Charlotte Nonprofit Takes Aim at Financial Literacy


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A homeless man in an encampment north of Interstate 277 in 2016. Some research indicates that chronic poverty lessens people’s capacity to make smart decisions.

Andy McMillan

The other night, over cheap domestic beer, I was chatting with a friend about money. She’s not rich. Neither am I. But we both grew up in middle-class households, where it was assumed that at some point, well before adulthood, you’d learn the essentials of stewardship of your own money: You’d open a savings account, learn what interest is, and grasp the basic principle that you ought to put some money aside for when you might need it rather than spend it as you get it.

She used to work for a company that employed a platoon of truck drivers. The office manager understood that at some point early in the year, more drivers than usual would call in sick. He knew what the ailment was. He called it something like “refund flu.” Many of his employees would file their tax returns as soon as possible after the first of the year. Then the refund would come in, and they’d either take a day or two off and spend most or all of it or, worse, secure advances on their expected refunds—often with fees or interest applied—to get cash in their pockets immediately.

This made me shake my head. My friend shrugged in a “what can you do?” gesture. Look, I thought. I sympathize with the working poor, people caught in the seemingly endless cycle of low-wage poverty. But … c’mon, man! You’ve got to be smarter than that! Why would you (hypothetically) slice off $50 from your $500 check in return for being able to spend the other $450 right this second? Can you not wait two months? Unexamined, this line of thinking leads to one of the most common arguments against anti-poverty programs over at least the last 50 years: The poor dug their own holes through their own bad choices, and people should not be rewarded for bad choices.

Except there’s an emerging body of evidence that the argument is at least oversimplified, if not flat wrong. Darren Ash, executive director of the financial literacy nonprofit Common Wealth Charlotte, sees it every day.

“Oh, my God, yeah,” Ash told me. “What we see is people in poverty, making $20,000 a year or less, which is 15 percent of the population of Mecklenburg County … What we see is people living in true scarcity, robbing Peter to pay Paul, losing their car, losing their home, always upside down. And what happens, when a person is in that state for an extended time, is a drop in enzymes that affects the frontal lobe of the brain—the part of the brain that controls things like planning and attention.

“Now, why pay attention to that? It’s a big thing for us to know when we do our interventions. Why? It’s because, to a large degree, you’re not poor because you make bad decisions. Clinically, you make bad decisions because you’re poor.”

You could argue reasonably that it’s not cut-and-dried either way. People, no matter how much money they have, make some truly awful choices; it’s just that the consequences are far harsher for the poor. But there’s evidence for Ash’s thesis. Nearly five years ago, the journal Science published the results of a study that examined the link between poverty and clarity of thought, as summarized by CityLab:

(Researchers) have concluded that poverty imposes such a massive cognitive load on the poor that they have little bandwidth left over to do many of the things that might lift them out of poverty – like go to night school, or search for a new job, or even remember to pay bills on time.

In a series of experiments run by researchers at Princeton, Harvard, and the University of Warwick, low-income people who were primed to think about financial problems performed poorly on a series of cognition tests, saddled with a mental load that was the equivalent of losing an entire night’s sleep. Put another way, the condition of poverty imposed a mental burden akin to losing 13 IQ points, or comparable to the cognitive difference that’s been observed between chronic alcoholics and normal adults.

The finding further undercuts the theory that poor people, through inherent weakness, are responsible for their own poverty – or that they ought to be able to lift themselves out of it with enough effort. This research suggests that the reality of poverty actually makes it harder to execute fundamental life skills. Being poor means, as the authors write, “coping with not just a shortfall of money, but also with a concurrent shortfall of cognitive resources.”

This explains, for example, why poor people who aren’t good with money might also struggle to be good parents. The two problems aren’t unconnected.

It’s critical to grasp the difference between temporary, incidental “poverty”—living on savings or off a credit card for six months because you’ve lost your job, for example—and the above-referenced “condition of poverty,” a generational affliction that some Americans experience simply as the reality of their lives. They don’t know anything else. If habits (and their absence) are handed down by parents, it’s no wonder people living in states of chronic poverty, among others in the same condition, can’t see any way out. In this kind of environment, deferring pleasure until tomorrow is another kind of foolishness, since there might not be a tomorrow.

Common Wealth Charlotte opened in 2016 as part of the Goodwill Opportunity Campus on Wilkinson Boulevard. It’s meant to provide basic financial education, access to credit and banking, and small, low-interest loans to people who may never have learned how to handle their money. One of the organization’s most important tools is its Opportunity Loan program, which lends qualified clients up to $750 at 3.15 percent APR and over a term of as long as six months. Clients can use the money to pay rent to avoid eviction, or pay off predatory payday loans—in short, to dodge anything that can severely and permanently damage their credit. To date, Ash said, the repayment rate is about 90 percent.

In the process, clients receive counseling on money management—what Common Wealth calls “trauma-informed financial education.” Counselors work with clients they know have little or no experience in asset management. “You can’t approach the poor in the old middle-class ways,” Ash said. “Pleasure is important for people in poverty. But the vast majority of people we counsel are denying themselves of anything. They’re using their money just to catch up.”

How many lives of people in Charlotte’s, or any other city’s, poor communities might get a whole lot better if they understood that their checking account balance was more important than what they happened to have in their pockets this minute—if they could learn to think beyond the present? “That starts leading to a change in the brain structure,” Ash said. “And that’s evidence-based, not the subjective thought of Darren Ash and his team.”

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