An Evidence-Based Approach to Improving Family Financial Security and Mobility

The incoming administration has a difficult job ahead: creating a comprehensive policy agenda that enhances opportunity for all Americans. However, the appropriate next step—focusing on policies that promote financial security and economic mobility—is clear.

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In the coming months, President-elect Donald Trump’s administration will present and refine its priorities for the next four years, recommending reforms for existing programs and outlining new policies. Recent research from The Pew Charitable Trusts has examined the health of American family finances, establishing an evidence base for the development of policies to improve the financial security and mobility of households across the country. The federal government has a host of opportunities to put families at the forefront of its agenda by focusing on the issues that affect their communities, neighborhoods, and bottom lines, including:

• Target the specific needs of communities. At a recent Pew event, experts highlighted the barriers to opportunity that rural communities face, including a lack of access to educational, financial, and social services and the migration of young professionals to urban centers. The panelists identified three practices with the potential to increase economic mobility in rural communities:
  • Flexible community institutions. Because many rural communities lack services and infrastructure, local institutions must often fill a variety of roles, and policymakers could help ensure that they have the flexibility to address multiple needs. For example, Community Development Financial Institutions – which provide credit and financial services to people and communities underserved by mainstream commercial banks and lenders – could expand financial counseling and technical assistance offerings to families and small businesses, especially in areas where larger bank branches are scarce.
  • Creative collaboration. Cooperation among nearby social service agencies, especially those implementing anti-poverty programs, can be critical to maximizing available staff expertise in rural communities. For example, in Highland County, Ohio, a range of agencies are working to streamline residents’ access to services and providing cross-training to enable staff to serve a variety of clients. Other rural communities are banding together and working with higher education institutions to train local workers to meet the needs of employers in the community.
  • Technology as a bridge to opportunity. Rural communities often have technological limitations that exclude them from greater educational and economic markets and restrict academic and training opportunities to those available locally. For example, community colleges can help bridge this technological divide by acting as small-business incubators, spaces for networking, and high-speed internet access points and by using broadband and other technology to offer rural Americans access to remote jobs and online educational resources.
• Address the economic needs of neighborhoods, including reducing economic segregation. Previous Pew research indicates that where Americans live is a critical driver of their financial security. For example, the most economically segregated metropolitan areas—those where the rich and the poor live farthest from one another—are also the least economically mobile. In economically segregated areas, parents with greater resources can transmit advantages to their children by selecting a home in a wealthier community, where the schools tend to be of higher quality. Conversely, low-income families are likely to live in areas where economic opportunities are scarce.
• Approach family balance sheets holistically. Policies and programs to boost and maintain family income are often in the national spotlight, but income is not a silver bullet. Improving household finances requires a deeper look at families’ savings, debt, and expenses. For example, Pew’s research has found that most households, regardless of age, race, and income level, experience financial shocks—unanticipated expenses such as car or house repairs and illnesses or income losses, including pay cuts. However, 80 percent of households have lower savings than they say households such as theirs should have, especially to address such shocks. Pew data clearly show that households want to save, but they may need targeted help to understand and manage the ebb and flow of their income and expenses.

The incoming administration has a difficult job ahead: creating a comprehensive policy agenda that enhances opportunity for all Americans. However, the appropriate next step—focusing on policies that promote financial security and economic mobility—is clear.

Sarah Sattelmeyer is an officer with the financial security and mobility project at The Pew Charitable Trusts.