Asset Building: A Means to Ameliorate Intergenerational Poverty: Opportunities and Challenges in the Mississippi Delta Paulette Meikle and Leslie Green-Pimentel Delta State University Community Development Society 2013 Conference July 21-24, Francis Marion Hotel Charleston, South Carolina
Introduction The Mississippi Delta is a region of persistent income inequality and pervasive intergenerational poverty. Several counties have sustained a poverty rate of over 20 percent or higher for more than five decades (U.S. Census Bureau, 2010). Current data show that more than one-quarter (1/4) of families and over half (1/2)of children under the age of 18 live in poverty. Social policy for the poor has been focused almost entirely on income (Sherraden, 2001).
Asset Poverty and Inequality We argue two main points: 1. Encouraging saving and building assets among the poor is a promising pathway for breaking the cycle of intergenerational poverty the way out of poverty is not through income and consumption but through saving and accumulation, (Sherraden, 2001). 2. Asset accumulation can create economic advantages for low and moderate income (LMI) individuals and families and address wealth disparity in the Mississippi Delta.
.Asset Inequality, more important Income Inequality The Corporation for Enterprise Development (CFED) that income by itself is necessary, but not sufficient, to allow families to escape poverty, achieve financial stability and move up the economic ladder. They found that: Assets can: 1. promote success in the labor market 2. long range planning, 3. better care of property, 4. increased learning about financial affairs, 5. increased social and political participation 6. psychological well being 7. promote economic mobility for single mothers 8. enhance the well-being and life chances of children 9. increase the likelihood of going to and succeeding in college 10. can create a financial buffer to weather emergencies
We describe an asset-building model and analyze strategies that enable LMI families to build personal financial wealth through savings and investments. Using data from a 2012 community survey we discuss opportunities and impediments surrounding assetbuilding activities geared toward stabilizing LMI families and improving the quality of life for residents in the Mississippi Delta.
Purpose of the Study We examine asset building gaps and financial education needs of LMI individuals and families in Leflore County, Mississippi. We addresses attitudes toward personal and family finances, financial education, fiscal responsibility and money management strategies among LMI residents in Leflore County. We further ascertain financial practices and impediments to asset building among LMI residents in Leflore County. Resident s perceptions of community financial welfare are also addressed. Finally, we dissect wealth creation strategies, and analyze successes (and impediments) of a diverse group of financial institutions and community development practitioners who are engaged in asset building projects in the County.
6. What are the wealth creation strategies used by financial institutions and community development practitioners who work with low and moderate Income families in Leflore County, Mississippi. Research Questions 1. What are the asset building and financial education needs of low income individuals and families in Leflore County, Mississippi? 2. What are attitudes toward personal and family finances, and financial education among low income residents in Leflore County, Mississippi. 3. What are the financial practices and perceptions of community financial welfare among low income residents in Leflore County, Mississippi. 4. What are attitudes toward children financial security and education among low income residents in Leflore County Mississippi. 5. What are some impediments to asset building among low income residents in Leflore County Mississippi.
Data Management: SPSS and Narrative analysis Methods In seeking to understand attitudes, social forces and behaviors that predict asset building and wealth creation among LMI families, we employ a social scientific approach in addressing main research questions. Therefore, to achieve the objectives of this study, several empirical data collection techniques were used as follows: 1. Questionnaire survey 104 LMI residents (Purposive Sampling) 2. Key informants survey - (N=21) 3. Participatory Dialogue: three communities
Conceptual Framework An Institutional Theory of Determinants of Saving and Investment Action and Asset Accumulation 1. Institutional constructs: characteristics of saving related programs and policies that can shape saving-related behavior. 2. Individual constructs: (economic resources Asset and Accumulation needs, informal social support, financial literacy, and psychological variables) Liquid savings Retirement savings Net financial worth Home equity Net worth affect saving and investment, which in turn affect asset accumulation. Household savings are low and people save best in contractual savings systems.
