I recently spoke at an Osgoode Hall LLM course on Banking and Law, talking about how low-income people interact with banks.\u00a0 This was my own observations, not presenting research or hard data.\u00a0 (For those interested, some research has looked at\u00a0low-income people’s access to bank accounts, a measure on which Canada scores remarkably high.\u00a0 An overview on some findings is here<\/a>.)<\/p>\n One thing that I wanted to bring\u00a0the students’ attention to is what I call a “taxonomy” of how\u00a0low-income people\u00a0interact with the banking system.\u00a0 I’ve seen clients range along two primary criteria: level of “engagedness” with financial\u00a0systems, and what I call “thriving”, which is a loose measure of quality of life.\u00a0 It looks something like this:<\/p>\n
Highly Engaged & Thriving<\/strong>: This is more\u00a0common than many people think. Lots of people have very little income, but\u00a0(at least in Canada) are well-connected to the banking and credit systems and\u00a0are doing well.\u00a0 They may have debt or\u00a0may not, but aren\u2019t overwhelmed by it.<\/td>\n| Disengaged & Thriving<\/strong>: This quadrant reflects\u00a0a lot of\u00a0 newcomers, and\u00a0some other groups. These people\u00a0often\u00a0have\u00a0bank accounts, but otherwise don\u2019t deal with the financial system: no credit,\u00a0no loans. This is the unintuitive quadrant, because it\u2019s the people\u00a0who defy the accepted wisdom that \u201cyou HAVE to have credit\u201d.\u00a0 I try to reassure clients\u00a0that\u00a0it\u2019s fine if they choose not to, as long as they know the pros and cons.<\/td>\n<\/tr>\n | Highly Engaged & Struggling<\/strong>: This is the stereotype that\u00a0people often\u00a0think of: poor\u00a0people with\u00a0credit cards they’ve\u00a0overspent.\u00a0This demographic\u00a0definitely exists, but isn\u2019t the whole \u00a0 picture.\u00a0Bear in mind as well that a\u00a0lot of low-income people who have\u00a0debt aren\u2019t actually spending capriciously; the lack-of-income issue may be more central.<\/td>\n | Disengaged & Struggling<\/strong>: Typical profiles here are people\u00a0with MH\/addictions issues, some who are chronically homeless, or others who have \u00a0 disconnected from the banking\/credit systems.\u00a0 \u00a0 Some here\u00a0have had accounts\/credit at one time,\u00a0but may have overdrawn accounts or bounced checks and are now \u201chiding\u201d so\u00a0their limited funds aren\u2019t seized.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n | I want to really highlight that there are a lot of low-income people who are thriving (relatively), but more importantly that there are a lot of people who are doing pretty well despite being disconnected from mainstream financial systems.\u00a0 This isn’t generally the message we send people, and being disconnected from the formal credit market has\u00a0consequences, but I do think it’s a totally reasonable choice to make.\u00a0 We tell\u00a0newcomers and young people that they MUST get a credit card to start building credit, but we rarely clarify that the primary reason to build credit is to make it possible to access more credit in the future.\u00a0\u00a0Yet some people do quite well,\u00a0either temporarily or more long-term,\u00a0without any credit.\u00a0\u00a0Many immigrants who’ve come from cash-based economies in their home countries\u00a0are quite able and happy to continue using cash only.\u00a0 Does that maximize their ability to grow their wealth?\u00a0 Maybe not.\u00a0 But that may be a tradeoff that people are very comfortable with.<\/p>\n","protected":false},"excerpt":{"rendered":" I recently spoke at an Osgoode Hall LLM course on Banking and Law, talking about how low-income people interact with banks.\u00a0 This was my own observations, not presenting research or hard data.\u00a0 (For those interested, some research has looked at\u00a0low-income people’s access to bank accounts, a measure on which Canada scores remarkably high.\u00a0 An overview … Continue reading »<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[8,9],"class_list":["post-31","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-canada","tag-financial-literacy"],"_links":{"self":[{"href":"http:\/\/blog.magil.org\/index.php?rest_route=\/wp\/v2\/posts\/31","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/blog.magil.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.magil.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.magil.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.magil.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31"}],"version-history":[{"count":3,"href":"http:\/\/blog.magil.org\/index.php?rest_route=\/wp\/v2\/posts\/31\/revisions"}],"predecessor-version":[{"id":34,"href":"http:\/\/blog.magil.org\/index.php?rest_route=\/wp\/v2\/posts\/31\/revisions\/34"}],"wp:attachment":[{"href":"http:\/\/blog.magil.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.magil.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.magil.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}} |