Financial Education
and Asset Building 101 for Welfare Recipients
Welfare recipients and low-income workers need more than
a well-paid job to break away from poverty and the deeply
rooted habits associated therewith. Money management skills
are required to build savings, establish good credit, make
sound financial decisions, and own a home, car, or business.
Living from paycheck to paycheck, low-income workers and
welfare recipients have little or no savings, use check cashers
rather than banks, often carry debts from abusive or unscrupulous
lenders, and are often unaware of consumer rights and protections.
Such factors make it nearly impossible to become financially
stable, and keep the American Dream just out of reach.
For the past two years, the public/private partnership between
the Illinois Department of Human Services (IDHS) and the Financial
Links for Low-Income People (FLLIP), has led the way in delivering
financial education and asset building for low-income earners.
This statewide coalition teaches money management skills,
enables participants to gain work support skills, and build
their savings through the use of regular bank accounts and
restricted, matched savings accounts called Individual Development
Accounts (IDAs). Many FLLIP graduates have saved enough to
buy or repair a home or car, start a business, or pursue education
or training, thus increasing both their assets and their asset-building
capabilities.
Recognizing the need for financial education and sound asset
management for low-income workers and public assistance recipients,
FLLIP targets those with income up to 200 percent of the federal
poverty level. FLLIP developed out of a working group which
embraced a suggestion from the Sargent Shriver National Center
on Poverty Law for IDHS to incorporate financial education
in its welfare-to-work program. They also welcomed a suggestion
from IDA program representatives to start IDAs for low-income
workers. Under Illinois law at the time, low-income workers
participating in Temporary Assistance for Needy Families (TANF)-funded
IDA programs could receive public and private matching funds
for savings in IDAs toward first-time home purchases, small
business start-ups, or post-secondary education.
In pursuing these suggestions, the FLLIP coalition garnered
broad-based support from a range of organizations: faith-based
and secular groups, representatives from legal and social
service agencies, community groups, IDA programs, banks and
credit unions, investment and insurance firms, state and federal
agencies, foundations, adult educators, financial planners,
certified public accountants, researchers, and volunteers.
FLLIP receives grants from their partners, including IDHS,
private foundations, and banks, to fund the financial education
and IDA programs. The University of Illinois Extension and
FLLIP members collaborated to develop “Your Money &
Your Life,” the curriculum used for the financial education
program. Using a hands-on approach, FLLIP trained and paid
its non-profit partners to offer financial education classes
and IDA programs at the local level.
“Many sites partnered with local financial institutions
to help teach classes or provide other support, such as graduation
gifts, food for graduation or classes, waiver of fees, and
initial deposits into graduates’ accounts,” said
Dory Rand, coordinator of the FLLIP coalition.
Since its inception in 2002, FLLIP has produced significant
results. Most FLLIP graduates changed their financial behavior,
with over 80 percent of the FLLIP Financial Education Program
graduates improving their skills and performance in tracking
expenditures and budgeting for their households. More than
70 percent of participants increased the amount of their savings
and better managed their credit card debt.
The FLLIP IDA Program graduates save about $40 per month,
and some now use direct deposit for their savings and tax
refunds. Many of the FLLIP IDA Program graduates made major
asset purchases six to 12 months after completing the program.
Money management knowledge and skills increased for over 600
FLLIP participants.
Because many of the FLLIP graduates took the first step toward
establishing credit, saving money, and building assets, many
non-profits, government agencies, researchers, and policy
makers outside Illinois have begun to contact the FLLIP program
to learn the secrets of their success. The State of Delaware
followed FLLIP’s lead in counting financial education
as a work activity for TANF. New Jersey has proposed legislation
requiring that states include financial education in their
TANF plans. Non-profit staff from New York, Louisiana, and
other states around the country have come to Chicago for training.
Dozens of agencies have sought grants to conduct financial
education using FLLIP’s curriculum, “Your Money
& Your Life.” FLLIP personnel have been generous
in lending their support, so that now, many other communities
are in the process of replicating their success. “It’s
all about relationships. Developing trust. Being persistent.
Showing all parties what’s in it for them. Recognizing
contributions. Doing media outreach. It may take a long time
to get a program off the ground, but don’t give up!
It’s worth it,” said Rand.
While the partnership between the IDHS and the FLLIP is fairly
new, the group has already achieved great results, and is
well on its way to helping many more people move into the
financial mainstream, and eventually achieve financial security.
For more information about the Financial Links for Low-Income
People, visit http://www.povertylaw.org/advocacy/community_investment/fllip_report.cfm
or contact Dory Rand, FLLIP Coordinator, at 312.368.2007.
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