Conceptual Framework Figure 1: Determinants of Saving and Investment Action and Asset Accumulation Institutional Constructs Access Information Incentives Facilitation Expectations Restrictions Security Individual Constructs Economic resources and needs Social networks Financial literacy Psychological variables Saving and Investment Action Deposit frequency Deposit amounts Withdrawal frequency Withdrawal amounts Portfolio composition Intergenerational and Interhousehold Transfers Asset Accumulation Liquid savings Retirement savings Net financial worth Home equity Net worth Source: Beverly, Sherraden, Cramer, Williams Shanks, Nam,and Zhan, 2008
Demographic Characteristics of Sample Gender: 62.5% were female & 37.5% were male Age: 25.5% were between the ages of 25-34 Marital statuses: 51.5% were single & 26.7% were married Race: 90.3% were African American Educational attainment: Some college-20.8%, High school - 28.7%, & Less than a high school education- 15.8%. Employment Status: Of those reporting being employed (n=63; either full, part, or self employed), most (41.3%) reported working in the service industry and 66.7% of those employed had been so for 10 or fewer years. Income: 64.1% earn $30,000 or less (see Table 1).
Asset building and financial education needs of LMI Asset Building Needs Education Income & Employment Transportation Housing
Financial dreams and Aspirations. 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00%
Asset building and financial education needs of LMI Financial Education Needs (from Resident Interviews): 75.75% of residents indicated they have good or satisfactory financial knowledge and skills Majority were female (64%) and most had a h.s. degree (25.33%) 67.3% want to learn more about financial matters Majority were female (64.3%) and most had some college education: Assoc. Degree or Bachelor s Degree (41.2%) Primarily interested in learning more about budgeting and savings
Money Management Topics of Interest to Respondents (n=70) 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00%
Asset building and financial education needs of LMI Financial Education Needs (from Key Informant Interviews): Residents are living beyond their means and others are living paycheck to paycheck not knowing how to meet expenses and save. Generally there is a lack of financial education that if acquired may help residents manage their money more wisely and create opportunities to save.
Attitudes toward personal and family finances, and financial education Debt adverse in certain situations When faced with a loss of income 60% never have to borrow money. When run out of money in a pay period 57% cut down on expenses. most are: female, single h.s. diploma/ged, employed full time, renters, ages 25-34 Those with debt (61%) report feeling burdened by it One resident s response: [Having debt makes me feel] Sad and depressed. Walk to groceries. Own a car, can't put gas in it.
Attitudes toward personal and family finances, and financial education Saving for emergencies and the future 75% indicate they save (N=104) Majority are: female (59%) employed full or part time (60.2%), single (52.6%) Most have: a high school diploma (28.9%) or masters degree (21.1%), and are age 25-34 (29.9%) Why do they save? Because I have to save. Any case of emergency. Again It is just something that I must do. Save for the emergencies or unexpected situations. For the kids funding of events. So I can have if I run out of food, I'll have more money to buy groceries. To do better than my parents did.
Attitudes toward personal and family finances, and financial education Lack of Motivation and hurt pride Focus group attendees said: I do not receive food stamps. There is no assistance for me. You are making me poor. I have to pay for every single thing out of my pocket. People who have degrees but are out of employment because they could not find a job position that they wanted and they did not want to settle for a regular job due to their pride. Key Informants indicated: There is a lack of motivation among residents to improve their economic well being. Government dependence may contribute to this lack of motivation. Unemployment among residents leads to lower morale.
Financial practices and perceptions of community financial welfare Financial Practices (from resident interviews): Residents demonstrate knowledge of where their money goes (clothing, housing, food) Most are female, single, with a h.s. diploma/ged, employed full time, homeowners and between the ages of 25-34 Knowledge of Personal Finances Yes (%) No (%) Do you know how to set up a personal budget? (N=104) 82.7 17.3 Do you know what percent of your total income goes toward paying for housing? (n=101) 71.3 28.7 Do you know what percent of your total income goes toward paying for food? (N=104) 80.8 19.2 Do you know what percent of your total income goes toward paying for clothing? (N=104) 78.8 21.2 Do you know what percent of your total income goes toward paying for utilities (such as electricity, water sewer, trash pickup)? (n=103) 84.5 15.5 Do you have an emergency fund? (N=104) 48.1 51.9 Do you/your family keep records of your income and expenses? (n=102) 62.7 37.3
Financial practices and perceptions of community financial welfare Financial Practices (from resident interviews): 48% never had to borrow to meet every day expenses in the last 6 months (n=104) Majority were female (54%) and homeowners (52%) Most were and between the ages of 25-34 (26%), single (43.8%), have their high school diploma or GED (29.2%), and are employed full time (40%).
