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Paycheck to Paycheck

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Tears trickled down Alicia’s cheeks as she recalled days that she went without food in order to pay her bills. Gently rubbing her eyes, she kept an unbroken smile, and told the story of a “bubbly” girl raised by hardworking Mexican and Tonga Island immigrants who instilled a fervent value in education. Though Alicia is more than $22,000 in credit card debt, she’s confident that she’ll earn her master’s degree, become an established attorney and send her best friend on the vacation of her dreams.

“One day I want to live where money isn’t an issue,” Alicia said. “It’s nerve-wracking ever since my credit card was taken away and sometimes I just don’t eat. Today, nothing can be saved.”

Alicia is one of the first in her family to earn a high school diploma and will graduate from the University of Phoenix in January. She plans on immediately enrolling for her master’s degree.

“Money is always on my mind and it’s overwhelmingly stressful,” Alicia said. “But I got myself back at school because I knew it would help me financially. I stay motivated for my future children. I’m thinking of the long term.”

Alicia, along with 11 other low-income people, were interviewed at the pilot workshop Paycheck to Paycheck; the brainchild of Stoyan Kenderov, Head of Business Development for CEG. The event was facilitated by Innovation Catalyst Trish Powell.

IC Trish is profoundly committed to the topic because she comes from poverty. Her parents were “Depression era, Dust Bowl folks” and Trish was the first-and-only child in her family to earn a college degree.

“This population really lives on the edge. There is never enough money and they need access to whatever money they have really fast,” Stoyan said. “Consequently, the under-banked population choses alternative financial products (check cashing, payday lending and money remittances) that are fast but cost them 10 percent or more every time for simple transactions that more affluent customers receive for free.”

Stoyan hopes Intuit teams can design products to decrease the need for such costly services, so people can save money to meet emergencies and retire.

The two-day D4D session took place in Menlo Park where three groups — comprised of 30 members from TurboTax, Payroll and Mint — listened to stories, questioned a panel of nonprofits, conducted experiments and documented their learnings in hopes of creating products that will help underprivileged communities save money.

“I realized that Intuit has the technology and the trust of customers to help them build better personal financial systems and, over time, end up with a retirement nest of their own,” Stoyan said.

Stoyan created the workshop due to deepening economy inequality. He was raised in the Bulgaria and after the fall of the Soviet Empire his parents realized they were a small part of generations of people who trusted the system, led productive lives but were left unable to retire.

“Fifty percent of Americans are not going to be able to retire either because they have no savings or live paycheck-to-paycheck,” Stoyan said. “The lack the financial skills and positive habits is not allowing them to break that cycle.”

Savings is a luxury: “It’s very difficult to convince people to save money when they don’t have cash to take their kids to the doctor or buy enough food for the week.” — Center for Financial Services Innovation Manager Nancy Castillo

“I just want to get through this month,” and “It will never be enough,” were common themes discussed June 2-3. Though many team members had little to no experience with being poor, they shared their first memories of money before talking to real customers.

Mint Group Product Manager Vince Maniago said he hadn’t understood the complexity of debt until he watched a documentary that focused on payday loan franchises, which are often owned by big banks.

“It opened my eyes and made me want to work for Mint,” Vince said. “It’s exciting because we’re finally at a time where technology can help a lot of people.”

Some team members grew up on welfare, went to college with the help of scholarships and watched their families struggle but also give back to their communities. Payroll team member Michael Dehlwes lived a privileged life but witnessed extreme poverty during his adolescence in Iran and Nigeria. The majority of the room said their parents were diligent with money.

Before conducting real-world empathy experiments — like applying for a payday loan, signing up for a prepaid card or sending money to another country — Trish introduced Center for Financial Services Innovation Manager Nancy Castillo.

Nancy gave a presentation about the U.S. Finance Diaries, a program created by the BYU Financial Access Initiative, the Center for Financial Services Innovation and Bankable Frontier Associates that fosters dialogue with low-income people all around the country.

“We embrace inclusion, create opportunity, promote success and build trust,” Nancy said

She discussed a variety of topics related to poverty, including income uncertainty — only 36 percent of the sample customers have reoccurring income. The remaining 64 percent have unsteady hours and multiple jobs. The result? About 97 percent of sample households have at least one month where their spending is greater than their income.

Sam and Sara Johnson have three children and debt associated with their mortgage, car loan, unpaid bills and credit cards. The Johnsons were one of many families that said they never thought about savings because they were focused on battling day-to-day money problems.

The U.S. Finance Diaries also revealed that people horded extra cash at home rather than at a bank.

“Our savings is what we do at home,” said Luz, a 25-year old from California. “Our checking account is just for expenses.”

Sixty-five-year-old Ronda from Cincinnati keeps her savings at home — in a four-gallon pretzel jar — and refuses to dip into it even when she’s broke.

“Many people want to have instant access to funds,” Nancy said. “It gives them control.”

Interviewee Yolanda shared her story with Payroll Senior Product manager Hung Phan. She, too, kept every saved dollar in piggy bank.

“Money is easier to control that way,” Yolanda said. “It’s out of sight and out of mind.”

