By Michelle Phipps-Evans
In the world of consumer empowerment and financial literacy, there is a school of thought that says that financial literacy, in itself is not enough. Millions of adults, ranging from literate to illiterate in finances, still struggle with personal debt, heightened consumerism and retirement deficiencies. With the current economic crisis, saturated with job losses, loss of consumer confidence and all-round frustration, financial literacy becomes so much more important to teach District residents about critical-wealth thinking and developing a mindset to build wealth and not debt.
Thousands of families in the District live on the financial edge, so much so, that just one unexpected setback—whether it is a long-term illness requiring hospitalization or a breakdown of the family car—could be a major financial crisis. For low-income families already struggling to meet basic needs, such common occurrences can trigger a devastating chain of events that may lead to unemployment, homelessness and family dissolution.
A host of factors contribute to family financial stability, including parental education, employment and training opportunities, affordable housing, child care, access to health care and other work supports. And far too many families have no significant savings or reserves to help stabilize their future. According to the National League of Cities (NLC), one in five Americans do not possess enough assets to meet his or her basic needs (as defined by the federal poverty threshold) for a period of three months. And an estimated 28 million Americans do not have a bank account, the basic mechanism to conduct personal financial transactions and the “on-ramp” to the financial mainstream. NLC is the nation’s largest and oldest organization devoted to strengthening and promoting cities as centers of opportunity, leadership and governance.
That is why for this year’s third Financial Literacy Month, the District of Columbia Department of Insurance, Securities and Banking (DISB) will take a proactive approach to financial empowerment, to move beyond financial empowerment through seminars, lectures and workshops. Although those will be kept in place, the agency is leveraging use of its limited resources through creativity, partnership building, and thinking outside the box.
“The quest for financial literacy should not be confined to any one month,” said DISB Commissioner Thomas E. Hampton. “Achieving financial wellbeing is a continuous journey that is well worth the trip. And we want residents to know that DISB is eager to assist in their vital efforts.”
On the pathway to financial stability, DISB will follow four key paths.
- Providing Financial Education—Continue to connect residents to programs teaching financial literacy, covering topics such as budgeting, saving, preparing for homeownership, foreclosures, using bank services, and accessing and understanding credit scoring.
- Promoting Homeownership—Purchasing a home is one of the most important financial decisions a family will make and home equity represents the greatest proportion of a typical household’s wealth. The District of Columbia has several first-time homebuyer downpayment assistance programs with low-interest financing. And there are several pockets where affordable homes may be found. DISB will work with the relevant District agencies to ensure that residents become aware of these benefits, and work on their behalf. DISB has also worked with residents going through home foreclosures, and have been able to intervene and save the homes.
- Expanding Access to Savings and Benefits—Residents without access to bank accounts and other mainstream services are more likely to pay higher fees. DISB has several resources that encourage residents to consider the city’s many regulated banks and credit unions instead. In 2007, DISB worked with several nonprofit agencies to launch and promote the DCSaves campaign, which encouraged cutting debt and building wealth, by opening no-fee bank and credit union accounts. This year, the agency will continue in the DCSaves program as well as explore other campaigns that promote banking and savings including the Bank On project and the DollarWise campaign among others.
- Protecting Financial Assets—Victims of predatory lending are prone to financial disaster as they incur spiraling debt, damage their credit records, or risk bankruptcy or foreclosure. To address the high interest charged by local payday lenders, DISB worked with the Council of the District of Columbia to pass legislation that required payday lenders to charge the same annual percentage rates as banks and credit unions. The agency is exploring other such ways to protect residents’ financial interests.
Of course, DISB will not be able to do any of these projects on its own. FY 2009 will be marked by partnerships and collaborations. This year, DISB is working with other city government leaders to launch the District’s Financial Literacy Council. Created 2008 by legislation, the nine-member council will serve as a conduit for all financial literacy programs in the District of Columbia. It will advise Mayor Adrian Fenty and the Council of the District of Columbia on financial education’s best practices. Part of the law requires that some form of financial education be taught in the District’s Public School system. By starting with the young people, you build habits that may be carried a lifetime, according to the Institute for Youth, Education and Families, a special entity within NLC, that helps city leaders take action on behalf of children, youth and families in their communities.
