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EARN: Helping Low-Wage Workers Learn to Save
Wednesday, 3rd September 2008 (by J.D.)This article is about Odds and Ends
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It can seem impossible to get ahead when you’re earning minimum wage. The idea of an emergency fund is nice, but to save for one, you must have money left at the end of the month.
MarketWatch recently published a story about a San Francisco program that helps low-wage workers begin to save and develop better money skills. The Earned Asset Resource Nework (EARN for short) is a non-profit organization providing financial assistance and education to those who need it most.
EARN empowers people to escape poverty. From the organization’s mission statement: “EARN breaks the cycle of poverty by matching the savings of low-wage workers and helping them invest in assets that build wealth, creating a cycle of prosperity across generations. ”
The MarketWatch article provides a little more information:
Participants in EARN have a household income of about $18,000, on average, yet manage to put aside almost 5% of their income each month. The U.S. savings rate in 2007 was just 0.6%. For every dollar a participant saves up to $2,000, EARN pays $2. That means those who complete the program can walk away with as much as $6,000.
EARN doesn’t just give participants the money, though. To obtain the matching funds, savers must:
- Attend eight hours of financial workshops with topics like “Investing 101″ and “The Language of Money”.
- Save toward a specific goal (buying a house, paying for college, starting a business).
- Spend six hours in “asset-specific training” about their chosen savings goal.
- Occasionally attend additional workshops.
The attitudes of those interviewed for the MarketWatch piece are awesome. “It’s just a breakthrough, the frame of mind, in terms of poverty,” says one participant. “To be able to overlook the poverty, the fear and all that, and be able to say, ‘Yes, I can do it.‘”
It’s also encouraging that these savers continue to put money way even after they’ve finished the program.
Most of the personal-finance advice available in books, in magazines, and on the web is targeted at people in the vast middle class. There’s not a lot of help for those mired in poverty. (And economic mobility for these folks is difficult, even with a college education. Only 5% of those without a degree ever escape poverty.) I believe it’s important to acknowledge and to support those resources that provide tools for the poor.
When I wrote about micro-lending and the battle against world poverty, some readers wondered if there were similar programs for people in the United States. EARN isn’t exactly the same thing, but it’s close. This is a charity I will gladly support. (And I would love to hear about similar programs in other cities, states, and countries.)
[Thanks to GRS-reader Joyce for submitting this story idea!]
25 Responses to “EARN: Helping Low-Wage Workers Learn to Save”
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September 3rd, 2008 at 1:13 pm
This is great. I used to volunteer for Operation Hope’s “banking on our future” program, teaching financial literacy. It was really inspiring.
September 3rd, 2008 at 1:32 pm
I have not come across program like this in Canada. We have RESP (Registered Education Savings Plan), CLB (Canada Learning Bond) etc which pay up to a certain amount for children’s education purposes. RESP pays 20% on the first $2,500 (or less) contributions made annually. CLB pays up to $2,000 for each eligible child born after January 2004. I am not aware of any adult program like EARN in Canada. It’s a great program to have.
A. Dawn
http://www.adawnjournal.com
September 3rd, 2008 at 2:16 pm
This is great. Anything to teach people the principles of financial management.
I actually earn very little compared to the average American, but I manage to put away savings each month. You don’t have to have a high income in order to create a good deal of savings. You just have to have the right tools and determination to do it.
September 3rd, 2008 at 2:23 pm
That is a fantastic idea.
September 3rd, 2008 at 3:05 pm
What EARN does is actually known as Individual Development Accounts (IDA) all over the country! United Way, for example, supports many local non-profits in Washington state by funding matched-savings programs that require participants to improve their financial literacy skills while building up their savings.
The money participants save is generally used towards either of three different goals:
- education
- buying a home
- starting a business
Anybody who wants to support similar programs could contact United Way or search out their local CAB (community action block grant) non-profit and inquire about their IDA program.
September 3rd, 2008 at 3:10 pm
I fully support any program that helps people who help themselves. I just donated to EARN and plan to do more in the future.
September 3rd, 2008 at 3:12 pm
http://www.chrismartenson.com/crashcourse
’nuff said.
September 3rd, 2008 at 8:08 pm
This program sounds really good and really helpful. I think one of the greatest things to break people out of poverty is education. If you can educate someone how to make more money then they will have more to save.
Entrepreneurialism drives the country though there are not that many entrepreneurs. If people learnt how to make more money this would serve the same purpose.
September 3rd, 2008 at 9:43 pm
This sounds like Saver Plus, a program run in Australia by the Brotherhood of St Laurence and ANZ bank:
http://www.anz.com/aus/aboutanz/Community/Programs/Saver.asp
September 3rd, 2008 at 10:02 pm
This is a fantastic idea. As a conservative, I am routinely accused of being “against the poor” because of my opposition to most welfare programs. What a lot of people fail to recognize is that most liberals and conservatives are good hearted and well intentioned people, but who strongly disagree on what methods would be most effective to achieve a goal that everybody wants: to raise people out of poverty. In my opinion, this program sounds like it does a great job of equipping people with skills they can use throughout their lives.
