Issue of the Month: Financial Stability – It’s a Powerful Thing


Over the last few years, the American economy has experienced some tough financial times. As a result, many American households have been faced with a number of important decisions to make in order to weather the financial storm. “Should we borrow money through high interest loans to pay bills?”, “How will we be able to afford our ballooning mortgage payment?” and “Should we dip into our retirement nest egg to get by?” are just a sampling of the types of questions that weighed heavily on the minds of many Americans. So what is correct the answer, you ask? The “correct answer” stems from one’s awareness and understanding of the power of financial stability.

From an overall economic perspective, financial stability can be defined as the ability of the financial system to consistently supply the credit intermediation and payment services that are needed in the real economy if it is to continue on its growth path. In short, the definition, as applied to the American household, has a very similar meaning — the ability of the American household to effectively meet its obligations and continue to experience financial growth. This may seem like an easy task, however, if you consider the fact that the average American household is carrying $16,000 in credit card debt and approximately 9 million American households are “unbanked” and do not have a checking or savings account, it reads more like challenging feat.

With the odds seemingly pointing to a continuation of past financial “incorrect answers” for many American households, many cities across America are tackling this issue head on and now more than ever recognize the need for American households to be educated on making smart financial choices to ensure financial stability. For example, in New York City, Financial Empowerment Centers were created to provide free one-on-one financial counseling to help clients manage their money, reduce debt, plan their financial futures, improve their credit and find affordable banking services.

Over the past year, counselors at the centers conducted over 28,000 sessions, helping New Yorkers pay down over $7 million in debt and increase their savings by over $900,000! Realizing the positive impact, more and more city governments are developing similar programs to put even more American households on paths to financial stability. As an added bonus a multiplier effect has occurred as an individual’s receipt of such financial counseling is looked upon favorably in other contexts such as social service and workforce development programs.

One thing is for sure. Financial stability is a powerful thing! It can make all the difference in an American household’s ability to live and realize “The American Dream.” Even more important, the financial stability of each American household can lead to a more favorable outlook on the American economy as a whole. Perhaps Sarah Boom Raskin, Federal Reserve Board Governor, said it best:  “Our overall economic stability relies ultimately on the collective financial health of all American households.”

This issue definitely hits home. United Way of Metropolitan Chicago’s LIVE UNITED 2020 Income  Initiative  sets out to advance economic stability for 100,000 American households. This goal can be easily met (or exceeded!) with your help. Whether you donate to the Income Initiative or volunteer to teach a financial literacy seminar at a partner agency, you are able to make a direct positive impact on the growth and awareness of financial stability among American households and economic stability in our communities.

Blog post submitted on behalf of Melissa A. Hamilton, Issue Awareness Committee Member.

Sources:
The Huffington Post — “Improving Financial Stability in America’s Cities” by Michael R Bloomberg, 4/26/2012
http://www.stlouisfed.org/household-financial-stability/about/
http://www.bos.frb.org/news/speeches/rosengren/2011/060311/index.htm

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