Community Jobs Bank Account Pilot Project Results

Transcription

1 Community Jobs Bank Account Pilot Project Results November 24, 2014 Brief Prepared by Maggie McKenna, PhD

2 Community Jobs Bank Account Pilot Project Results November 24, 2014 Introduction One in four very low-income households does not have a savings or checking account. 1 In Washington State 4% of the population is unbanked and an additional 19% is underbanked meaning the adults have a bank account but also access alternative financial services. Without a bank account, low-income families are more vulnerable to losing cash kept at home and they can t have payments or benefits deposited safely. Without a bank account for deposits, families are also much less likely to generate any savings for the future and they remain close to financial hardship if any unexpected expenses or emergencies occur. The adults in these unbanked households are likely to have limited skills to manage family finances and may also regularly access alternative financial services using payday lenders or check cashers. In Washington State, adults in underbanked households were four times more likely to have used a payday lender, at some time, than adults in fully banked households. 2 A growing focus in the asset-building field is on delivering financial education as well as increasing access to low-cost financial products in order to improve the financial outcomes and well-being of lowincome families. But, low-cost financial products in the form of bank accounts are not readily available, accessible, or sufficiently attractive to many income challenged families, including parents with children. Parents employed in low-wage jobs struggling to support their families remain vulnerable and at-risk when they have limited knowledge of mainstream financial services, lack financial skills, and incur costs from using alternative financial services. In addition to this growing evidence in the asset building field, further support to conduct a pilot project came from Washington Senate Bill 5921 that called for strategies to increase opportunities for public assistance recipients to maintain bank accounts and increase financial education and management skills that help minimize recipients costs related to bank fees and ATMs. These national and state influences made a setting for the Washington State Department of Commerce Community Services Asset Building Program to partner with The Prosperity Agenda. The Prosperity Agenda is a research-driven organization focused on identifying, piloting, and testing evidence-based approaches to increase financial security for disadvantaged populations. In early 2012, The Prosperity Agenda released a white paper titled Innovations in Welfare Policy: Building a Personal Safety Net with a Bank Account which discussed how acquiring access to a free or low-fee bank account can be a first step for low-income families including families receiving Temporary Assistance to Needy 1 Federal Deposit Insurance Corporation. (2012) 2011 FDIC National Survey of Unbanked and Underbanked Households. 2 FDIC (June 2013). Addendum to the 2011 FDIC National Survey of Unbanked and Underbanked Households: Use of Alternative Financial Services. 1

3 Families (TANF) assistance to move toward financial security. 3 A recommendation in the white paper was for a contracted financial institution to make a no-fee, accessible, attractive banking option available to low-income families that receive public benefits and that families also develop financial capability through acquiring financial skills and knowledge. The Washington State Department of Commerce contracts with community-based non-profit agencies to implement the WorkFirst Program, Washington s welfare reform program designed to help Temporary Assistance for Needy Families (TANF) participants prepare to enter the workforce. The Department of Commerce WorkFirst contractors provide three employment-based training programs; the largest is the Community Jobs Program. The WorkFirst Community Jobs Program was a logical focus for initiating a pilot on increasing access to banking because WorkFirst dispenses monthly cash assistance to TANF families. To receive the cash assistance, of $478 a month for a family of three, the adult is required to perform 32 hours of work activity each week. In receiving the assistance, the family has two options: (1) an Electronic Benefits Transfer (EBT) card that may be used as a debit card, or (2) having the benefits deposited by Electronic Funds Transfer (EFT) into a checking or savings account. The EFT option would require that families have accessed mainstream banking services, but based on available 2012 data only about 12% of participants took advantage of direct deposit or EFT. This low proportion of banked WorkFirst clients suggested an opportunity to pilot an intervention to improve the clients access to mainstream banking along with building financial knowledge and skills. In this project, two community based contractors were selected to pilot the blending of a combination of financial education, financial coaching, and access to a financial product into the Community Jobs transitional work training program for adults receiving TANF benefits. Brief highlights of relevant research The results from a prior research study that aimed to increase financial education and/or access to financial products among groups of low-income workers lend support to the aims of thiss pilot study. The CFED and the Financial Empowerment Center partnered in a study that examined the outcomes of a transitional employment program for low-income Parks Department employees who were also offered financial counseling and bank account access. The groups of participants were offered a single service or combined services at different points in their job programs. The study identified the contribution of each component in shifting the participants financial behavior. The results indicated that the participants who were unbanked took advantage of opening a bank account when the conditions were acceptable and well understood. But, over time, the decrease in the clients maintenance of the accounts when the new workers income levels fluctuated indicated that new savers need more support such as extended financial counseling. 4 The overall results were encouraging that integrating financial empowerment services into an existing program may increase the success of both interventions. The integrated approach of combining financial empowerment with other services has also been endorsed in other Wiedrich, K.,Gons,N.,Collims, J.M., Drever, A. (2014)Financial Counseling and Access for the Financially Vulnerable Findings from the Assessing Financial Capability Outcomes (AFCO) Adult Pilot. CFED April

