|
Achieving
greater stability allows lower-income
working families to move toward financial
independence. A revealing indicator of this
level of stability is the percentage of
lower income working families who spend more
than 40 percent of their income on housing.
This tenuous balance between income and
housing costs gives a sense of the hardship
faced by many as they attempt to pay for the
single biggest expense for a typical family.
The situation has worsened significantly
since 2000, according to data from the
American Community Survey. More than
one-third of lower-income working families
spend more than 40 percent of their income
on housing. On average, a family needs to
earn at least $15 per hour so that housing
does not overwhelm their monthly budget.
With the minimum wage less than $7 an hour
in most states, many millions of families
earn far less than $15 per hour—even when
two members are pooling their wages.
Given the cost of living today, a family
needs to earn at least 2.5 times the federal
poverty level to be considered financially
stable in most communities. But the
percentage of working families that earn
less than this has stagnated over the past
decade. Currently, about 23 percent of
working families fall below that level; with
the percentage of financially unstable
African American and Latino families
significantly higher.
Note the emphasis on lower-income working
families: those in which one or two adults
together work the equivalent of a full-time
(or even more than full-time) job and simply
cannot earn enough to make ends meet. Our
10-year goal is to cut in half the number of
these families who lack financial stability.
This goal aims for financial independence,
not a street of gold. Many families lack the
opportunity to earn a decent income and the
skills to manage their money, save even a
small portion or build assets for the
future.
Building savings
is vital to deal with unexpected,
unbudgeted expenses. Only 37 percent of
lower income working families have a
checking or savings account with at least
$300 saved, according to an analysis of the
Survey of Income and Program Participation
of the Bureau of Labor Statistics. That
amount—$300—is what is needed to weather a
single typical emergency, as evidenced by
the average loan obtained through payday
loan services. Just as important as the
dollar amount, an account means building a
relationship with a bank, credit union or
other mainstream financial institution and
not having to rely on a high-fee
check-cashing or payday loan service. It
also allows a family to set goals to build
savings and ultimately assets, whether for
higher education, a business, retirement
funds or a home.
This leads to the third step in a continuum:
building assets.
The largest asset for many Americans is
their home. Even with the current downturn
in the real estate market, a home’s value
increases over the long term so the owner’s
assets grow. About 50 percent of lowerincome
working families own a home, according to
the American Community Survey. However, this
figure hides a great disparity in
homeownership, with Latinos and African
Americans only one-third to one-half as
likely to own a home as white working
families.
|
|
