Improving financial literacy programs among underserved communities, particularly communities of color, has long been a focus for much of the financial services industry. Most view it as a critical component of the roadmap to driving economic mobility and financial access for those most in need. Unfortunately, there’s a significant barrier preventing these programs from flourishing in some underserved communities around the country — a lack of trust in the mainstream financial system.
It’s not difficult to understand why.
People from underserved communities, including people of color and low-income households, have often been excluded from mainstream banking opportunities, and lack access to traditional loans or existing credit cards, leaving them with limited options for building a solid financial foundation.
As a result, many are considered “credit invisible” — that is to say they don’t have a credit history or a credit score. Without affordable banking and credit options, people from underserved communities don’t have opportunities to build wealth in the same way as those in more affluent households.
With so many people from underserved communities starting the race to financial wellness at a significant disadvantage, it’s paramount for all of us across the financial services industry to reach them with core financial knowledge.
Establishing and building trust is critical
Part of the problem is that many of the financial literacy programs and materials being presented to underserved communities, just aren’t relevant. It’s not enough to deliver education materials and collateral, we need to show we understand the communities’ day-to-day struggles. We can’t approach financial literacy with a one-size-fits-all mindset. Sometimes we just need to recognize our messages and programs may not be relevant to the realities of some communities.
We build trust by making conscious efforts to develop solid relationships with the communities we are trying to serve. This means engaging with local leaders, churches, businesses and others within the community in meaningful conversations about their financial well-being. Technology is critical, but human relationships are irreplaceable and invaluable to earning trust.
Reaching entire communities
While our willingness to listen and tailor financial literacy programs to the challenges that many underserved communities experience, some may still be reluctant to engage with us. Instead of throwing in the towel, we must find new, innovative ways to reach the intended audiences.
According to a recent National Financial Educators Council survey, less than 23% of respondents turn to financial professionals for trusted financial guidance, while nearly 38% turn to parents, family, friends or coworkers.
It’s common knowledge that people tend to trust those with similar experiences. In order to build trust within underserved communities, perhaps we can begin by building relationships with the people that those communities do trust. In other words, teaching the teacher, and at the same time, learning from the teacher. We have to remember relationships are a two-way street.
For example, organizations such as the Society for Financial Education & Personal Development (SFEPD), engage college students, particularly those from Historically Black Colleges and Universities, with actionable financial knowledge, and empowering them to share with family, friends and other community members that may have not been exposed to the same learnings.
Overcoming the barriers to financial inclusion requires a multi-faceted approach within a community — there isn’t a single-point solution. We have a responsibility to uplift all communities, particularly those that are underserved. Focusing on building strong foundations for making sound decisions with money, developing budgeting techniques, understanding credit and debt, and investing wisely with knowledge will help equip individuals within the community with the necessary know-how they need in order to not only get by financially but to be empowered financially.
By Rod Griffin, Senior Director of Consumer Education and Advocacy at Experian and Ted Daniels, Founder & President of SFEPD