4 study contexts including three different model projects serving groups of low-income individuals. 5 Selected research studies have also explained the factors that contribute to low-income households being unbanked which are unresolved overdrafts, patterns of unauthorized account use, lack of personal identification, or personal preference to not open an account. 6,7 Some individuals also remain distrustful of financial institutions or they fear their privacy being violated so they remain detached from any financial institutions. 8 These studies lend support to this Community Jobs pilot project which explored how a group of TANF parents responded when financial education and coaching were offered in conjunction with the case management services in their employment training program. Overview of the Community Jobs Bank Account Pilot Project This brief describes a pilot project for TANF recipients who were referred to the Community Jobs program at the Lower Columbia Community Action Program in Longview in southwestern Washington State and to the YWCA Opportunity Place in Seattle. The participants in the Community Jobs program typically face multiple barriers to gaining employment. Commerce s local Community Jobs contractors place participants in temporary, 20-hour-per-week paid positions with local nonprofit organizations and public agencies to gain work experience and job skills. In addition, participants enroll in at least 10 hours of additional activities to help increase their future employability including education, job readiness training, life skills training, or community service. Case managers interact with participants to help them acquire or increase their life skills, communication skills, and overcome any challenges to prepare for full-time employment. Participants remain in the program up to six months long enough to gain both substantial work experience and tools for dealing with life situations beyond crisis management. This pilot project focused on the addition of client-focused financial empowerment services for TANF parents in the Community Jobs program. In addition to being referred to on-the-job work training at a community site the clients were also offered a bundle of financial services including access to low-cost bank accounts and to electronic funds transfer, Money Smart financial education or other group financial education classes, and financial coaching that addressed the clients barriers to personal financial management. The Bank On program in Cowlitz County has several credit union and banking partners that have been expanding access to low-cost financial services for county residents. Bank On Seattle-King County also has participating credit unions and banks that are partnering in making banking services accessible to more diverse clients. The Community Jobs program was a relevant setting for 5 Annie E. Casey Foundation (2010) An integrated approach to fostering family economic success: How three model sites are implementing the Center for Working Families Approach. 6 Romich, J., Waithaka,E., & Gordon, S. (2010). A Tool for Getting By or Getting Ahead? Consumers Views on Prepaid Cards. Center for Financial Services Innovation. University of Wisconsin, Madison, April 2010 Symposium- Family Financial Security. 7 Wiedrich, K.,Gons,N.,Collims, J.M., Drever, A. (2014)Financial Counseling and Access for the Financially Vulnerable Findings from the Assessing Financial Capability Outcomes (AFCO) Adult Pilot. CFED April Barr, M.S., & Sherraden, M.W. (2005) Institutions and inclusion in saving policy. In N. Retsinas & E. Belsky (Eds.) Building Assets, Building Wealth: Creating wealth in low-income communities. Washington,D.C.: Brookings Institution Press. 2

