Last month CFI invited all of Accion’s staff, both inside and outside the U.S., to complete a questionnaire on their own financial health. Many of you have seen and even taken this survey (see blog post here). The survey is broadly based on the U.S. financial health framework developed by the Center for Financial Services Innovation (CFSI), which we believe is a better fit for Accion employees than the global financial health framework we developed with CFSI for base-of-the-pyramid markets. In this post we report on what we found when “Accionistas” took the survey.
It turns out that Accionistas are a pretty financially healthy bunch. Three quarters of the 122 people who took the survey scored in the good or excellent range. Given that Accion employees have steady employment with fringe benefits (pension savings plan, health insurance), this is not terribly surprising. As Jonathan Morduch and Rachel Schneider show in The Financial Diaries, income volatility is one of the biggest causes of financial stress among American families. Thankfully, Accion employees, like most employees of international development non-profits, can count on the same paycheck week after week, and this makes the task of staying financially healthy much easier. Health insurance is also an essential source of financial protection, as is car insurance.
Still, it’s good news that Accionistas are financially healthy, especially since they make their living by investing in, designing, or advising on financial services for vulnerable populations. We were happy to find that for the most part, Accionistas are not spendthrifts who make extravagant purchases, gamble their salaries away, over-borrow or fail to pay their bills on time. They pay attention to their credit scores and strive to improve them. They appear to be sober citizens (except perhaps when they go out on the dance floor) who make prudent financial decisions. The combination of steady salary, important financial tools, and personal financial capabilities all come together to make for a positive result.
But there is room for improvement.
For example, planning ahead is not a strength, with over half of the respondents saying their planning horizon is less than six months, and many of those saying they do not plan at all. In analyzing the results, we saw a strong correlation between overall financial health and longer planning horizons, so there may be something important that happens when people carefully set longer term sights. Among those who plan, many use their own spreadsheets – tapping into their Excel expertise – but many others use online financial planning tools, especially Mint.
Emergency savings is also a weaker area. While Accion, like many other American employers, provides a pension savings plan, an automatic way for people to contribute to it, and some level of match, there are no particular support mechanisms for short to medium-term savings. Just over one-third of the survey respondents said their emergency savings would carry them for less than three months (a suggested benchmark).
And of course, debt is an issue for some, with 41 percent of respondents saying they have too much of it, and half of those saying they had far too much. Some few in the last category reported very high proportions of income going to debt service.
The nature of the debt load shifts across the life cycle. Among Accion’s 20-somethings, student loans are by far the dominant form of debt, with a more diverse borrowing portfolio for those in their thirties and beyond – mortgages, vehicle loans, and various forms of consumer debt. More importantly, many of those with student loans said their debt is difficult to manage, while relatively few mortgage-holders said the same. The National Association of Realtors argues that high student debt is causing younger people to delay home ownership, and our results are very consistent with that possibility. Several of the younger Accionistas with whom we discussed the results confirmed that this is a big and emotional issue for them. It’s a uniquely American challenge. Very few non-U.S. employees reported holding student debt.
As an employer, Accion will be examining these survey results and considering ways to assist its employees to become financially healthier. Like many employers that use payroll services, Accion provides access to a wide range of information resources, so every Accionista has the opportunity to be informed about available financial services and how to make good financial decisions. Most of us take these resources for granted, and they are probably under-utilized.
For employees with steady salaries, achieving financial health is a matter of applying common sense: live within your means, save regularly, borrow prudently, and check your insurance coverage every so often. Also, count your blessings, because for at least half the world’s people without a steady paycheck, achieving financial health is a much more difficult task and requires creative use of financial tools. Accionistas need to keep this in mind as they seek to develop financial services with the power to assist.
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