Clients at SVdP lack bank accounts

Whenever I get to the “do you have a checking/savings account?” portion of a client assessment, I can usually anticipate a no in response. I have yet to stumble across one client out of the 60 some assessments I’ve recorded as having a bank account. The Federal Deposit Insurance Corporation (FDIC) surveyed of 54,000 American households and showed that “7.7 per cent were unbanked, which translates nationally to 9 million households – approximately 17 million adults”. In California alone:

  • Nationally, as many as 28 million people are unbanked
  • One in five Californians does not have a checking account
  • Nearly half of Californians do not have a savings account
  • The average unbanked worker will throw away more than $40,000 over a lifetime to cash checks and pay bills (from http://www.bankoncalifornia.ca.gov/)
  • SVdP works mostly with minorities and the FDIC survey reflected that, “21.7 per cent blacks do not have bank account, while 19.3 per cent of Hispanics are unbanked.”

    FDIC Chairman Sheila Bair acknowledges “Access to an account at a federally insured institution provides households with an important first step toward achieving financial security …” In addition to helping clients to achieve long-term employment, opening a bank account is an important step in budgeting and transitioning into a life with more security, especially when layoffs are ever-common.

    An article by a California Assests Fellow for the Bank of the America backs up this claim:

    THERE ARE PROFOUND COSTS OF BEING “UNBANKED”
    The un-banked poor pay more to conduct their financial lives. Check cashing outlets typically charge between 2-3
    percent of the face value of a check. So, someone who makes $30,000 a year can pay $900 a year just to get their
    salary and pay their bills. But there are more profound costs to being un-banked, costs that aren’t readily
    apparent.
    Families without accounts don’t have a safe place to keep their money. They walk around with wads of cash in
    their pockets. Or they keep it at home in a coffee can. Robberies are more prevalent around check cashing
    outlets, according San Francisco police reports. And if people’s homes are broken into or there’s a fire, they may
    lose their life’s savings.
    Also, a bank account is the first step to financial security for many families. Without an account, it’s harder to get
    well-priced car loans, credit cards, or mortgages–the exact financial tools needed to climb up the economic
    ladder. Many families stay stuck on a different path–going to the pawn shops, pay day lenders, rent to own
    stores—where the interest rates can reach several hundred percent.

    To address this concern, the California Governor’s Office stepped in December 2007 to bridge  financial institutions and community groups statewide. “Bank on California,” is a key collaborative voluntary initiative working with the Governor’s Office. The initiative works to:  

    • Develop and market starter accounts with features that work for unbanked consumers.   
    • Educate Californians without bank accounts about the benefits of account ownership and encourage them to open accounts.
    • Help Californians build their money management skills. 
    • Form diverse coalitions of financial institutions, regulators, city mayors and nonprofits in key markets statewide to market the accounts to unbanked Californians.

    I am still locating how effective this initiative has been, or at least stats depicting its significance since implemented in 2007. PLease share any information you may have on this topic.

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    Filed under St. Vincent DePaul Center

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