Financial Stability Proposals
While steady and growing income, benefits that provide additional supports, and career pathways that offer opportunities for advancement are all critical to economic mobility, ensuring people can achieve financial security will be the difference between getting by and getting ahead. It is our shared vision that people will have an opportunity not only to earn a decent income, but also build assets that are the key to upward economic mobility for this generation and those to come.
The basis for our financial security recommendations is our shared understanding that there are two forces determining whether an individual can achieve financial security; both are equally critical. Focusing on one without the other will be insufficient to achieve our aim:
- A person’s individual financial abilities – the knowledge and skills to make financial decisions that lead to household financial security.
- The financial system – access to products and services needed to build financial security.
Our recommendations address each of these in turn. We believe that we must simultaneously provide individuals with the knowledge and skills they need to build financial security and build fair financial systems that give opportunities for people to save early, responsibly manage debt, and navigate financial decisions. Doing this will require public officials, financial institutions, educational institutions, employers, and community-based organizations to collaborate. Each plays a critical role in the solutions.
The following actions are key to advancing individual capacities and effective systems:
- Build opportunities for children and youth to get on the path to financial security early by establishing universal children’s savings account programs; embedding opportunities to bank and receive financial education in schools; and establishing partnerships with community-based organizations to create local, trusted conversations about financial issues and raising financially literate children.
- Ensure that opportunities to build skills, gain credentials, and otherwise get ahead at work are paid for in financially responsible ways.
- Ensure that quality work, especially for low-income Americans, includes access to key financial benefits that are critical to building financial security, including income smoothing financial services, tax credits such as the EITC paid out in smaller increments and other creative approaches to building emergency cushions, and other employee wellness benefits – benefits that can be portable across employers.
Key Solutions to Recommend
We believe the foundation of financial security must be laid early in life. In order to build both an asset base that enables financial success and a habit of saving, we recommend that:
- State governments create universal children’s savings account programs that aim for equitable outcomes.
- These children’s savings account programs should be supported by state and community organized parental engagement, business and philanthropic investments in incentives, and financial education in schools coupled with bank investments in school programs.
- As young people advance into post-secondary education and seek credentials for employment, governments and employers work together to reduce the financial burden on students. Students should be able to build skills without jeopardizing long-term financial security.
We also believe that workers should have readily available tools to deal with financial disruptions (e.g., income volatility, expensive emergencies) so that these disruptions do not undermine the pathway toward financial security. To do this, we recommend:
- Governments should establish mechanisms for emergency savings through the EITC, reduce barriers to savings, including reforms to asset limits for some public programs, and facilitate the portability of benefits for an increasingly mobile workforce.
- Employers should offer financial wellness benefits that address both short-term financial instability and long-term financial security such as vehicles that help build emergency savings and financial products that assist in reducing income volatility. Community-based organizations and financial institutions can play a strong partnership role in facilitating uptake of such products.
Build Financial Security from Early in Life
In order to achieve financial well-being later in life, we must a foundation that ensures access to quality financial products, provides opportunities to build important financial skills, and establishes financial resources for use later in life. In order to achieve this, we recommend the following actions.
Convergence Center for Policy Resolution is a national non-profit based in Washington, DC that convenes individuals and organizations with divergent views to build trust, identify solutions, and form alliances for action on issues of critical public concern. Reports and recommendations issued under our auspices reflect the views of the individuals and organizations who put the ideas forward. Convergence itself remains neutral and does not endorse or take positions on recommendations of its stakeholders.
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