Financial education & how pink floyd was wrong

As much as I love that Pink Floyd song ‘We Don’t Need No Education’, we could probably all agree that a little education would go a long way. I went to Target last week to buy some cleaning products. There were so many choices it was hard to decide and I just wanted someone to come along and point to one and make the decision easier. Sometimes wading through all the financial options and services available to consumers is a similar experience. There are more and more short term loan options, a myriad of options for prepaid, debit and credit cards, not to mention all the options available for traditional banking services.

Research shows that often people make financial decisions based on emotions, or with pieces of information without having the whole picture. During the Great Depression, even economists had trouble evaluating the causes, demonstrating that even these scholars had a limited understanding of the economy of the time.

With the availability of the Internet, there are now many online resources to help consumers wade through complex financial information to make an informed decision. Here are a few examples where you can turn for help:

AmericaSaves.org: Site supported by a broad coalition of nonprofit, profit, corporate and government organizations to help consumers save money and build wealth. The site offers articles, tips and free resources for how to protect yourself in case of emergencies and build savings. Great resources for how to begin saving money everyday can be found here.

FDIC.gov: The Federal Deposit Insurance Corporation provides information and resources on topics from real estate and housing, identity theft, consumer protection, and financial education to information on bank closings and foreclosure prevention.

New Mexico Payday Loan Overview: Many states offer overviews on payday loans and short term borrowing, as well as resources for managing debt, saving money and how to determine if a payday loan is best for you. We have provided a link to a site in New Mexico which provides additional links for financial tips; for state-specific rules in your area, be sure to do an additional online search.

thebeehive.org: A great nonprofit resource for families on topics varying from how best to manage money, and topics for better living including health, jobs, schools and housing. The site aims to help consumers enter the economic mainstream and connect to educational tools and services to inform and empower people to improve their lives.

For additional resources, including online sites geared for kids and youth, a comprehensive list is found here.

In addition, don’t miss resources on this site for how to set up a budget, financial tips for single parents, and other articles in our financial literacy category

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IDA

Individual Development Accounts –The Basics

One financial service offering that you may not be aware of is an Individual Development Account (IDA), a special savings account offered to low and moderate income households. Consumers deposit money into a savings account each month and the amount is matched by a local non-profit organizations, federal or state grants, or program sponsors, and then connect participants to partner with a local financial institution such as a credit union, bank, or similar business that manages the account.

The savings plan is designated for specific use – consumers can use the savings toward a purchase of a first home, capital to open a small business, or for post-secondary education or vocational training. IDAs also require savers to complete financial education classes, giving them further financial literacy to make informed decisions and provide additional life skills. In addition, consumers participating in the program receive further training depending on how they will use the assets – for example, if the funds are used toward a home purchase, individuals obtain homeownership education and counseling.

IDA programs vary in length, usually as few as six months or up to several years, depending on the goals of the participant. The sponsoring organization works closely with each applicant to ensure goals are met.

A report published in 2016 by the Administration for Children & Families, soon after the federal program was established, revealed that participants in the IDA program were 35 percent more likely to become homeowners, 84 percent more likely to become business owners and nearly twice as likely to pursue post-secondary education or training. The most current report submitted to Congress late last year showed participants saving over 34 million dollars, with matching funds of just over 79 million.

For inspiration on how other individuals have used IDAs to improve their lives, read these success stories.

To find an IDA program in your area, search this directory for a location near you or use this interactive map.

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CFPB Seeks Public Comment on Nonbanks

Last week, the Consumer Finance Protection Bureau (CFPB) issued a statement asking for public comment on regulation for nonbanks, which includes entities such as debt collection agencies, consumer credit agencies and debt relief services.

While the federal government has long issued legislation and regulations for traditional banking sectors, the CFPB will now have jurisdiction and power to issue reforms for non-traditional banking organizations. Many anticipate that the CFPB will issue reforms, although possibly not right away.

This is a first step and indication that the agency does plan to analyze the industry and make changes. There is a requirement for the CFPB that in order to regulate certain organizations, it must be determined that they are “larger participants” in the greater market. For this reason, the agency is now seeking public comment on six specific markets: debt collection, consumer reporting, consumer credit and related activities, money transmitting, check cashing and related activities, prepaid cards, and debt relief services.

The primary aim for the CFPB is to protect consumer interests, specifically with regard to nonbank companies, and to expand its supervision among these businesses. As for payday lending companies, the CFPB has authority to regulate the entire industry, regardless of size, because the “larger participant” requirement does not apply to mortgage, payday lending, or private student lending markets.

To contribute your two cents, instructions for submitting comments are found here, including instructions for online submission.

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