...and how to avoid it
OVERWHELMED by debt and flooded with dicey credit card come-ons, many consumers need a solid education about their own finances. There are promising options. If only more consumers knew about them.
Right now, says Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance, "People get educated through the marketing." His group offers home buying and personal finance classes.
Sadly, while there's a great need for financial literacy classes, demand can be low. "People don't want to come out and talk about budgeting," says Margaret Miley, executive director of the MIDAS Collaborative, a nonprofit that helps low-income people build their assets.
In a recent report, Miley highlights a more appealing approach: Weave financial training into other programs, such as English classes for immigrants or programs for small business owners. Released by the nonprofit Massachusetts Community and Banking Council -- which encourages investment in low- and moderate-income communities -- the report looks at five innovative programs in Greater Boston.
Action for Boston Community Development, an antipoverty agency, has shown that good training can pay off quickly. ABCD enrolled eight of its case managers in a financial course, providing information that case managers could use for themselves and their formerly homeless clients.
As a result, the case managers improved their own finances -- clearing up credit problems and planning for retirement. And on the job, case managers shifted from "talking at" clients to helping them devise financial plans, says Vernette Allen, ABCD's asset development director.
Several clients have gone on to enroll in ABCD's individual development account program, which offers matching funds as an incentive to save. For example, a client who saves $2,000 for housing gets a $6,000 match, for a total of $8,000.
The challenge is to scale up good programs. Some efforts are underway. In 1999, Mayor Menino launched the Don't Borrow Trouble campaign, which helps homeowners avoid predatory loans through public awareness and counseling.
The state's Asset Development Commission is looking at how to broaden financial education. Representative James Eldridge, the commission's cochairman and an Acton Democrat, says that good programs can also help people see that they're not entirely to blame for falling prey to predatory lenders.
Lack of financial literacy has been a major factor in the current mortgage mess. At the least, it should be easy to learn sound financial lessons. 