Special to the Philanthropy Journal
By Chuck Jones
In 2014, a long overdue alarm bell went off in the Charlotte community. That year, a study published by the National Bureau of Economic Research ranked our city last among the country’s 50 largest metro areas for economic mobility. The bottom line, according to the study’s researchers: The vast majority of those who are born poor in Charlotte will remain poor.
Enter Common Wealth Charlotte, a nonprofit organization that had been formed prior to the study’s release. Economic mobility is a complex, multifaceted issue, and Common Wealth Charlotte focuses on an important piece, providing financial literacy education to Charlotte’s roughly 150,000 low-income wage earners who work full time yet take home only $1,500 per month, or 30-35% of the area median income.
I joined Common Wealth Charlotte in 2017, and a key component of our success has been understanding the psychological and emotional trauma experienced by the working poor and incorporating that into our educational approach, which we call trauma-informed financial education (TIFE). Research has now shown that the mental burden of being poor has a material effect on one’s cognitive abilities and makes it harder to execute fundamental life skills. Simply put, the decisions people make as a result of poverty may not always be the best, but trauma is usually the driver of those decisions.
Unlike traditional workshops or seminars, we encourage multiple meetings and touchpoints between our financial counselors and clients in order to impact behavior over time. We also try to bring compassion, respect and even humor to each client engagement. Trauma doesn’t have to be a lifelong inhibitor, and positive reinforcement can actually replace trauma, allowing the brain to begin healing itself.
Many of our clients are referred to us by other local nonprofits and workforce development agencies, and we’ve found that by collaborating closely with the case managers who make those referrals, we see better results over time.
Another key to our success is providing mainstream financial products in order for our financial education to be effective. It’s challenging for a low-income wage earner to break free on his or her own from high-fee services such as check cashing or prepaid debit cards. Instead, we pair our financial education with checking and savings accounts, helping our clients to open accounts with our partner banks and credit unions.
We also provide “Opportunity Loans” to our clients that can be used for financial emergencies, to pay off predatory loans or to address items such as evictions or auto repossessions, which can do significant long-term damage to credit scores. The loans are up to $750 in size with a maximum term of six or 12 months, and thanks to a donor-funded collateral pool, they carry a low 1.5 to 3% annual percentage rate (APR). By comparison, predatory lenders charge rates 300% APR or higher and structure their loans with high upfront fees.
Our loan repayment rate is now 90% for a population that would otherwise be ineligible for loans, and we’re helping our clients take steps toward financial independence while recycling our donor dollars. It’s a model we’re proud of as we look to maximize the impact of our funding and reach more clients who need us in Charlotte.
Although our organization is relatively young, our work has impacted thousands of low-income wage earners. To date, 10,400 people have gone through our empowerment workshops, and we have helped 2,200 previously unbanked people obtain checking and savings accounts. We have provided 4,400 hours of advanced financial counseling and have made $240,000 in loans to Charlotte residents with average credit scores below 500. We have also forged partnerships with 51 local nonprofits and workforce development agencies who have helped us reach those who need our services most.
We’re on course to serve 4,200 clients this fiscal year, and we’re humbled and inspired by their success stories every day. We believe that establishing pathways to financial stability and empowerment is critical to our community’s efforts to address its economic mobility challenges.
Chuck Jones was named Executive Director of Common Wealth Charlotte in 2018. A 31-year resident of Charlotte, Jones joined the organization in 2017 and previously served as its director of financial services.