“It seems like this whole system was invented to screw over poor people, but you have to participate or else you’ll get screwed, too.”
I’ve never been prouder of an Oliner than when I heard this come out of one of their mouths during a HOPES (Helping Oliners Plan Economic Success) session about credit scores. We’d been discussing how credit functions in American society: When we need to pay for things most of us can’t afford on our own (a car, a house, a college education, etc.), we must borrow that money from someone else (i.e., a lender). But the lender will only let us borrow their money if they think we’re likely to pay it back later, plus interest. So they’ll only lend to those of us who have already proved in the past that we’re able to do this. This history is what makes up our credit score.
Yes, it’s often that simple: A good credit score gives us access to cheap credit for the things we want and need. With no or poor credit, however, the lender will either deny us or charge a higher interest rate, making it harder to finance that car to get to work, that house that’s likely to appreciate in value over time, or that degree that will increase our earning power. The fact that someone is already financially vulnerable makes it more difficult to take the steps needed to find their footing.
Sometimes people we’re not asking for money, like landlords or employers, can even use our credit history as a factor in deciding whether or not to rent to us or employ us.
And this is just one way that the poor get poorer and the rich get richer.
All I could say to the student was, “You’re absolutely right.”
I think my answer may have surprised them. After all, it’s both my job and my passion to help students develop lifelong financial skills. Just because Jerry Goss (Olin’s Financial Wellness Ambassador) and I are personal finance nerds, however, doesn’t mean we buy into the financial systems and industries on which financial wellness is built.
Beyond credit scores, there are countless ways in which these systems perpetuate inequality. Right now, the COVID-19 pandemic is not only a global emergency in itself, but it’s also exposing and exacerbating the deep cracks that permeate our society. For example, people in poverty are more likely to:
- Lose their jobs as industries are forced to either suspend operations or implement radical changes
- Own small businesses that will not survive an economic recession
- Continue going to work if they exhibit symptoms because they don’t have paid sick leave
- Live without health insurance, or be at risk of losing coverage if they get laid off
- Go without essential supplies that others are stocking up on because they live paycheck-to-paycheck, don’t have space to store them, etc.
- Rely on public transit where social distancing is more difficult
- Feed their families with WIC-approved foods (WIC is the Special Supplemental Nutrition Program for Women, Infants, and Children), which may be unavailable during times of crisis as people stock up on staple ingredients
- Depend on school or work for meals
- Lack appropriate technology at home to continue their work or education
- Exist without the protection of an emergency fund in times of financial hardship
- Have their utilities shut off if they can’t pay their bills (as you can imagine, it’s hard to wash your hands without water or work from home without internet)
- Serve as primary caretakers for older family members, so they can’t keep them safe by social distancing
- Get evicted if they can’t pay their rent
- Experience escalation of an abusive home situation they can’t afford to leave, given that the resources that might normally provide some respite (work, school, religious organizations, etc.) are unavailable
- Fall victim to predatory financial scams that prey on desperate people
- Face barriers to accessing mental health treatment in a time of heightened stress and anxiety
- Be shamed by others for their predicament
And much, much more. Far more than I can list. Far more than my own privilege allows me to be aware of.
If this makes you angry, it should. It makes me angry.
So here’s the thing: Yes, I want Oliners to develop practical personal finance knowledge and skills. I want to help you learn what you need to know about budgeting, credit, and so on to survive (and hopefully thrive) in today’s world, a world in which financial stability is both crucial and fleeting. As they tell you on airplanes, you must put on your own mask before you can help others.
At the same time, however, I want you to fight for others to have the same opportunity. This isn’t about getting rich. It’s about waking up in the morning not having to worry about whether you can afford to be a person. This is what one outcome of financial wellness can be if we want it to.
And I think it’s you specifically, as Oliners, who are needed in this arena. Don’t leave this in the hands of the folks on Wall Street, in business school, and in political office. We need people like you to be angry, to be compassionate, and to imagine how things could be different (not just during an economic crisis, but afterwards, too). We need people to think and act like Oliners.
So yes, April is Financial Literacy Month. And we’re still having it! Because in many ways, I feel it’s more important than ever. Hope to see you at our events on the Zoom machine.