Monday, September 18, 2006

While payday loans may be gone from nursing homes in Missouri, they still exist for other individuals around the state.

If everyone follows the lead of Geri Hughes, however, these fiscal resouces may become obsolete. Eight years ago, The Kansas City Star reports, Hughes suddenly found herself a single mom with four kids, loads of debt and big dreams.

She wanted a nice house for her children in Kansas City and she wanted to send her oldest daughter, Jeannette, to college. There were many enticements for quick-fix, high-interest no fax needed payday loans. However, Hughes, who works for the U.S. Treasury Department, steered clear. She’d seen how such loans entrapped acquaintances in cycles of debt.

Instead, in 1998 she enrolled in a pilot program offered in Kansas City and 12 other cities. The program’s intent was to help low-income and low-wealth families save, build assets and enter the financial mainstream, where they could share in the American dream. It was called Individual Development Accounts.

The concept was to offer an alternative to quick cash loans, while encouraging and rewarding monthly savings of working-poor families who were trying to buy their first home, pay for post-secondary education or start a small business.

Hughes participated in the initial program administered in Kansas City through the nonprofit Heart of America Family Services, now The Family Conservancy. As long as she saved $30 a month, the program matched her savings 2-to-1.

“You had to keep saving in order to get the match. You couldn’t withdraw any money until you reached your maximum account,” Hughes said.

So, how did she do?

After successfully going through that first program, Hughes was able to finance her daughter’s freshman year in college. Learning from her mother’s success, Jeannette Hughes joined the program herself and saved enough to pay for her junior year in college. No payday cash advances were needed.

Emboldened, Geri Hughes took the program a second time and saved enough for a down payment on a home. Now her son is in college.

“I tried to tell my family and friends about it, and they didn’t believe it. ‘Nobody is going to give you money,’ they said. Now they see all the things I’ve done, and they wish they’d applied for it,” she said.“It’s a great teaching tool. You learn different ways that you can actually save when you think you can’t."

So has Hughes’ success been replicated? The answer is a big yes, said Julie Riddle, family asset-building program manager for The Family Conservancy. She said that since that first program, participants in Kansas City have collectively saved more than $1.2 million - all without considering the use of a faxless payday loan.

The success stems in part because the program motivates families, Riddle said. Medicaid and food-stamp programs can provide temporary help, but they can also discourage people from building assets, since greater assets could disqualify them.

IDAs give low-income participants access to the same asset-building tools most middle-class Americans take for granted, such home ownership, bank accounts and retirement plans. The program also teaches the importance of credit and maintaining a good credit rating.

Nationally, more than 500 IDA initiatives benefit as many as 50,000 people. Moreover, a bill pending in Congress called the Savings for Working Families Act could help as many as 980,000 people, who may now see high-interest payday loans and title loans as their only options.

This entry was posted on Monday, September 18th, 2006 at 1:09 pm and is filed under Missouri.