September 3rd, 2008 at 10:11 pm
I hope that programs like this continue to flourish, so that Americans regardless of socioeconomic status can learn the virtues of how to effectively manage their finances. I think Dave Ramsey is doing a great job in this area, hopefully this is just the beginning.
September 4th, 2008 at 2:21 am
This is a great idea. With such an appalling savings in the U.S there needs to be more programs like this. Saving needs to be promoted as exciting and appealing to counter the advertising and cultural juggernaut that pushes rampant spending.
September 4th, 2008 at 7:59 am
If anyone knows of a program in upstate NY (north of Albany), please share it! My mother-in-law is in desperate need of a program like this.
September 4th, 2008 at 9:06 am
I really, really think that this is a great program and I was glad to be able to offer my support!
September 4th, 2008 at 10:01 am
The IRS offers a tax credit of up to $2000 for low-income taxpayers who put money into a retirement account (IRA or 401k). Last year my son, whose income was about $12,000, got a refund of about $700, because he contributes to a 401k. Without this credit he would have owed about $250 to the IRS.
http://www.investopedia.com/articles/retirement/04/031704.asp
September 4th, 2008 at 10:57 am
Deb,
You might see if there is a Financial Peace University program offered through a local church in your MIL’s town.
September 4th, 2008 at 12:01 pm
Thanks for that link, Peg.
I have seen these kinds of programs popping up all over. In fact, I heard on the news that one high school in Indianapolis opened a faux bank to teach kids about saving, investing, and avoiding overdraft fees.
September 5th, 2008 at 10:53 pm
Spend six hours learning about their specific savings goal.
What on earth does THAT mean?
September 6th, 2008 at 12:07 am
Terry, I tried to clarify the wording a little. You’re right — it was confusing (and maybe still is). Basically, I believe participants are required to take eight hours of classes about general financial topics, and then six hours of classes about their specific goal. Does that make sense?
September 6th, 2008 at 3:31 pm
I’m a businessman in living in the Philippines and wish something like this would be available to ordinary Filipino workers or even taught in companies. In Manila the minimum wage would be around 6 USD a day. Enough probably to feed their family but many of them for some reason tend to spend it on gambling or mobile phones (a favorite status symbol here). If these people can save to purchase relatively expensive mobile phones then they can save money.
September 6th, 2008 at 6:35 pm
Last October, my husband and I were able to buy our first home in large part thanks to a matched-savings IDA administrated through the Portland Housing Center. Going through that program certainly changed our saving habits, we now have an emergency fund in a high-interest savings account and are contributing to a retirement savings account. They also helped us to interpret and fix up our credit reports.
This also ties in to the previous article–the PHC is an incredible resource for first-time homebuyers. They have homebuying and financial fitness classes, offer referral lists of realtors, lenders, inspectors, etc. who are used to working with first-time, middle to lower income homebuyers and who won’t hoodwink you into taking on more loan than you can handle. In fact we were a little discouraged when we went to the Homebuying 101 class to learn just how little we could afford.
Ultimately this was a good thing, we are now the proud owners of our first home and although it is smaller than what we initially imagined, we love it and it is within our means. This is a really, really wonderful organization and we will always be grateful to them. Actually they are still helpful, my husband recently went to a class on basic home maintenance, taught by our home inspector. In my opinion they would make a great topic for an article!
September 11th, 2008 at 4:10 am
Prosper.com is a sort of microlending source that I’ve been using. You can invest in people trying to lower credit card debt, start businesses, and other similar goals with as little as $50 increments. I started with $100 and have upped it to $200. Over the last 6 months it has been my best investment. You can review credit ratings and you enlist a collecting agency in case individuals default on their loan. There is associated risk with the project, but you can look at it as a form of charity while still getting some return. I like the idea of having individuals pay a return to you for your help while totally skipping the middlemen of banks who can often confuse the process and take advantage of ignorant consumers.
September 14th, 2008 at 8:20 am
As saving becomes more and more advantageous to the country as a whole, hopefully programs like this will become common for middle class and even high-income individuals.
September 15th, 2008 at 2:50 pm
I think this is great and wish they had something like this in Canada. We are low income ($16k a year) and last year managed to save half our income in a high interest earning account. Yes, we lived very, very frugally, although we loosened up this year. We did use some to buy a car but knowing that we have more money in savings than people we know who are earning 6-digit figures is extremely satisfying! Even more gratifying is we have no debt. It’s fantastic!
October 15th, 2008 at 8:53 am
Fantastic. Good for them. I get tired of people with low wages telling me they can’t save because they have a low income. I can always see where they waste money.