What Would Help DC Residents Have Greater Financial Security?
Washington, DC, is a city of contrasts with respect to residents’ financial security. While some residents are among the country’s most financially secure, others find it hard to make ends meet. High housing costs, unequal opportunity, and economically segregated neighborhoods make it challenging for some residents to feel financially secure and to weather unexpected expenses and emergencies.
The city has extensive resources to support residents, ranging from policies that protect consumers to city-led programs that assist those in need to deep nonprofit capacity that helps residents improve their financial standing. But even in a city with strong supports for financial health, more can be done. To learn where gaps and opportunities exist in DC’s financial landscape, we spoke with residents about their financial challenges, how they address financial crises, the financial services they like and use most, and what financial service needs are not being met. From this knowledge, better programs can be designed to help residents shore up their financial standing.
This brief describes the financial landscape for DC residents and the products and services that would help them most. Additionally, this brief is responsive to the city’s concurrent and ongoing policy and program conversations. For one, the DC government is investigating whether a financial empowerment center—where residents can receive financial counseling—may be needed and for whom. For another, nonprofit and government stakeholders have been discussing small-dollar loan gaps, where residents seek emergency funds, and how best to address such needs. This brief is grounded in these conversations and related questions, explored through six focus groups conducted in October and December 2018 with residents accessing financial programs through various DC nonprofit service providers. We conducted additional stakeholder interviews among leaders working within the DC government and at area nonprofits who work with people with notable financial needs of potential interest for financial empowerment center programming. These people include returning citizens, immigrants, those transitioning off Temporary Assistance for Needy Families (TANF), and those transitioning out of homelessness.
The findings reveal the financial service needs that programs are not meeting and potential avenues to better help DC residents move toward greater security.
Key findings include the following:
- Distrust in financial institutions is prevalent. Most residents in the focus groups were banked. But there was considerable distrust of large financial institutions because of negative experiences with banks and loans. Some residents reported switching banks or credit unions after bad experiences and reported pulling money out of their accounts.
- Residents struggle to build up savings. Most respondents reported that saving money for emergencies and long-term financial goals was difficult for such reasons as student loan payments, transportation expenses, financial disruptions, unpredictable employment, and consumer debt. Housing costs were frequently cited as the biggest expense and concern.
- Credit access and understanding is limited. Despite an interest in improving their credit scores, respondents did not necessarily have the correct information or know the best way to achieve this goal. In addition, not all residents have access to revolving credit, and its access is limited in less affluent areas.
- Small-dollar loans could help. Residents expressed a need for emergency cash assistance. There are few safe and affordable small-dollar loan products in DC, and none provide immediate assistance, so expanding access could help. But residents are concerned about borrowing money and being locked into an inflexible payment cycle and schedule.
Many residents could be served well by a financial empowerment center. This includes returning citizens, people transitioning off government assistance and housing programs, and immigrants. Financial counseling and coaching, loan products, and programs that target debt management and housing expenses could offer benefits.