“From the Executive Director’s Desk” is a monthly column written by CARE’s Executive Director, Anna Flores, about various Financial Literacy topics and CARE news. This month, Anna writes about trauma-informed financial education.
I recently read an interesting article in Charlotte Magazine and learned a new term, “Trauma-Informed Financial Education.” While others in the financial education space may be familiar with this term, it’s new to me and may be new to you as well.
Trauma-Informed Financial Education
Trauma-Informed Financial Education refers to education that incorporates an understanding and recognition of the physical, psychological, and emotional trauma caused by living in poverty and in lower-income households, and how those experiences affect financial decision-making.
According to the article, a series of experiments conducted by researchers from Princeton, Harvard and the University of Warwick 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 (e.g. going to night school, search for a new job or pay their bills on time). The findings undercut the theory that poor people, through inherent weakness, are responsible for their own poverty or that they should be able to lift themselves out of poverty with enough effort.”
Common Wealth Charlotte
A Charlotte-based nonprofit organization, Common Wealth Charlotte, has developed programs and services that tackle these issues. In partnership with workforce development agencies and other organizations dedicated to the upward mobility of the working poor, they provide basic financial education, access to credit, banking services and small low-interest loans.
CWC’s holistic approach begins with one-on-one and classroom-based empowerment workshops where the instructors and volunteers have a deep understanding of the physical, psychological and emotional trauma experienced by their clients. They use motivational interviewing and other evidence-based guiding communications techniques designed to create an environment of safety and trust, affirmation, and cultural relevance, in order to elicit and strengthen a client’s motivation for change.
Through partnerships with banks and credit unions, they connect clients with traditional banking and financial services. These include second chance checking and saving, asset building and credit score enhancing products. In addition, they offer clients an Opportunity Loan of up to $750 with direct paycheck drafts and a six-month term at 3.15%. The use of loans is limited to financial emergencies, paying off payday lenders and other priority issues that impact the clients’ credit score. Their repayment rate is an impressive 90%.
While we don’t all have the capacity and resources needed to create a program like the one in Charlotte, we should all be informed about innovations and research in financial education that might help us address the special needs of the communities we serve.
If you’re interested in learning more about Common Wealth Charlotte and how to create Trauma-Informed Financial Education programs, you can visit their website, www.commonwealthcharlotte.org. If you have any comments or questions, you can reach out to me directly at [email protected] or visit our website, www.care4yourfuture.org to learn more about the CARE program.
About the Author
Anna Flores joined CARE as its first Executive Director in 2015 and helped to bring the organization into official 501(c)(3) status. Previously, Anna worked as a VP for American Express and has years of experience working with volunteer-driven organizations throughout the Washington, D.C. area.