the headline is "Income Inequality Hurting Growth."In this case I think we can all be right, here's the whole speech:

The news is out – many Americans are living on the financial edge.  Last week, Justin blogged about how Bankrate’s June Financial Security Index poll found that one in four Americans has no emergency savings.  Last month, the Today show featured new research showing that nearly half of Americans are financially fragile, meaning that they probably or certainly would not be able to cope with an emer

This paper argues that common definitions of financial capability understate the role of psychological barriers to establishing sound financial behaviors, namely savings habits. Drawing on insights from psychology and behavioral economics, we explore these missing psychological variables in the standard financial capability equation and suggest mechanisms, or nudges, to overcome those barriers to accelerate financial capability among low-income youth.

Every year the Asset Building Program conducts an analysis of the federal budget to provide a more complete understanding of how the federal government encourages the accumulation of assets for families up and down the economic ladder. We seek to shine a light on what policy levers are deployed, who benefits from these programs and policy efforts, and how recent legislation potentially alters the landscape.