Yolanda learned how to budget using her method: “trial by fire.” After a divorce, she was left to raise her daughters and signed up for food stamps and Medi-Cal.

“I was panicked and unfamiliar with budgeting and it took a lot of strength not to fall apart,” she said. “I made sure my kids didn’t see me cry and I fought through the pain and frustration.”

Nancy also highlighted the percentage of low-income people that don’t trust financial institutions. Instead, they rely on “tandas” — groups made up of coworkers, family or friends who use a rotating payout system of consolidated deposits. The system is contingent on trust among the group and has existed for centuries.

Nonprofits coach financial literacy: “We know that gentrification is the monster but sometimes we have to tell our clients that their best option is to move out of the area.” — Juma Youth Development Coordinator Melvin Cowen

Representatives from nonprofits Juma, Able Works, Opportunity Fund, Doorways to Dreams Fund and EARN talked about their history before holding an open dialogue.

Juma Youth Development Coordinator Melvin Cowen and Strategic Initiatives Manager Sukie Jefferson talked about instilling trust among young people and the importance of saving. The nonprofit was established to help break the cycle of poverty by ensuring that young people complete a four-year college degree.

Juma also provides job opportunities to its clients. “They have to feel the actual money,” Melvin said. “Otherwise all this financial education is simply theoretical.”

Juma is attempting to instill healthy patterns in communities where harmful patterns have worked for poor communities for many years, Melvin said.

“We’re coming into their communities from a privileged place and as outsiders,” Melvin said. “So, we’re not trusted.”

To offset this problem the team discusses financial literacy and hosts community forums, most effectively during tax season. Engaging with community centers and churches, for example, allows the nonprofit to build trust with the communities they target.

“I think we have a lot of assumptions on how products can help the community but we don’t know anything unless we emerge ourselves,” Melvin said. “We want to build a positive and loving relationship to find a way to rise out of poverty together.”

Serving “communities in crisis” Juma also receives financial education curriculum from EARN — one of the two largest providers of goal-based savings accounts in the United States. EARN’s accounts and online platform help low-income workers build lifelong savings habits. According to EARN, research proves that regular saving leads struggling American workers out of the bottom 20 percent.

San Francisco’s EARN Development Manager Tad Oyler and Product Manager Matthew Silva have been serving a client population that makes an average of $21,000 a year. Talking about their failures and successes, Matthew spoke about a new product; a starter savings account.

“Some people just want to save $20 a month,” Matthew said. “They need a baby step to get to the larger goal. We had to ask ourselves how to make the first interaction so easy that a client invests the second day, the third day, and so on.”

They reiterated that nonprofits “have to go where the people are” to be successful. If not, a group will pour time and resources into [a product] that won’t work.

Intuit team members asked a slew of questions about gentrification, financial literacy, the economy, breaking habits and evoking empathy.

Some reps advised that people who suffer financially should relocate to more affordable areas. Others argued that financial education will help offset bad moves. Groups also realized that by valuing education, many students and parents were taking out bank-issued, high-interest loans, even with already bad credit.

“Because of this many people think that is where the next debt crisis will come,” Melvin said.

Gwyneth Galbraith represented San Jose-based Opportunity Fund, a nonprofit social enterprise helping thousands of California families build financial stability by combining microloans for small businesses, microsavings accounts and community real estate financing. Since its first loan in 1995, Opportunity Fund has deployed $297 million into Bay Area communities.

“A small amount of money and good advice can make a huge difference,” Gwyneth said. “Providing matching funds is an incentive for people to save.”

Able Works’ CEO and Cofounder John Liotti passionately spoke about the trials and tribulations of serving youth and young adults, many of which are victims of abuse.

“Trauma affects decisions,” John said. “We have two main programs: one that teaches life and financial skills to high school students and another serving single mothers.”

D2D’s Director of Project Incubation Preeti Mehta visited Menlo Park from her small Boston office and was the only representative to participate throughout the entire two-day session.

“I am thinking about innovative ways to create access to products and services and am primarily focused on savings,” Preeti said. “We want to make things fun and simple, so people use them.”

“We learned a great deal from [the nonprofits] and realized we have so much more to learn,” Trish said.

Paycheck-to-paycheck to prompt financial literacy

Teams used a slew of D4D tools to help organize their assumptions and insights during the session. Using large posters, white boards and empathy maps the groups discovered that savings is subjective. By the end of day two, each team came up with questions, solutions and potential product ideas that could help low-income people start saving.

Some of the questions included: how do people living paycheck-to-paycheck avoid overdraft fees, credit card debt or fine print fees associated with prepaid cards and payday loans and how can Intuit teams help the working-class community become more financially literate?

Stoyan hopes to answer all of these questions by reaching a broader audience (he met with all of CEG in June) and submitting the ideas into the upcoming Incubation Week, which is sponsored by CTO.

“We’re hoping to recruit teams that want to work on them for a week to get prototypes in market,” Stoyan said. “Ultimately, the goal we are pursuing with this workshop, and others to follow, is to develop empathy across the entire organization for the financial challenges of the 80 million Americans who live paycheck-to-paycheck and to create a grand challenge to help them solve their problems.

“The energy from the event is still carrying me 30 feet above the surface."