Most financial literacy programs are geared toward steady paycheck earners with long-term savings goals. But how can programs assist households that are struggling with volatile incomes and unpredictable expenses?
Recently Mediaplanet included a feature on the findings of the US Financial Diaries project and how they can relate to more effective financial literacy approaches:
“In the U.S. Financial Diaries (USFD) study, poor and middle-income working households typically had three months a year when their incomes dipped at least 25 percent below their average and three months when their incomes spiked at least 25 percent above their average. Income dips often coincide with spending shocks...What do you do when you’re low on cash and the car breaks down? How do you deal with a costly health emergency? Should you lend your brother-in-law money when he’s short on his rent, or borrow from him when you’re short on yours?
These are the types of financial challenges that many working households today need help addressing. They need help holding onto income when they have extra and prudent ways to cobble together resources when they get stuck.
Technology can make a difference. Simple text message reminders like ‘pay your bill today’ can help people stick to a payment plan. New mobile apps can even help low-income workers turn impulse buys into ‘impulse saves.’”
You can read more about income volatility and its effect on households in this issue brief. The full Mediaplanet article is available here.