Saturday, January 12, 2008

Quick Question to All Y’all and Thoughts on Poverty Alleviation

Are you finding this stuff worth reading?
Is there a topic you'd rather I focus on?
I'm visiting my mom today in North Cackalackey (sorry, Ari, I am only here for the day) and we're talking about my year of service (we've not really talked about it all this year and I think my work may be a little confusing unless I give a more thorough explanation of what I do).

Anywho, we're talking today and I realized that one of the best poverty-reducing institutions I can think of is the bank account. 30 million Americans operate without bank accounts according to the Aspen Institute.

How would a bank account help alleviate poverty? A bank account is a neutral thirda party accounting tool. It simply says how much was spent, when, and where. But, having that statement shows you what your actual income is. It tells you what your cash flow really looks like. I get dozens of people across my desk who say their cash flow is great because they have a thousand dollars in their account. When I do a three month analysis, however, I see that the person actually had a large deposit (say a tax return) in one month and has generally been spending tow or three hundred dollars more than they earn every month. That means that although they may have money in the bank, they actually have negative cash flow.

A bank account teaches people at least two REALLY IMPORTANT lessons about being poor in America:
1) it costs more for a poor person to purchase things that middle- and upper-class families buy and need:
If you're poor, you probably have poor credit. That means your car payment interest is higher, your mortgage payment is higher, your car insurance is higher (that's right, they use your credit report to determine what your insurance will cost).
2) it costs money to have the money you earned by working:
If you're poor you probably don't realize the relative cost of banking fees are. I have a client that spends on average $55-75 a month just in fees for using the debit card. Why? ATM fees, fees for using your card to purchase groceries (a PIN-based transaction fee is usually how it's stated)

SORRY, I have to go now; I will post later

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