38 percent of Illinoisans one financial emergency away from poverty
Online Staff Report
CHICAGO — Nearly half of Chicago families (49 percent) do not have enough savings to live above the poverty level for just three months if they lose a job, face a medical crisis or suffer another emergency that leaves them without a steady income. The findings are part of a new data analysis from Family Assets Counts, a project of CFED (the Corporation for Enterprise Development) and the Assets & Opportunity Initiative in partnership with Citi Community Development and the Illinois Asset Building Group.
These families live in a state of persistent financial insecurity — known as “liquid asset poverty.” In Chicago, 42 percent of households with incomes between $50,000 and $75,000 are liquid asset poor, even though they earn well above the median household income of $45,483. Communities of color fair even worse: 67 percent of African-American households and 71 percent of Hispanic households are liquid asset poor.
The data was presented at the 2014 Illinois Asset Building Group (IABG) Conference Oct. 9 at Federal Reserve Bank of Chicago, which brings together leaders in the asset building field to develop strategies that help families build financial security for themselves and their children.
“The new Family Assets Count data show that these families are one emergency away from falling into debt or even losing a home,” said Lucy Mullany, senior project manager at Heartland Alliance and coordinator of the Illinois Asset Building Group. “The inability to bounce back from financial pitfalls not only hurts Chicago families, it stifles the city’s long-term economic growth.”
Additionally, the data point to a range of other challenges confronting Chicago’s vulnerable families, including the following:
• Although the city has a 45 percent homeownership rate, one in three families are “asset poor,” meaning they lack sufficient net worth (what they own minus what they owe) to subsist at the poverty level for three months in the absence of income.
• 16 percent of Chicago families are “unbanked” with no savings or checking account — twice the national rate.
• One in four families are “underbanked,” which means they have a bank account but still relied on alternative financial services such as costly check cashing or payday loans in the past year.
The data analysis also shows that families across the state are struggling to stay above water. A total of 1.8 million households (38 percent) in Illinois do not have enough savings to live above the federal poverty level for three months if faced with a job loss or other income disruption.
IABG and its partners are working to promote a range of policy proposals that would help Illinois families improve financial security. Policy solutions at the state and local level include the following:
• Passing land-use ordinances to limit the prevalence of predatory lenders like payday, auto title and rent-to-own stores that entrap families in a cycle of debt.
• Investing in citywide initiatives that help families build and maintain good credit scores through credit builder loans and credit counseling.
• Creating an Illinois Children Savings Account Program that provides a savings account for every child.
• Expanding access to the Illinois Bright Start program through structural changes that make it easier for families to save for their child’s college education.
• Ensuring all Illinois workers have the opportunity to save for retirement through the Illinois Secure Choice Savings Program.
“We hope these data ring as a clarion call to action for policymakers who have an important role to play in improving financial security for families in Chicago and statewide,” said Solana Rice, senior program manager at CFED.
The findings were compiled as part of the national Family Assets Count initiative, which uses cutting-edge data, tools and resources to leverage the power of cities to improve financial stability for families and advance programs and policies that encourage and enable families to save and build assets.
For more data on Chicago families, visit www.familyassetscount.org.
Posted Oct. 9, 2014