why financial coaching? fact pattern – the smith family household monthly income is $2,000 2...

Why Financial Coaching?

Fact Pattern – the Smith family

• Household monthly income is $2,000

• 2 children• 2 cars• Rent an apartment

Goals:• Understand poverty in

America• The need for

Coaching• The benefits of

Coaching

2

Poverty in America

~100 Million Americans in

poverty (150% of poverty line or

below)

8.3% Unemployment rate

30 million un or under-banked

households

18.2% under-employment

24 million with no credit score

Fringe/predatory lenders=

$100 billion/year industry

3

Wealth vs. Income

• The wealthy vs. the

non-wealthy

• The 2008 recession

• Building assets vs.

expenditures

4

Financial Stability Is Harder Than Ever to Achieve

Weak EconomyHigh unemployment

rates and stagnant wages

Risky Consumer Credit

Easier than ever to take out too much debt: one bad decision can have a

lifetime of consequences

Predatory Financial Products

Financial products designed to take

advantage of vulnerable or unsuspecting

TechnologySpending is just a click

away, making it harder to stick to a budget

5

61% of Americans report some difficulty in covering expenses

and paying bills.

The average American borrower has $10,852 in outstanding

revolving debt (e.g., credit card debt), the 5th highest amount in

the country.

38% of American homeowners are “cost burdened” (i.e. their

homeownership costs more than 30% of their income) — only 5

states have worse rates and none are in New England.

10% of Americans with a retirement account took out a loan or hardship withdrawal

against the account in the past year.

Over 12 million Americans used a payday loan in 2010. The

industry has issued $27 billion in loans since the 1990s.

55.8% of Americans have sub-prime credit scores.

58% of Americans have never calculated their retirement

needs.

24% of Americans have no retirement account (IRA, 401(k),

etc)

Note: All data 2009 except for home ownership cost-burden (2010), credit-card/ credit score (Q3 2011), and payday (2012) Source: CFED; FINRA 2009; RI Dept of Business Regulation

A Growing Problem: National

Saving

Trajectory to Financial

Empowerment

CREDIT DEBTBUDGETINGBANKING

How Coaching Helps:

• Avoid predatory services

• Open a safe, affordable account

• Reduce expenses

• Increase income

• Build credit

• Plan for future goals

• Manage & avoid debt

• Save for emergencies and the future

7

The EndCGF

JuniorAchievement

LIFT

CommunityAction Programs