Since financial literacy is a yearlong endeavor, DISB has partnered with the Office of the Tenant Advocate to launch a campaign on renters’ insurance, and to be part of the tenant summit. It is also working with the Department of the Environment to focus on flood insurance because of a remapping of the District’s floodplains. This May, DISB, along with the Investor Protection Trust, DC Public Library and others, will be launching an Investor Education in Your Community program that will continue throughout the summer. Also, in May, DISB will be on hand at a small business exposition, hosting a seminar on the COBRA benefits in the president’s stimulus law.
Throughout this year, the agency will continue exploring other legislation and regulation to protect your financial interests. DISB will keep the residents abreast of changing financial trends on its website. Or call the agency at (202) 727-8000.
Maybe the word, financial literacy, is lost on some people as it may be considered a “boring word.” At DISB, the agency aspires to financial intelligence. It is something that should be taught at home, at faith-based institutions, at schools and in our community. DISB’s contention is that armed with this intelligence, residents will be able to take steps to protect themselves against financial predators, and to make the best financial decisions that build wealth and eliminate debt.
Below, residents may find DISB at the following events during Financial Literacy Month.
April 4: DISB will host a noontime workshop on the new COBRA benefits laid out in the president’s stimulus package. A significant provision in the law established a new federal subsidy of up to 65 percent the cost of COBRA benefits for up to nine months for eligible employees who involuntarily lose their jobs between September 1, 2008, and December 31, 2009. Find out more. DCSaves Financial Fair at THEARC, Boys and Girls Club, 1901 Mississippi Avenue, SE, 12 pm to 12:30 pm
April 8: Older members of the District of Columbia’s population are particularly susceptible to financial fraud, especially with the downturn in the economy. Therefore, DISB will host a workshop to teach seniors how to spot fraud and show them the tools available to protect themselves. Metropolitan Police Department’s Fourth District Financial Crime Forum at 6001 Georgia Avenue, NW, 10 am to 12:30 pm
April 15: Learn more about the consumer protection services the agency offers to District residents at DISB’s information booth at the Southeastern University Career Fair at 501 I Street, SW, 3 pm to 7 pm
April 22: Find out about DISB’s regulatory function and its consumer empowerment and protection services at the US Department of Transportation Financial Education Fair, 1200 New Jersey Avenue, SE, West Atrium, noon to 4 pm
During the month of May, DISB will collaborate with DC Public Library, the Investor Protection Trust/Investor Protection Institute and the Financial Planning Association of the National Capital Area to present How Can I Afford Retirement? an investor education in your community seminar, which will be launched in the District of Columbia on May 14, from 6 pm to 8:30 pm, at Howard University Law School, 2900 Van Ness Street, NW. These solicitation-free events are open to the public. There will be a presentation, break out groups and a question and answer period. Refreshments will be served.
The topics are:
Taking the Mystery Out of Retirement Planning (May 14)
- Setting retirement goals
- Projecting retirement income and expenses
- Allocating assets for retirement investments
- Developing a personal financial/investment plan
- Next steps
Closing the Gap: Investment and Expense Strategies - Even for Late Starters! (May 28)
- Determining the gap between desired and projected income
- Building investment strategies to address financial gaps
- Creating retirement income from investment assets
- Learning catch-up provisions
Investing Wisely to Avoid the Financial Risk of Longer Life Expectancy (June 4)
- Assessing the risk of outliving your assets
- Determining the best diversification, asset allocation and types of investments
- Understanding the impact of withdrawal rates on your investments
Protecting Your Investments - The Best Defense is a Wise and Safe Investor (June 11)
- Learning the common investment and retirement planning mistakes
- Understanding common methods of financial fraud and abuse
- Discovering basic insurance investment strategies for retirement
Using Your DC Public Library and the Internet for Financial Education and Lifelong Learning (June 16 at Martin Luther King Jr Library, 901 G Street, NW)
Michelle Phipps-Evans is the supervisory public affairs specialist in the DISB’s Office of Communications.