Financial Services for Low-income Workers

  • Prosperity
  • 1994

Recognizing that low-income workers in Manhattan were having trouble budgeting, saving, and staying out of debt, a former New York City school teacher raised $85,000 from donors including Atlantic Philanthropies to create the organization now known as Neighborhood Trust to provide financial services to residents in need. Most of these were immigrants, but one quarter of all American families who earn less than $25,000 per year have no bank account. These people end up relying on payday check cashers, high-interest lenders, and other unproductive channels outside the banking system. The typical client who initially came into the Neighborhood Trust program earned $18,000 per year, had less than a high-school education, and no banking relationship. He had average household debt of $14,000, poor credit scores, and was on track to spend $40,000 in his lifetime for exploitative check-cashing and credit services. Improving the financial knowledge and health of households like these helps stave off many social dysfunctions and work problems that flare up when families fall into insolvency.

The new organization began by offering financial counseling and courses teaching basic money management in Spanish and English. In 1997 a credit union was opened that quickly had thousands of account-holders at two branches—60 percent of whom had never previously had a bank account, and 75 percent of whom had never used a credit card. (Two thirds had used loan sharks, however.) The credit union also made small loans to this population to allow the establishment of businesses like livery cabs and family day-care services. As they proved themselves, clients were migrated to larger commercial banks.

In 2012, grants from the Robin Hood Foundation, the Harry and Jeanette Weinberg Foundation, and other donors helped create two new programs: The “Employer Solution” builds partnerships with companies that hire many low-income workers and embeds its services in their human resources departments so that, for instance, employees get their paychecks electronically deposited, and payroll savings becomes easy. Workers are offered no-cost meetings with financial advisers who help them prepare budgets, plan for emergencies, set goals, save money, and eliminate debt. The “Trust Card Program” is a second initiative that helps people who have run up credit-card backlogs pay these off by entering into a structured program offering personalized information, limits on household spending, and personal contracts pledging rapid pay-down of debt.

In its Upper Manhattan service area, 6,000 working families now rely on Neighborhood Trust to solve money problems and help them work their way up the economic ladder. Within months, most achieve substantial debt reductions, increased savings, and improved credit scores. Scores of donors have helped the program expand, including, in addition to Atlantic, the Robin Hood, Weinberg, and Altman foundations, the Carson Family Charitable Trust, a number of New York bank philanthropies, and many individual donors.