CEF Savings Program Provides Savings Opportunities for Homeless
The Community Empowerment Fund (CEF) in Chapel Hill, North Carolina began as a microloan program working with the local homeless population. Based on the idea that poor access to capital (even just $60 for work boots or $500 for a truck) could prevent people from accessing economic opportunities, CEF focuses on providing capital that could allow members to break out of cycles of homelessness and poverty. Volunteer students from the University of North Carolina at Chapel Hill are paired two-on-one with a "member" and act as both loan officers and "advocates," serving as friends, job coaches, housing searchers, much more. Members and advocates meet weekly to discuss goals, options, resources, and make loan payments.
It was at one of these member-advocate meetings that the CEF Savings Program was born. Tommy, a CEF member at the time, had received a cell phone microloan from CEF for a $120. After weeks of making $15 payments, he was almost ready to pay off the loan. On this day, however, Tommy came into his meeting with $320—almost three times the amount of his loan. The advocates were dumbfounded, but Tommy explained that he trusted them to hold his money so that he wouldn't spend it.
In this moment, we identified a real need in the homeless community: what people were really lacking wasn't necessarily just income, but possibly a safe accessible place to save their money as well. Especially for people like Tommy who are recovering from substance abuse, having a safe and "off-hands" account could really help facilitate savings and prevent relapse.
While traditional Individual Development Accounts (IDAs) work towards three main asset purchases – homeownership, education, and small business development – we recognized that savings and housing were in themselves assets to the homeless living in and transitioning out of shelters. While staying at shelters, expenses tend to be minimal. However, when it comes time for many residents to move out, they find that despite their best efforts, they still don't have enough money – for a rental deposit, furniture, utility deposits, and a financial cushion for emergencies. Though some may have enough funds to move into proper housing, many people have a hard time keeping up with their rent while dealing with volatile incomes and unexpected expenses, and many even return to homelessness.
Based on the unique need of our members, we structured the savings accounts to incentivize savings towards anything the CEF members see valuable, be it $2000 for an emergency fund, $150 towards a refurbished laptop, or $900 to move into new housing. CEF members define both the amount of the goal and the asset. Unlike a traditional IDA, the CEF match rate is only 10%. Although low compared to other match savings programs, CEF staff has found that this rate truly does incentivize saving, while still allowing the program to remain flexible and easy to administer.
While many CEF members have had negative banking experiences (having been shut off from mainstream banking due to poor credit or unmet minimum balance requirements), we help put a face to the institution holding member money, while bringing the convenience of a bank to our members. CEF can take deposits and set up accounts from anywhere—be it at the shelter, in the CEF office, during weekly meetings at a coffee shop, or after weekly CEF classes.
The savings accounts are held in a CEF custodian account "for benefit of" each member. There is a 48-hour waiting period for withdraws after the member makes a request to his/her advocate. Like an IDA, this helps prevent "impulse" withdrawals, giving people time to think whether or not it might be an unneeded expense. Unlike a traditional IDA, however, members are still allowed to withdraw without having to start from scratch to receive match funds. CEF believes that a traditional model just would not work for most of its members, who are living paycheck to paycheck.
Also different from most IDAs, CEF runs its financial classes in discussion-based groups, facilitating resource sharing, fostering confidence in what people do know, and providing learning tools to move forward. Beyond financial literacy, these "Opportunity Classes" seek to cultivate knowledge about all of the topics that are involved in reaching CEF members' goals—effective goal-setting, health and wealth connections, local resources, job readiness skills, and tools to find and stay in housing.
Through a network of strong relationships, assertive individualized support, flexible accounts and matches, holistic education, and self-selected goals, CEF continues to facilitate savings, promote asset-building, and create access to a mainstream financial world for a population normally deemed "too poor" to be served by most IDAs. By continuing to listen to and believe in our members that have believed so much in us, we hope that we can move our community closer to realizing their own self-defined goals and promoting financial stability.
About the author: Alex Biggers is a Savings Program Coordinator at the CEF.