5 blending asset-building activities with job training because the program aims to prepare participants to enter the workforce with the goal of increasing their incomes through unsubsidized full-time employment. Acquiring a bank account and increasing personal financial knowledge and skills would prepare the TANF parents to manage their family finances and move toward financial stability. The pilot data collection was initiated in August 2013 for new Community Jobs clients and enrollment of clients in the pilot continued through early The participant data collection concluded at the end of July 2014 to include participants who had enrolled through April 2014 and who had finished at least three months of services at the end of July. There were 82 individuals who were enrolled in the pilot at one site and 29 clients at the second site. All of the individuals who were enrolled in Community Jobs were provided with the enhanced financial services as well as the job training during the duration of the pilot. The participants were informed about the pilot study by the case managers and if clients agreed to participate their data were included in the analysis. One site had six clients and one site had only one client who did not wish to have any participation data included in the pilot data analysis so they were not counted in the data collection. At one site, the participants initially attended a group orientation to the Community Jobs services where they also heard about financial services including the benefits of using direct deposit and the importance of using credit wisely. The majority of the participants, 66%, were engaged in services for less than four months. Within this group, 36 individuals or 34% participated for less than two months. One fourth of the participants, 26%, were engaged in services for five to six months. The participants ranged in the number of times they were meeting with their case managers from weekly to once a month. Those who had a short duration of two months and met only monthly could have had three hours of face to face time with the case manager. A different participant meeting weekly with another case manager over six months could have had up to 25 hours of one-on-one interaction. What questions did the pilot project address? Par$cipants' dura$on of Community Jobs services August 2013-July 2014 (N=111) > 6 months, 9, 8% 5-6 months 28, 26% 1-2 months, 36, 34% 3-4 months, 34, 32% The project objective was to recruit 100 individuals into the Community Jobs Bank Account Pilot Project and a total of 111 participants were included in the pilot. There were 82 participants at one site and 29 at the second site. In the remainder of this report, the total group of 111 clients is referred to for some data points while the data from only the larger group of 82 clients are included for other data points. The data from the smaller group of 29 clients were not available to be combined from all of the program components. The pilot offered several financial components: access to a bank account, referral for EFT, 3

6 coaching assistance to reduce barriers to opening an account, financial education, and assistance on financial skills including budgeting and tracking expenses. The participant data that were collected and analyzed led to answering four evaluation questions: 1. To what extent did the pilot project activities lead to the participants decreased barriers to opening and using bank accounts? 2. How well did the pilot project, including financial education and coaching, increase the participants financial knowledge and skills? 3. What evidence indicated the clients increased their abilities to manage their financial situations? 4. How much did the pilot project contribute to the TANF recipients having lower bank fees related to their accounts? Case managers helped some clients resolve barriers Combining data from both sites, a total of 8 out of 111 participants, or 7%, initially had no barrier to opening a bank account and were referred to a community bank that offered low-fee accounts. This includes 5 out of 82 participants at one site and 3 out of 29 participants at the second site. Examining the data from only the larger site, the majority of the 82 participants, 54 individuals, had a barrier to obtaining a bank account. Nearly one-quarter or 13 clients who had a barrier such as their previous history of overdrawing an account successfully resolved the barrier and opened an account following completion of the Money Smart program. Combining these two groups, one in five participants, 18 or 22%, had opened a new bank account when they exited Community Jobs. These participants also used Electronic Funds Transfer (EFT) for the deposit of their transitional job wages into their accounts. Along with these participants there were an additional 11 participants who had an existing bank account who started using EFT after this option was explained to them. A total of 29 individuals, or 35%, were using EFT for their bank accounts at the project end which is a 22% increase from the start of the pilot. 4

