What's Financial Empowerment Got to do With it?

Submitted by Prosper Canada on November 21, 2017 - 8:32am

To borrow from Tina Turner’s classic song, when it comes to poverty reduction, you may ask – What’s financial empowerment got to do with it? The answer is – everything. 

Financial Empowerment is an integrated set of interventions that improves financial outcomes for people living in poverty: 

  • Financial information, education and coaching to build financial capability
  • Tax filing and benefits assistance to increase incomes
  • Help accessing safe and affordable financial products and services to enhance financial inclusion
  • Connection to saving and asset building opportunities to build financial security 
  • Consumer protection and education to reduce financial risk.

Financial empowerment is a critical but missing piece of the poverty reduction puzzle and building it into other poverty reduction initiatives can actually help them to realize their full potential. Here’s why:

  • Many people need more outreach and hands-on help to access existing income supports 

The recent report, Tackling Poverty Together, identified that Canadians are not always aware of important income benefits or can’t access them because of the way programs are designed and delivered. Screening Canadians with low incomes for benefits they are eligible for, but not getting, and helping them to access these benefits through one-on-one financial help and free tax clinics can make a huge difference.  In just 21 months, 14 of our community partners have been able to help 66,560 people with low incomes access $110.5 million in new income using these approaches.

  • Poverty is not just about income. Assets, debt and spending matter too.  

To measure and improve our financial health we need to look at our overall household balance sheet – spending as well as income, our assets and our debts.  Once families have enough income to meet basic needs, evidence shows cash savings actually play the biggest role in determining if they’ll experience financial hardship and having liquid savings reduces that risk.  Why? Because savings provide a cushion against life’s emergencies, help families to smooth income/expense gaps to make ends meet, and reduce the need for high-cost loans. Households that achieve financial stability and build savings can then invest in proven routes out of poverty – education/training, employment, entrepreneurship, and home ownership.  We need to help people build their financial capability, access safe and affordable financial products, reduce debt, and – most of all – build liquid savings that can help them stabilize financially, increase their resilience and open the door to future opportunities.

  • Financial empowerment can have a ‘supervitamin’ effect when built into other social supports.

Financial empowerment is a complement to, not a substitute for, other poverty reduction approaches. When interventions are woven into other programs and services for people with low incomes, like income assistance, employment programs, housing and shelter services, and health care, they can measurably improve people’s employment, earning, housing and mental health outcomes, as well as their financial outcomes. (See: Municipal Financial Empowerment: A Supervitamin for Public Programs) This “supervitamin” effect is why over 40 U.S. cities are currently building financial empowerment solutions into a wide array of municipal public services and doctors in Canada are working to make benefit screening part of their healthcare toolkit.

Like poverty reduction, financial empowerment is everybody’s business and every sector has a role to play when it comes to mobilizing solutions:

  • Provincial and municipal governments can explore opportunities to build financial empowerment into existing programs and services targeted to people with low incomes where evidence suggests this can improve outcomes. Financial education, screening and support to access benefits, and financial coaching are all good places to start.
  • Employers can offer financial education and counselling (or referrals) for employees, facilitate direct deposit and automated emergency and retirement savings through payroll, partner with community organizations to support or host free tax clinics, and provide new employees with information on RESPs and RDSPs and related grants and savings incentives if they have children.
  • Community organizations can look for ways to build financial education, benefits assistance, and one-on-one financial help into their existing services for people with low incomes, collaborate with other local organizations to identify and address service gaps and establish formal referral networks, build partnerships with local financial institutions to facilitate access to mainstream services, and advocate to local and provincial governments for integration of financial empowerment into broader poverty reduction strategies and programs.

By working together, we can help people with low incomes to strengthen their financial inclusion, knowledge, behaviours, and opportunities and help smooth their path from poverty to opportunity. Please join us!

For more information, please visit our website at www.prospercanada.org

 

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