In recent years, city governments have developed new strategies to improve the financial stability of low- and moderate-income households. The city of San Francisco believes in the unique capacity of local government to build economic fairness and inclusion, and the city has been at the forefront of this work over the past decade. The San Francisco Office of Financial Empowerment (SF OFE) was created to leverage the power of city hall to increase financial security—and economic opportunity—for all San Franciscans.
The United States has two financial systems. In the first—the financial mainstream—the majority of people enjoy access to the types of financial products and services that help them manage money, establish credit and build wealth: checking and savings accounts, credit cards, mortgages and prime-rate loans. This is a system that creates upward mobility and allows people to invest in themselves and their families.
But there is another system—the financial fringe—that strips wealth from those who can least afford it. These households, disconnected from the financial mainstream, rely on check cashers, payday lenders, rent-to-own stores, pawnbrokers and auto-title lenders. These products and services charge exorbitant fees and can mire people in a cycle of debt. More importantly, they do not encourage upward economic mobility.
In the United States, more than 25 percent of people rely on fringe financial products. That number increases to 50 percent of African-American households and more than 40 percent of Hispanic households. Even in wealthy San Francisco, one in three children are born into families with no savings or assets of any kind, and more than 40 percent of residents have a subprime credit score. And while college is the surest route to economic mobility, less than 10 percent of students from low-income families will graduate from college by their mid-20s.
The city’s first step in addressing these challenges was the creation of the Bank On San Francisco program in 2006. Fourteen banks and credit unions, a wide range of community partners and the Federal Reserve Bank of San Francisco partnered with the city to create low-cost checking accounts that could be opened even by people with no state identification, with a poor banking history or who had never been banked before. The program has banked thousands of San Franciscans each year since 2006, and is being replicated in roughly 100 cities nationwide. (For more information about the Bank On movement, visit www.joinbankon.org.)
Building on this success, the SF OFE launched a suite of financial empowerment programs, including Payday Plus SF (www.paydayplussf.org), which provides affordable small-dollar loans, and the Smart Money Network (www.sfsmartmoneynetwork.org), which increases access to financial education resources and provides professional development training for financial education practitioners.
The delivery channels for this work are broadened by engaging employers. CurrenC SF (http://currencsf.org/) was created to engage employers in electronic pay and workplace financial wellness programs, because how people get paid directly correlates with how they manage their money.
In 2010, Kindergarten to College (K2C) (http://sfofe.org/programs/k-to-c) was launched. Today, every child who enters public school in San Francisco receives a college savings account in his or her name with a $50 deposit from the city and county of San Francisco, as well as incentives like a dollar-for-dollar savings match to help their family save early and often for college. San Francisco is the only city in the country to ensure that every child starts their academic career with the opportunity to save and invest in their own education. To date, 13,000 students have been automatically enrolled. More than 1,600 of these families have started saving for college and have so far saved more than $630,000 of their own money.
Through their ability to convene, influence and negotiate, local govern-ments are uniquely positioned to impact financial security on a large scale. Cities can bring the financial services industry and consumer advocates together to develop standards and pursue innovative products. They are also a trusted voice in the community, and a message from the government takes on a different tone than one from a community or corporate partner.
So, what is the best way to engage with public and elected officials? How can local policymakers be persuaded to pay attention to an idea, program or policy priority? Over the years, the SF OFE has identified four effective strategies:
Important and innovative work rarely happens alone. It takes community collaboration, the alignment of strong research and data, clear priorities, the right partners with the right influence and a solid strategy for implementation. When these pieces come together, the results can be powerful.
Keep up with what’s new and noteworthy at the St. Louis Fed. Sign up now to have this free monthly e-newsletter emailed to you.
FedCommunities.org is a portal to community development resources from all 12 Federal Reserve Banks and the Federal Reserve Board of Governors.