7 Par$cipants' Bank account status at end of pilot project (n=82) Had an account & started EFT Removed barrier & opened account Opened account-no barrier participants or 35% were banked at the end of the pilot compared to 13% at the start Not open account Number of individuals In addition to the participants who had an existing account or who opened a new account, another 29 participants, or 35% could not or chose not to open an account. Participants might have been ineligible if they had repeatedly overdrawn an account or if they could not produce documents to verify their identity. Participants might have also refused to open an account due to their beliefs about financial institutions, previous negative experiences, perceptions regarding high bank fees, or distrust of any financial institutions. All of these participants opted for a prepaid card, the Bluebird American Express card issued through Walmart. The participants WorkFirst wages were loaded to the card. The Bluebird card is a debit card based checking account alternative. The participant does not incur an ATM fee if accessing the ATMs at Walmart and also using direct deposit. The card allows for cash reloads. The card does not charge monthly or annual maintenance fees. The use of a pre-paid card did reduce fees or costs that would be incurred in using a payday lender or check casher. The drawbacks of the card are that it is not insured by the FDIC and users could incur fees if accessing the Walmart MoneyPass ATM while not also using direct deposit. Research on the use of prepaid cards has supported this option for unbanked and underbanked individuals. The prepaid cards make funds available at a lower cost than using alternative financial services and the cards do not allow for overdrafts which means users would not incur the related fees. The addition of a savings component to the card would be a further means of nudging underserved households toward asset building. The Bluebird card also has a linked savings, a set-aside portion of the account that cannot be directly accessed by check writing which encourages savings. 5

8 Clients increased financial knowledge of bank fees and credit Nearly all participants, 79 of 82, completed a financial knowledge pre-test. The case managers referred each client to the Money Smart classes that are taught in an eight week series on a recurring schedule. Participants who completed at least four sessions receive a Second Chance certificate that they could present at participating financial institutions to open a new bank account. A large majority of participants 72 or 91% completed all of the Money Smart financial education sessions and 80%, increased their financial knowledge at the end of the sessions, approximately two months after being referred to the sessions. The FDIC sponsored Money Smart content includes credit services, using credit effectively and repairing credit, checking accounts, borrowing, tracking spending, and the importance of saving. Participants increased their understanding of interest rates, learned how to access their credit report, learned about avoiding overdraft or insufficient fund fees, learned about month to month lease agreements, and acquired knowledge about mortgage options. An encouraging result was 30 individuals or 42% of those who finished the financial education sessions stated their intention to save. At the second site where 29 participants had received services 20 individuals responded that they intended to continue to save after having started a savings account or another means of saving. The pilot timeline was too short for follow-up if the participants maintained their savings accounts. Completed Money Smart classes 91% Par$cipants' comple$ng Financial Educa$on (n=79) Did not complete 9% Clients changed in their personal financial management The case managers typically met with the pilot participants at least monthly and often as frequently as weekly. During these meetings the case managers coached the clients in any of the clients identified goals including their interests in increasing savings or other financial goals. The case managers were also guiding the participants in other areas that influenced their work readiness including improving their transportation options, accessing child care resources, achieving safe housing, or addressing other concerns. The case managers were trained financial coaches who also worked with the clients to complete a projected monthly budget, an actual budget, and track spending. Participants were also referred to access a workroom within the agency where they could receive help to use computers, learn how to request a credit report, and interpret the report. Just one in five of the participants, 20%, reviewed their spending and nearly four of five participants did not track their spending even after the case managers reminders to do so. While the participants were 6

