Beyond Financial Literacy Is Financial Capability

By Sabrina Terry, Project Manager, Wealth Building Initiative

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The path to financial stability requires more than just financial literacy. Most Latino families understand basic banking principles, but struggle to follow them because of financial strain. Latino families suffered tremendously in the aftermath of the recession, losing 66 percent of their wealth. They need practical financial tools to stabilize their households and communities. Ongoing challenges exacerbate Latinos’ ability to recover, including homes that remain underwater, unemployment, underemployment, lack of access to credit, or having no credit profile, as well as immigrant-specific challenges such as language, proof of income, legal status, and identification barriers.

Like many of our partners in community development, NCLR has expanded its model beyond basic financial education. Instead, we celebrate Financial Capability Month. For us, financial capability is combining financial education and one-on-one coaching with access to safe and affordable products. We also recognize that Latinos need a fair financial marketplace, so our model also includes policy advocacy for better products, services, and financial regulations.

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This Financial Capability Month, Naturalization Leads to a Secure Financial Future

In a nation of immigrants, becoming a citizen is a major milestone. During the naturalization process, aspiring Americans integrate more deeply into the social, cultural, and economic fabric of the United States while following a time-honored tradition of generations of immigrants who naturalized before them.

As we wrap up Financial Capability Month, it’s important to remember the many financial benefits—for both people and for the U.S. economy—that come when people change their immigration status and become more deeply tied to the nation they’ve decided to make home.

There are currently more than nine million legal permanent residents (LPRs)—noncitizen immigrants who are eligible for U.S. citizenship but have not yet applied—in the United States. Research has shown that language barriers and the high cost of the application process often dissuade qualifying immigrants from naturalizing. With a steep cost of $680—not including legal fees and the cost of English classes—many immigrants are effectively priced out of citizenship. In a recent survey of Latino LPRs, an overwhelming 93% said that they would become citizens if they could and NCLR survey research shows similar results.

Last year, NCLR developed a pilot program to help immigrants overcome this financial barrier. Many nonprofits and credit unions have successful citizenship program models that offer legalization assistance, financial coaching, or loan products, but the hallmark of NCLR’s innovative approach is a model that combines all three. NCLR worked with five Affiliates in Washington, DC (Central American Resource Center); Minneapolis, MN (CLUES Comunidades Latinas Unidas en Servicio); Chicago, IL (The Resurrection Project); Miami, FL (Hispanic Unity); and Stockton, CA (El Concilio) to provide LPRs with both legalization services and financial coaching as they navigated the lengthy and complicated naturalization process. Self-Help Federal Credit Union, in partnership with the Affiliates, offered affordable $680 loans to help applicants with the fees.

The pilot program is in its final stages with a report on its outcomes expected in early summer. Anecdotal evidence during the pilot points to the positive impact that financial coaching has had on new citizens’ ability to better manage their household finances, build credit, and save. Research by NCLR Affiliate Mission Asset Fund shows individualized financial coaching with a loan product is an effective combination to help immigrants build a strong financial identity. Because the NCLR Affiliates offer a one-stop shop for citizenship application assistance, financial capability, and a loan product, clients are less likely to become stuck on a step of the process or lose interest because they have to visit multiple locations for services.

Though President Obama’s landmark executive orders on immigration are currently winding their way through the courts, NCLR is prepared to launch a similar program for Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) and expanded Deferred Action for Childhood Arrivals (DACA) if administrative relief proceeds. In this program, eligible immigrants will receive help from various nonprofits to obtain work authorization while also building a strong financial foundation with the help of financial coaches. Becoming a citizen is associated with a significant boost in income, and work authorization for DACA and DAPA residents would also significantly improve eligible recipients’ financial lives and their contributions to the U.S. economy. Pilot programs in the field, including the NCLR model, offer a path for immigrants to build a strong financial identity, particularly a credit history, which will allow them to succeed.