Financial practices and perceptions of community financial welfare Financial Practices (from resident interviews): Strategies for getting buy when money runs out (n=97) Yes (%) No (%) We cut down on expenses before the next pay cycle 57.7 42.3 We borrow money from relatives, friends, and acquaintances 40.2 59.8 We spend our savings 25.8 74.2 We use a credit card 23.7 76.3 We borrow cash from a payday loan company 9.3 90.7 Our friends and relatives give us money free of charge 22.7 77.3 We work extra hours or do additional jobs 33.0 67.0 We withdraw a required amount from our business 4.1 95.9 Do not run out of money 5.15 94.85 Other: Donations from Church 1.03 98.97
Financial practices and perceptions of community financial welfare Financial Practices (from resident interviews): Table 6. Financial services used by the respondent and their family (n=100). Financial Services Used Yes (%) No (%) Consumer credit 13.0 87.0 Bank checking account 75.0 25.0 Bank savings account 56.0 44.0 Credit card 39.0 61.0 Debit card 60.0 40.0 Prepaid card (non-bank) 10.0 90.0 Mobile banking (mobile phone) 16.0 84.0 Mortgage loan 10.0 90.0 Insurance policies 29.0 71.0 Private pension fund policies 17.0 83.0 Payday loans 4.0 96.0 Other 12.0 88.0 Note: the columns will not total 100% as respondents could indicate yes or no to more than one financial service.
Financial practices and perceptions of community financial welfare Financial Practices (from resident interviews): 75% have a checking account (n=100) Majority are female (64%) have a high school diploma (26%), have some college (26%), are employed full or part time (62.6%), Most are single (48.6%) 56% have a savings account (n=100) Majority are female (58.9%) Most have a high school diploma (24.1%), are employed full or part time (62.5%), are single (43.6%)
Financial practices and perceptions of community financial welfare Financial Practices (Focus Groups/Key Informants): In need of improvement: residents are living pay check to pay check and living beyond their means One key informant who is associated with a non traditional banking service reported that many customers do not appear to be living within their means as they have become repeat customers. Key Informants indicated: I believe a small group of people in our area live within their budget. On the other hand, we see young people going in debt for big fancy cars that takes all their income and then they struggle. They don t make wise decisions at all thinking if I spend for things, what do I have left. They lack financial analysis skills when caring for their households, paying bills, budgeting etc.
Attitudes toward children financial security and education In favor of children receiving an education to better their future A focus group resident indicated: I wish I had planned better for my children to go to college. It cost more than I thought. I wasn t financially ready. Key informants indicated: When residents are preoccupied with meeting basic needs for survival, planning financially for the future of their child may not be a part of their thought processes. Educate the children that are in the street and get individual parents better jobs to be at home with their children at night.
Attitudes toward children financial security and education Resident attitudes toward saving for their children s education: 78% of those with children not grown rate saving for their education as very high (n=50) Majority are female (62.2%), employed full time (55.5%) and are renters (60%) Most are single (44.18%), have a high school diploma/ged (30.95%), and are ages 25-34 (46.5%). 62.7% do not have a savings account already established (n=51) Majority are female, (59.4%), single (50%), employed full time (53.1%), are renters (59.4%) Most have a high school diploma/ged (30%), and are between the ages of 25 and 34 (46.7%). 37% do have a savings account already established
Some impediments to asset building among low income residents Income and employment Educational opportunities Transportation Internet access Government assistance Limited access to goods/services Not financially savvy
Wealth creation strategies used by financial institutions and community development practitioners Existing Programs / Networks / Products Employment Financial Educational
Conclusion There both institutional and individual constraints for AC There is an obvious need for asset building initiatives The poor do in fact save Financial education does matter
Conclusion More research is needed among LMI individuals, families and community to assess the effective financial education curriculum and behavioral change approaches that will engender change to help LMIs manage their finances effectively to support their life goals. Develop tools measure change and progress among LMIs regarding savings and asset accumulation.
Conclusion We argue that asset accumulation is a gendered process - an uneven process between men and women. Feminization of Poverty in Leflore county affect asset accumulation(continued erosion in the social and economic safety net for women and children).