9 not actively engaged in consistently tracking expenses for 30 days, more than half of the participants, 46 or 56%, completed a budget. 45 of 82 participants ( 55%) and 4 of 29 participants (13%) pulled a credit report with help 37 of the 82 participants or 82% understood the report with help from the case managers 55 of the 82 participants or 67% signed up for Credit Karma along with 1 of the 29 participants (3%) Clients did experience reduced fees While the focus of the pilot was not solely on reducing the participants bank fees or fees related to cashing checks, through the use of new bank accounts at selected banks and with the use of prepaid cards, 47 of 82 participants or 57% did reduce the fees that would have been incurred by using check cashers or payday lenders. To what extent was this pilot effective in meeting the expected outcomes? Successfully blended financial services into human services- The pilot demonstrated that an added focus on financial education, financial barrier resolution, introduction of a bank account, and financial management including budgeting and accessing a credit report could be blended into case management services in a transitional job program. The successful integration was in part due to all of the case managers having earlier completed the Financial Coaching for Prosperity training which increased the case managers comfort and confidence to introduce financial topics and ask the participants about their financial goals. Moved individuals in a positive financial path- A very encouraging finding is the high uptake in the use of bank accounts by one out of four participants and the use of the prepaid bank card by an additional third or 35% of the participants. These results indicate participants are starting on a positive financial path of reducing the use of costly alternative financial services and taking a step toward establishing family financial security. Increased financial capability- The results from this pilot in one Community Action Agency suggest that embedding financial literacy along with financial coaching and access to financial projects can be a means to increase financial capability in the individuals who are income challenged. The positive response of the case managers and the clients to integrating a financial focus into the transitional jobs program further suggests that the pilot could be replicated in other social and human services programs including more transitional job programs. Helped individuals to overcome barriers to banking- This enhanced financial focus led to 1 out of 5 of the participants starting a bank account which could be the first step toward improving financial habits including building assets. To increase the use of low-fee or free bank accounts, one future 7

10 approach would be to work for system level changes that urge financial institutions to expand their acceptance of applicants identification verification in order to reduce one barrier to opening accounts. Decreased costs related to use of alternative financial services- The number of participants who were banked at the end of the pilot, having had an account or opened an account, was equal to the number of clients who started using a prepaid checking account alternative card as a result of the pilot. This is a very encouraging result that these clients have decreased costly fees incurred in the use of alternative financial services and the clients are giving more attention to improving their financial Recommendations for future efforts to increase financial capability in low-income individuals Adjust focus to meet the client- The pilot demonstrated that more clients were interested in learning about their credit than tracking their spending or budgeting. This suggests that financial education sessions or classes could draw clients with an emphasis on learning the steps to improve personal credit while also tailoring the following sessions to help clients see how relevant budgeting and money management are to their financial well-being. The finding also supports financial coaches to persist in their efforts to work with clients to improve many aspects of their financial situations including credit management, budgeting, and limiting spending. Many clients are most interested in improving their credit because a poor credit score and history can have direct effects on their status to get into rental housing and to be hired for some jobs. This finding suggests that financial education sessions should focus on informing the clients about their immediate financial concerns such as paying down debt and loans, not relying on money from friends and family, and improving their financial outlook to make a more stable life for their children. Follow-up on savings account maintenance- The pilot had a good result in stimulating 42% of clients to start saving. There were multiple influences on the clients to adopt this financial behavior including the Money Smart classes, the coaching relationship, and their own motivation and actions to take steps to save. The results lend support to the finding that financial education alone is not sufficient to promote positive financial behavior change. Developing and maintaining financial habits calls for individually tailored approaches such as financial coaching that is growing as a means to guide individuals toward accomplishing steps toward financial stability. The timeline for the pilot did not allow for following up with any clients to identify if they were fulfilling their intention to save regularly. A future study could explore the dual mechanisms of financial coaching with the mechanism of a savings component either in the form of a savings pocket on a prepaid card, a savings account, or other form of savings behavior. Provide information to overcome banking challenges- In the pilot, there were many factors that contributed to individuals not opening bank accounts including their personal preferences and beliefs, but the lack of information about ChexSystems and how to resolve issues also led to the pilot participants not accessing any mainstream financial services. The case managers provided information or guided the participants to access information to understand ChexSystems reporting, how to access and use reports, and how to dispute issues. The pilot highlighted that a need exists to increase 8

