Living Day to Day

May 24, 2011

The Financial Access Initiative (FAI) today announced the launch of what it hopes will become a baseline of understanding of how low-income Americans manage their financial lives.

Working in partnership with Bankable Frontier Associates, a Boston-based consultancy, and the Center for Financial Services Innovation (CFSI), a team of researchers will track the financial activities of 300 families in four regions of the country (the South, Northeast, Midwest and the West), meeting with the participants every two weeks for a year and a half. Using the Financial Diaries research methodology, the team will collect detailed information on household financial activities.

The Financial Diaries methodology is a relatively new concept, originally developed for use in less developed countries (namely, Bangladesh, India and South Africa) and documented in the 2009 publication Portfolios of the Poor: How the World's Poor Live on $2 a Day. That tome provided an eye-opening look at how poor people lead surprisingly active and sophisticated financial lives, driven by the need to cope with irregular and unpredictable incomes and no reliable safety nets.

The U.S. study is being underwritten by a $3 million grant from the Citi Foundation and the Ford Foundation. Findings are to be published in a series of report beginning in mid-2012, according to the FAI, a research center at NYU.

"This research can fill an important gap in the current data on how low-income families in our backyards are making ends meet and help reduce barriers to financial well-being that these families currently face," says Brandee McHale, chief operating officer at the Citi Foundation. Citi and the Ford Foundation are backing the project with a $3 million grant.

The Federal Deposit Insurance Corporation (FDIC) estimates there are 17 million adult Americans living in households where no one has a bank account, and that another 43 million are underbanked (they may have bank accounts but also use non-banks like payday lenders, pawn shops and check cashing houses). However, there is little verifiable information about how these Americans function financially.

"This landmark study will help us to better understand their financial lives, greatly improving the ability the financial industry of non-profits and policymakers to meet their needs and increase the quality, affordability and accessibility of financial services," says Frank DeGiovanni, director of fianncial assets at the Ford Foundation.

The only question remaining is will U.S. banks take the findings to heart?

17.2% of Americans reported carrying prepaid debit cards in 2009

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