Social change work is hard and frustrating and wonderful and terrible; it is also, at times, funny, quirky and just plain fascinating. With this blog we hope to capture all that goes into what we do at Capital Good Fund, and we invite you to join the conversation!

Monday, December 24, 2012

Educational Inequality and Financial Coaching + Schools

In this blog we've already looked at the link between poverty and health and how our Financial Coaching program can help to improve health outcomes for the poor.  Unfortunately, a recent study by the UMass Boston Center for Social Policy only served to reinforce this pernicious paradigm: the study found that the children of low-wage workers are "Far more likely to drop out of school than are higher income youth, are more likely to be among the one in five American teens who are obese, and are far more likely to become parents in their teen years."

On the heels of these sad reports comes an article in the New York times titled 'For Many Poor Students, Lead to College Ends in a Hard Fall.'  Here are some of the more troubling quotes:

"Poor students have long trailed affluent peers in school performance, but from grade-school tests to college completion, the gaps are growing.  With school success and earning prospects ever more entwined, the consequences carry far: education, a force meant to erode class barriers, appears to be fortifying them."
 "Fewer than 30 percent of students in the bottom quarter of incomes even enroll in a four-year school.  And among that group, fewer than half graduate."
"Thirty years ago, there was a 31 percentage point difference between the share of prosperous and poor Americans who earned bachelor's degrees...Now the gap is 45 points."

And so on and so forth.  Now, before we look at how our Financial Coaching Plus (FC +) Schools program seeks to break this cycle of intergenerational poverty, let's take a moment to understand why this inequality is growing.  According to the excellent 'Poor Students Struggle..' article, these reasons include: soaring incomes at the top and changes in family structure...Neighborhoods have grown more segregated by class, leaving lower-income students increasingly concentrated in lower-quality schools...even accounting for financial aid, the costs of attending a public university have risen 60 percent...Many low-income students...are deterred by the thought of years of lost wages and piles of debt."

Okay, deep breath.  We CAN do something about this.  Here's how our FC + Schools Program (formerly known as T.E.C.H.) works to address these challenges.  First, we know that helping parents increase their disposable income when their children are young has significant impacts on the ability of those same children to earn more money as adults.  For instance, research conducted by Greg J. Duncan of the University of California (Irvine), Kathleen Ziol-Guest of Cornell University, and Ariel Kalil of the University of Chicago found that: 

Children in low-income families that received an annual income boost of $3,000 (in 2005 dollars) between their prenatal year and fifth birthday earned an average of 17 percent more as adults, and worked 135 hours more annually, than similar children whose families didn’t receive the added income, The additional 135 hours of work is nearly a third of the gap in adult work hours between children raised in poor families and children raised in families above twice the poverty line.
The average Financial Coaching clients saves $1,100 per year thanks to Coaching, but that's not the only impact.  Through FC + Schools we empower parents to get more engaged in the education of their children, help them start saving for college, work on managing debt and building a budget--all of which reduces stress and creates a home environmental more conducive to educational attainment.  And finally, we work with parents to identify, and knock down, barriers to success.  Don't have a computer?  We can provide a loan to purchase one.  Your car is broken down, leaving you unable to get to work?  Our loans can be used to repair that car.  Or to pay off a payday loan that has a crushing interest rate of 260%, or to cover the $875 cost of applying for U.S. Citizenship, or to allow you to put a security deposit on an apartment in a safer neighborhood with a better school.

In other words, the theory of change is that a financially empowered household--one that is managing debt, has a budget, is building savings, and has access to safe and affordable financial products--is more likely to nurture children and prepare them for future success.  Because we will never end poverty in America if the next generation isn't able to succeed academically and professional, and the urgency of the problem cannot be overstated: we are presently going in the wrong direction.

Our goal is to bring FC + Schools to every school district in America.  We believe the program is one of the most cost-effective, comprehensive and holistic approaches to tackling poverty, health and educational issues, and we are proud to make 2013 the year that we take this powerful idea and spread it to more schools, more families and more children.

Here's to a reversal in the trend of income, health and educational inequality.  Here's to a poverty-free America.

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