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Financial Security
Too many people experience financial crisis because of inadequate savings, too much debt, and poor planning. A 2010 report prepared for the Financial Crisis Inquiry Commission concludes, "Managing day-to-day finances has become not only more difficult, but getting it wrong poses greater risks today than in the past." NIFA targets programs for youth, financially vulnerable populations, and consumers making financial decisions through their lifetimes.

More than half of Americans report living paycheck-to-paycheck. During the past decade, the rate of personal bankruptcy in the UnitedStates rose by 69 percent. The overall goal is for people to acquire the knowledge, skills, and motivation to build financial security. Programs focus on behavioral change, starting with achieving financial self-sufficiency, then stability. The ultimate goal, financial security, is the cornerstone of prosperous communities, nurturing neighborhoods, and strong families.

Self-sufficiency -- the first step in achieving financial security -- is the ability of individuals to be on their own financially without depending on friends, relatives, or government programs. Next along the continuum of personal financial responsibility is stability, or making ends meet. On average, U.S. households carry about $8,000 in credit card debt, up two-thirds from a decade ago. Life is often a constant paycheck-to-paycheck treadmill where short-term needs are met. However, one shift in the status quo (for example, loss of a job, death of a breadwinner, divorce, or long-term illness) can result in increased indebtedness or more desperate measures, such as personal bankruptcy.

The goal of most Americans is financial security -- the ability to save and invest for the future while keeping pace with day-to-day basic needs. Adequate financial assets provide that security and have vast economic and social effects on neighborhoods, families, and children. Financial assets can result in less economic strain on households, more financial resiliency, more educational attainment, less marital dissolution, less risk of poverty spanning generations, better overall health and satisfaction, higher property values and stability in a neighborhood, improved property maintenance, and more citizen involvement in civic issues. Building financial assets allows households to achieve goals that require a lot of money. Examples include buying a car or real estate, paying for a college education, starting up a small business, and providing a steady stream of income in retirement. Further, assets provide a cushion during unforeseen economic hardships and help people achieve a higher level of living.

Annamaria Lusardi, author of report prepared for the Financial Crisis Inquiry Commission, warns, "If people are ill-equipped to make financial decisions, there can be consequences for the individuals themselves and for the economy as a whole." There are three main ways that U.S. households accumulate assets: savings, home ownership, and small business ownership.

Saving -- the ability to set aside some money routinely from a stream of income -- is at the heart of household asset development. It is the springboard to investing in property or stocks. Though one may believe that people in poor households absolutely cannot save, research has repeatedly refuted this notion.

Once a household has an emergency fund in place, it can channel its savings into higher-yielding investments (e.g., stocks, bonds, and mutual funds) or into home and small business ownership. Buying a home not only increases household assets, in most cases, but it is also a key contributor to community prosperity. Where home ownership flourishes, residents take more pride in their community, are more civic-minded, benefit from better school systems, and enjoy lower crime rates.

Household assets also increase as a result of investing in and growing a small business. Such businesses, which account for more than half of private gross domestic product in the U.S. economy, are especially significant as a way for minority and rural households to accumulate wealth.

Several behaviors stand in the way of significant asset accumulation. Credit card debt is on the rise. In the United States, the rate of personal savings as a percentage of disposable personal income is among the lowest of any industrialized nation. Another concern is the estimated 10 million U.S. households that do not have a deposit account or any relationship with the formal financial services sector. These households often are female, single parent, African-American or Hispanic, less educated, characterized by low levels of net worth and home ownership, and with impaired credit histories.

Asset development for households, particularly an emphasis on improving personal financial security, has moved from conversations at America's kitchen tables to the highest levels of government, business, and non-profit organizations. Certainly, citizens are responsible for managing their income appropriately, making informed decisions about credit use, negotiating a complex maze of financial services, and saving and investing to accumulate assets. However, it is clear from numerous studies that people need more education about these matters. In addition to informing policy and research, community-based organizations can play a critical role in educating their constituencies.

An early, clear understanding of the basic principles of budgeting and saving will usually result in increased household wealth later in life. Financial education can help people learn the lifelong skills of creating and sticking with a spending and savings plan and making strategic investment decisions. Community-based, audience-targeted education can help them obtain the skills to own a home or small business, avoid abusive lending practices, and take a long-term view of their financial futures.

Extension, research, and educational programs in this area help individuals and families build financial assets instead of debt. Extension provides unbiased, research-based information and education via courses, Web-based curricula, and other educational outlets for people to acquire knowledge, skills, and motivation to build financial security. The emphasis of extension programs is on behavioral change -- developing a financial plan, managing risks of loss, reducing household debt, and saving and investing to meet life goals. Research provides the foundation for developing, delivering, and documenting effective behavior modification. Education prepares professionals to maintain their capacity to conduct research and extension activities successfully.

Public policy directly affects extension, research, and education. It increases funding opportunities and the ability to implement successful programs for a variety of audiences. In return, community-based organizations play a critical role in informing policymakers.
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