Profitwise News and Views

January 2004 Issue

• Chicago Community Ventures Launches Community Development GIS Website
• Around the District
• Savings Account Usage by Low- and Moderate-Income People in the Chicago Metropolitan Area
• A Discussion and Display of Innovations: The Second Annual Illinois Asset-Building Conference
• Beyond Financial Education: Changing Financial Behavior A Portfolio of Applied Research Projects
• An Informed Discussion of the Earned Income Tax Credit—Milwaukee
• Calendar of Events
• January 2004 Issue (PDF,209KB)

A Discussion and Display of Innovations: The Second Annual Illinois Asset-Building Conference
By Harry Pestine

The Second Annual Illinois Asset-Building Conference sponsored by the Federal Reserve Bank of Chicago and the Sargent Shriver National Center on Poverty Law (NCPL) was held on September 25 and 26, 2003.

Approximately 100 individuals from various financial institutions, non-profit organizations, community groups, local and state policymakers, and institutions of higher learning attended the conference. Dory Rand, supervising attorney for community investment at Chicago-based NCPL, and coordinator of the statewide Financial Links for Low-Income People coalition, moderated the conference.

Panel Presentations and Brainstorming Sessions
The conference included four panel discussions and twelve brainstorming sessions. The overarching topics that guided the conference were:

• How do low-income people save, build assets, and benefit from financial education?



• Should we incorporate financial education into public school curricula?



• Are there State of Illinois asset policy initiatives that should be pursued?



• What are some of the private sector asset-building innovations that are working?

The panel presentations provided an opportunity for experts and professionals to share information about on-going research, asset-building strategies for low-income individuals, and successful asset-building/financial education programs. The presentations also provided ideas for the brainstorming sessions that followed. The panelists presented data on: the assets and savings of lower-income people, success of adult financial education programs and Individual Development Account (IDA) programs and available K-12 curricula. Data also included the needs and strategies for incorporating financial education into school curriculums successful policy initiatives and initiatives worth pursuing and model programs in Cleveland, Milwaukee, and Chicago.

Panelists and attendees used this information in the brainstorming sessions and produced the following "top" policy/ program recommendations:

• Provide greater access to asset-building programs for low-income people through inclusion of more agencies, more populations, higher asset limits, and more funding.



• Mandate financial education for adults who are on any form of public assistance and for K-12 students.



• Involve financial institutions in schools as providers and sponsors of financial education programs.



• Strengthen and enforce state and federal regulations of traditional and "fringe" (e.g., payday lenders) financial institutions.



• Provide tax incentives for corporations, banks, and employers to build, market services, and provide jobs in underserved areas (urban and rural) and low-income areas.



• Create a more equitable tax code.



• Complete longitudinal studies (with control groups) on the effects of IDA and financial education programs on low-income individuals.



• Perform comprehensive research on the financial habits, practices, and needs of a variety of cultural groups and physically challenged groups.



• Study mandatory financial institutions in schools and its impact, if any, on students.



• Create a formal communication and service network among agencies that serve low-income individuals.

SEED Initiative
Carl Rist, program director for the Corporation for Enterprise Development (CFED), gave a presentation on CFED's new initiative, the Savings for Education, Entrepreneurship and Downpayment (SEED) Policy and Practice Initiative. This initiative was designed to assist young children in saving for their future and as means to address child poverty. The question guiding SEED is, "What difference would it make if every child in America grew up knowing that she/he had a nest egg to use to go to college, start a business, or buy a home?"

Rist advocated that it would make a significant difference. This is why CFED has partnered with 10 organizations around the United States to set up SEED accounts. SEED accounts are long-term savings and investment accounts for children ages 0-18 to be used at a future date to attend college, start a business, or buy a home. CFED and other cooperating financial institutions provide the funds for these accounts. Each partner organization has a specific age group and has established the guidelines for their SEED participants.

In Chicago, NCPL has been chosen as one of the 10 CFED partner organizations. NCPL, in coordination with Bronzeville's Mayo Elementary and Bank One, has begun the process of establishing SEED accounts for 50 children in grades K-4 at Mayo Elementary. For more information about the SEED program go to www.cfed.org or www.povertylaw.org

Chicago Fed Research on the Assets and Savings of Low-Income People
Robin Newberger, a research analyst with the Consumer Issues Research unit at the Federal Reserve Bank of Chicago, discussed research on the financial practices and asset accumulation of low-income people as compared to those with moderate incomes. Newberger's three main findings were: 1) the majority of low- and moderate-income people have positive levels of wealth, 2) asset ownership differs substantially between low-income and moderate-income respondents, and 3) there is considerable variability among low-income respondents in terms of asset ownership and dollars of assets held. See Newberger.

Model Programs: Cleveland, Milwaukee, and Chicago
The final presenters of the conference included George Barany, executive director at WECO Fund, Inc. and director of financial education of Consumer Federation of America (CFA), James Maloney, chairman of Mitchell Bank (Milwaukee, Wisconsin), and Allen Rodriguez, vice president and director of community development, Illinois division, of Charter One Bank. Each presented a viable model program.

Barany shared information about Cleveland Saves/ America Saves, a nationwide social marketing campaign that utilizes a broad coalition of nonprofit, corporate, and government groups to encourage individuals to save. The WECO Fund, Inc. and CFA provide materials and/or facilitators to members of the coalition as well as any other interested parties to do motivational presentations on how to save. In addition, Cleveland Saves/America Saves has special events to encourage people to save. Currently, efforts are under way in Illinois to implement this program. If you would like more information about Cleveland Saves/ America Saves, please go to www.americasaves.org To learn more about Illinois Saves, please contact Steve Wrone at stevewrone@povertylaw.org.

Maloney provided evidence that financial institutions should seek to serve their local Hispanic population. First and foremost, the Hispanic population is quickly becoming the "greatest potential source of new customers." Banks that serve Hispanics effectively grow a loyal customer base with little additional effort. Mitchell Bank opened Cardinal Bank, a full service branch at the local high school where 70% of the student body is Hispanic, in part to address negative perceptions of banks recent immigrants sometimes hold. The school provides a familiar environment to encourage families to enter the bank and take advantage of its services. This bank has not only provided services to the parents of students, but it has also provided many opportunities for the students to learn and take on new responsibilities. For more information about Cardinal Bank at Milwaukee's South Division High School go to www.mitchellbank.com/c_cardinal.htm

Rodriguez described Charter One's services, and specifically how the bank's free checking can help low-income customers. What Charter One Bank provides free is key to helping those who are currently unbanked to get banked. For more information regarding the services offered by Charter One Bank go to www.charterone.com

The recommendations collected at the conference will be used to create a 2004 agenda for the Financial Links for Low-Income People coalition as well as to guide ongoing asset-building policy activities. For a full report on conference proceedings and recommendations, please contact Heidi Weber at heidiweber@povertylaw.org.

Harry Pestine is the community affairs program director for the State of Illinois, in the Consumer and Community Affairs division of the Federal Reserve Bank of Chicago. Mr. Pestine is a specialist on economic development issues, including bank compliance and the Community Reinvestment Act. He is also the economic development editor for Profitwise News and Views. Prior to joining the Federal Reserve Bank, Mr. Pestine was with the Governor's office of economic development in Illinois for 12 years. He has coordinated financial and technical assistance programs for small businesses throughout the State of Illinois, as well as managed or comanaged small and major retention, expansion, reindustrialization and recommercialization projects. Mr. Pestine has been an instructor at the Neighborhood Reinvestment Institute and the National Small Stores Institute. He was also an alternate-voting member on the board of the Illinois Development Finance Authority.