Feb 16 2012

“We Don’t Do Banks”: Financial Lives of Families on Public Assistance


This brief highlights the role policymakers can take in easing the financial lives of financially tenuous citizens, but credit unions with members or potential members in the same straits can take a more immediate role by making sure that, for all its popularity, cash is only one of several good options for low-income households.

The author conducted in-depth interviews in California with 37 CalWORKs recipients. To qualify for CalWORKs state aid, a single parent with two children must earn less than $12,000 annually, and the maximum benefit is $600 per month.

The interviews show a group that is aware of the limits of a low-income, low-asset lifestyle. What’s striking is the concurrent mistrust that many have for traditional financial institutions, despite the fact that unbanked consumers spend hundreds of dollars per year conducting routine financial transactions. They especially feel the costs of accessing cash, which for many is their payment and savings vehicle of choice. Contrary to stereotypes, they seem wary of payday loans and even responsible short-term debt. And many of them devise elaborate savings mechanisms outside of traditional savings accounts.

The brief finishes with several specific policy recommendations, but it spells out several lessons for credit unions designing products for cash-centric consumers like those profiled:

  • Prepaid cards are seen as a substitute for a financial institution.
  • Interviewees prize predictable, transparent fees.
  • Credit unions should offer transparent basic accounts.
Report Number 261