The plan, published last year by the American Enterprise Institute and the Brookings Institution, emphasizes among other things the need for stronger families, more responsible parents and training to help parents do a better job. An Albuquerque-based agency called Prosperity Works was putting some of these ideas into action before AEI and Brookings started their study. The agency’s promising results suggest the think tanks might be on to something.
Prosperity Works CEO Ona Porter sums up the group’s philosophy this way: “Income gets you by. Assets get you ahead.” A poor family that can effectively build its personal, social and financial assets can get ahead. Prosperity Works creates opportunities that help families set personal goals, such as owning a business, buying a home or paying for higher education. It puts families in a position to tap social networks composed of neighbors, friends and businesses. Using funds provided by donors and foundations, Prosperity Works helps families accumulate financial assets by matching their savings.
Among the group’s partners are 1st American Bank, First Financial Credit Union, Los Alamos National Bank, My Bank, Rio Grande Credit Union, Southwest Capital Bank, Wells Fargo Bank and Western Bank. Porter said in an interview that Prosperity Works doesn’t need those financial institutions’ money – though some of them do donate – as much as the agency needs them to open their doors to new customers with unconventional needs. These are customers who have never had a bank account, who were never taught how to handle personal finances, who have no access to credit. Some are caught in the high-interest world of payday and title loans, because they have never known how to use the financial system.
The institutions help establish accounts and credit cards for Prosperity Works clients, then discover they are doing good business with a new kind of market, Porter said.
Prosperity Works has two major asset-building programs. Individual Development Accounts target families with earned income, such as wages, but who make less than 200 percent of the federal poverty level (less than $48,600 a year for a family of four). IDA holders attend a 10-week personal finance class before opening an account. The accounts must be used for post-secondary education, the purchase of a home or establishing a business. When certain benchmarks are reached, Prosperity Works matches the family’s savings four to one.
Children in poor families can establish Child Savings Accounts with $100 from Prosperity Works. Family contributions to the account are matched up to $200 a year for 10 years. The account holder’s parents must complete training in child development, community leadership and financial capability.
Prosperity Works will also establish an emergency account for CSA participants. The agency adds money to the accounts when parents complete a GED, an English as a second language course or computer training, or receive a certification of appreciation for volunteering at their kids’ schools or for keeping their kids’ absences from school to one day or fewer in a given period. Those accounts come with a secured credit card, which helps families establish a credit history.
Prosperity Works says that 1,192 families had established IDAs totaling $8.3 million as of last September. More than 500 businesses had been established or expanded by account holders, creating 903 new jobs. More than 400 people were earning a college degree, and 271 families were buying homes with $43.4 million in new mortgages.
Over a little more than a year’s time, 520 children from 255 families in Albuquerque deposited $25,000 in Child Savings Accounts. Donors, including the Kellogg Foundation, have deposited almost $75,000 in matching funds. Ninety families have opened emergency accounts.
It isn’t just the money that is making the difference, Porter said. Along with financial assets, participants build social and personal assets. During IDA training, only 85 percent of the class members are prospective account holders. The rest are members of the community, perhaps a public official or a business leader.
Community members begin to understand the structural barriers to prosperity the poor face. Future account holders develop relationships with people in the classroom who have the power to break down those barriers. Porter says there is a direct relationship between your ability to escape poverty and the number of middle-class and upper-class people you know.
Families begin talking about a promising future, one that includes college and a home of their own. The culture of families and communities changes from one of few expectations to one of achievement. “Small changes in resources change people’s view of themselves and their future permanently,” Porter said.
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