By Laura Choi

Federal Reserve Bank of San Francisco*

 

The concepts of “personal responsibility” and “rugged individualism” are buried deep in the American ethos, reflecting our historic ideals of being a land of opportunity. Yet it is becoming clearer every day that the opportunity structure in America is inequitable, as lower-income communities and communities of color are too often cut off from key drivers of opportunity such as quality schools, safe neighborhoods, reliable transit, and good jobs. The growing national conversation around inequality is shedding important light on the intersection of individual behavior and socioeconomic context—if we want to influence the former, we must work across sectors to address the policies and systems that create opportunity within the latter. This is especially true in the area of personal financial well-being, where individual decisions around spending, saving, borrowing and investing are deeply tied to the broader context in which an individual or family operates.

 

That’s the underlying premise of the new book, What It’s Worth: Strengthening the Financial Future of Families, Communities and the Nation, a joint publication@goodreads of the Federal Reserve Bank of San Francisco@frbsf and CFED. What It’s Worth is a compilation of over 30 essays from a wide range of experts that lifts up new ideas for helping all Americans gain control over their financial lives and achieve their financial goals. The book examines financial well-being through many lenses, including race and ethnicity, and explores some of the drivers of the racial wealth gap, such as historic discrimination in the housing market and the disproportionate impact of the Great Recession on communities of color. More importantly, the authors push for new solutions and policies to build financial well-being and expand economic opportunity for all. Some of these promising ideas include:

 

Developing a framework for a national asset development policy. Dedrick Asante-Muhammed, Director of XXXX at CFED@cfed states, “Just as massive federal investment was necessary to develop the white American middle class economy of the 1950s and 1960s, so too will it be necessary to develop an American economy that finally bridges racial economic inequality. The kind of massive-scale and sustained national policy commitment that is required will depend on strong leadership and broad-based consensus.” He suggests a number of critical policy elements, such as: equity assessments, which examine whether federal funds are being invested in communities that are most in need of federal assistance; direct federal job creation programs, which create jobs for those with the greatest challenges in finding employment; and asset development policy that directs federal investment to the asset poor, such as refundable tax credits rather than tax credits that overwhelmingly favor the wealthy.

 

Investing in communities of opportunity. Angela Glover Blackwell, CEO of PolicyLink@policylink, describes communities of opportunity as, “places that have the resources and amenities we all need to thrive… Most basically, communities of opportunity provide access to jobs that pay wages that families can live on and that offer opportunities to advance.” She points to four ways to build opportunity and strengthen the financial security of communities of color: invest in good jobs and new businesses; make housing affordable for all; make higher education affordable and attainable; and reform the criminal justice system. She ends her article by making the case that equity “is more than the moral thing to do. It’s an economic imperative for families, communities, regions, and our nation.”

 

 

Expanding an innovative platform for saving that builds on the strengths of existing cultural practices. Jose Quinonez@jquinonez, Executive Director of Mission Asset Fund (MAF), writes, “… an implicit assumption underlying most social policy was that low-income people are poor because they are somehow unsophisticated or otherwise deficient, lazy, or just doing everything wrong. We rejected this ‘deficit-based model’ because it robs people of both agency and dignity. Instead, we built ‘strength-based’ programs by meeting people where they are, and building on what is good in their lives.” MAF developed the Lending Circle model to formalize the traditional practice of small groups of individuals loaning money to each other by creating a platform where activity takes place within the mainstream financial system and repayment activity is reported to the credit bureaus, allowing participants to establish and build their credit.

 

Strengthening community-based organizations to deliver culturally relevant services.

Lisa Hasegawa@lhasegawa and Jane Duong@jduong of the National Coalition for Asian Pacific American Community Development@capacd discuss the importance of working together as communities of color to strengthen community organizations, pointing to “the extraordinary opportunity to work in partnership with local practitioners to design solutions that not only benefit individual community members, but also create opportunities to build solutions that cross ethnic lines within neighborhoods and communities.” These include greater access to responsible financial services, financial coaching, and legal services that benefit low-income individuals and people of color.

 

These are just a few of the many ideas that are explored in What It’s Worth. All of the book content is available for free at www.strongfinancialfuture.org where you can also download the e-book or order hard copies at no charge. We encourage you to explore the book, share it with your networks, and start a new conversation on strengthening the financial future of families, communities and the nation.

 

*Laura Choi is Senior Research Associate in Community Development at the SF Fed. The views expressed are those of the author and do not necessarily represent those of the Federal Reserve Bank of San Francisco or the Federal Reserve System.