11 knowledge among the unbanked and underbanked low-income individuals who could benefit from resolving past bank account issues in order to move forward toward future financial stability. Assess the amount or threshold of financial coaching that leads to action- The number of hours varied that the participants interacted with the case managers and specifically acted on financial goals. A future study could assess the duration and frequency of financial coaching, as well as if there is a critical threshold, that is related to the clients taking actions to adopt, improve, and maintain positive financial habits toward achieving financial stability. Implications for future projects to integrate financial empowerment into subsidized employment programs There were several implications that we can draw from implementing the bank account pilot project at two different social service agencies that each provided an array of services to low-income individuals who were TANF recipients in the WorkFirst programs. The level of the clients participation varied at each site which was influenced, at least in part, by the different programmatic and staff features within each of the agencies. One agency has a program focusing on increasing the financial stability of local residents. The case managers who are interacting with the WorkFirst clients have all completed Financial Coaching for Prosperity training and had been applying a coaching approach in their relationships with clients prior to the pilot. They are also supervised by an experienced financial coach who practices and endorses coaching in guiding clients toward achieving their financial goals. The site also offers a computer workroom where clients can receive some help to access online financial information, request a credit report, or search for jobs or educational options. Prior to and during the pilot, the clients were directed to financial education classes that were either offered on-site or at three other accessible locations. The program supervisor and the case managers who were the financial coaches are also well informed about the local financial institutions that offer low-fee bank accounts that encourage new clients to access mainstream banking services. At the second site, one case manager who had completed the Financial Coaching for Prosperity training initially served as a resource to other case managers until being reassigned to another office. The other case managers had not completed the Financial Coaching for Prosperity training and had a range in their interests and comfort in discussing financial topics with clients. The case managers at this site were experienced and this site has well-established goals to stimulate and assist the program clients to find jobs, increase their incomes, and move toward stability. The agency refers clients to financial education group sessions that are offered at a different multi-service organization that is located some distance away but it is accessible by public transportation. This site experienced more staff attrition and staff reassignments during the course of the pilot than the other site. To enhance the uptake of the financial empowerment services into existing services the first step should be to assess the agency receptivity and capacity to implement the additional financial empowerment focus into an already full set of agency service goals and program objectives. Social service agencies are typically working with limited staff and financial resources to meet multiple goals, reporting requirements, and funders expectations. New requests to collect project-specific data 9

12 imposed a burden onto frontline staff who were interested in financial empowerment for their clients but the case managers have many demands on their time. The pilot project aimed to design data collection tools that could be completed in a reasonable amount of time but closer tracking of the time actually being spent to enter data onto the pilot project forms could have led to more complete data collection over the project duration. To increase the case managers accurate recording of the client data more time should be spent in face-to-face meetings at the start of the project to explain the use of individual-level data collection tools and monthly caseload summaries. To increase staff participation in the pilot project time should be spent to discuss the potential benefits of banking with the service providers to generate their interest and engage them into the process of offering the enhanced financial services as part of the existing services. This may be a twostep process with the first step being to interact with the social service providers to inform them about asset building and how to improve credit, pay down debt, and start a savings habit. When the service providers have acquired sufficient financial information and have become comfortable about their personal or family financial situations they are far more likely to consistently address financial issues with clients. To maintain staff engagement in the project the staff require frequent reinforcements. When financial services are added to existing services the providers need direction and support to consistently take time to discuss the client s financial concerns, habits, and goals as part of the overall service plan. The service providers who were financial coaches more readily accessed peer reinforcement and their supervisor s support so they consistently discussed financial barriers with their clients and the clients made more progress on starting and keeping banking accounts. The case managers who had completed financial coaching training were more consistently initially asking clients about their financial goals and were routinely asking clients about their progress in tracking spending, learning more about their credit, or removing barriers to opening a bank account. This finding supports continuing financial coaching as a means of encouraging individuals to develop positive financial habits including starting banking accounts. 10