| | Cut in Half the Number of Lower-Income Families Who Are Financially Unstable
 By 2018, 1.9 million more working families will become financially stable and able to take the next steps to long-term independence.
| | This 10-year goal means helping these families increase income, build savings and grow assets so they have reduced debt and are working toward a goal that might be stable housing, business, retirement or postsecondary education. |
Helen Keller, Abe Lincoln, Irving Berlin, Frederick Douglass— these inspirational Americans have exemplified the uniquely American ideal that hard work will lead to success, and that no matter how humble one’s origins, the sky is the limit in the land of plenty and opportunity.
That ideal is in peril. Even with more than one family member bringing in wages—or with one person holding down two or three jobs—many families are barely getting by, with no ability to save for college, a home or retirement. Wages have not kept up with the rising cost of housing, health care, child care, gas and other needs. Just one unanticipated expense—a car breakdown, an uninsured illness, a week without a paycheck—can lead to crisis.
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 lowerincome 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 lowerincome 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. top^
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