Helping families get away from “one paycheck away”

They gathered quietly in a union hall on Tremont Street in Boston. Revenue officers from the Internal Revenue Service, scientists from the Environmental Protection Agency, and housing specialists from Housing and Urban Development.  They all came to share how the partial government shutdown had impacted their families, co-workers, and friends.  Most said they were able to get by missing one paycheck, but they worried about missing a second. That one, they said, would make it very difficult to pay the monthly bills.

The national spotlight on the impact of the partial government shutdown on furloughed federal workers, and federal contractors who may never get paid for those missed weeks, has brought more than the plight of government workers to light.  Many families are now thinking to themselves, “Would we be able to get by if we missed two paychecks?”

the high cost of not having emergency savings

A new report by Prosperity Now shows that only 56 percent of Massachusetts families report keeping emergency savings in the past year.  That means almost half of Massachusetts households did not keep emergency savings, and 60 percent of households in America have experienced a financial shock in the past 12 months, according to Pew research.  

The high cost of housing plays a big role in limiting a family’s ability to save: 49 percent of renters in Massachusetts and nearly one-third of homeowners are cost-burdened, which means they pay more than 30% of their income on housing.  

A report by the Federal Reserve Bank shows nationally, 40 percent of families surveyed said they cannot cover a $400 emergency expense.

The Working Families Network is here to help

Fortunately, help is around the corner, tucked into neighborhood storefronts, community-based organizations, even a downtown office building in Boston.  United Way has created the Working Families Network of Massachusetts, which consists of 20 nonprofit partners, eight of which serve as Financial Opportunity Centers, to offer financial coaching as a core means of building better lives for their clients.  

These United Way-funded Financial Opportunity Centers are in Downtown Boston, Lawrence, Lynn, Quincy, Roxbury, Jamaica Plain, Chelsea and Lowell.  Partners include Quincy Community Action Programs, Chelsea CONNECT, Lynn Housing and Neighborhood Development, Lawrence CommunityWorks, JVS Boston, Roxbury Center for Financial Empowerment, Jamaica Plain Neighborhood Development Corporation and Community Teamwork in Lowell.

Every day at these centers, staff trained in financial coaching meet with clients who are looking to improve their financial well-being and stability. Many of these staff have been formally trained through the Financial Empowerment Learning Institute run by United Way and funded by Citizens Bank.

We talked to some of the experts at these organizations and asked them about the strategies that are most effective at helping households build their savings and assets, the biggest challenges that families face to saving, and their best advice for those looking to improve their financial well-being.   

Paola Liendo is Senior Financial Coach at the Family Prosperity Initiative at Jamaica Plain Neighborhood Development Corporation, and Constance Martin is Deputy Director of the Office of Financial Empowerment for the City of Boston. Both organizations are United Way partners in Boston Builds Credit, an initiative funded by Citi Community Development that is aimed at reducing income and wealth inequality by raising credit scores.

What are some of the most effective strategies you see in your work?

Paola:  “We encourage participants to be creative and resourceful so they can take advantage of non- traditional benefits to increase their income. Some examples are to visit a food pantry once a month to get non-perishables, or to buy fresh fruits and vegetables from the Fresh Foods truck (also known as $2 dollar a bag), or become members of the Boston Public Library to get free tickets to the museums, aquarium and other local activities.

“Also, make a plan before you fill out your taxes. Most of our clients will receive a tax refund and although most of them know already where are they going to spend that money, only a  few consider saving part of it. Starting an emergency savings fund at that moment can be much easier for them.”

Constance: “Everyone wants to save, in theory, but the strategy and amount have to be manageable.  At the Roxbury Center for Financial Empowerment, we have found that the Twin Account program sponsored by Justine Petersen is very helpful.  The Twin Account is a vehicle for low- to moderate-income individuals to save and build credit at the same time. A client commits to saving $26/month for 12 months and can receive a $300 match at the end of the year.   The monthly payment is steep but the $300 match is very motivating for our clients.”

What are some of the biggest challenges households face to healthy finances?

Paola: “The high costs of housing.  For those clients who pay market rate, the cost of housing is the biggest barrier to being able to save.  The “cliff effect” is also an important barrier, because families are afraid of losing important benefits such as health insurances and are afraid their rent will increase if their income goes up.”

Constance: “In addition to the cliff effect, families simply have too many expenses to make saving easy.   Most of our clients have difficulty making ends meet to begin with, and unexpected expenses – such as a medical bill or housing, for example – can cause homelessness overnight.  Also, many of our clients are single parents, some of whom cannot find affordable child care, which limits their availability for traditional 9-5 employment.“

What is your best advice to families looking to save?

Paola: “Be a smart consumer, do your homework every time you are making a purchase to get the best prices.  Don’t be afraid to ask for help, we all have strengths and weaknesses and it is important to recognize them and reach out for support.  Finally, identify “money leaks,” money that you spend without thinking and that does not add any value or well-being to your life. Whether it is a cup of coffee in the morning, a pastry mid-afternoon, or Uber rides on cold days, identifying these “leaks” and planning to avoid them in the future can have a big impact on the monthly cash flow.”

Constance: “An important piece of advice is to be patient. We ask clients to enter into a partnership with us to start improving their financial wellness, but it doesn’t happen overnight, and it is important to explain this up front.  It is easy to get discouraged when obstacles are encountered so we stress that a coaching relationship is for 18 – 24 months, so that we can work together over time. We stress that they are not alone and we are helping provide the tools they will use to put themselves and their families on a pathway to prosperity – we will be there cheering them on!”