Mandate eNewsletter, 2008 - Issue No. 1

A Penny Saved is a Penny Matched
by Stephan Fairfield

Veralisa was struggling to get off welfare and support herself and her two children by making jewelry, but the harsh chemicals involved were taking a toll. Her income for the year totaled less than $6,000, and then she learned she had cancer. At this low point the Texas Workforce Commission told her about a faith-based organization called Covenant Community Capital that helps low-income working families escape the cycle of poverty by building personal finance skills and acquiring assets that grow in value over time.

Veralisa enrolled in Covenant’s Smart Savers Individual Development Account (IDA) Program, which rewards the monthly savings of working-poor families by providing a 2-to-1 savings match toward buying a first home, paying for post-secondary education, or capitalizing a small business. She earned the match by saving her own hard-earned dollars and taking other steps to prepare for the future, such as attending personal finance education and homebuyer preparation classes. The classes helped her acquire or polish the financial skills essential for long-term success, skills such as long-range planning, household budgeting, credit repair, and savvy consumer habits.

Veralisa graduated from the program 15 months later, buying her first home for $52,000 using her IDA savings plus Covenant Community Capital’s matching funds, together with a second match from the Federal Home Loan Bank and a mortgage from World Savings. Possessing a renewed sense of personal effectiveness, Veralisa went on to increase her income while also enrolling at the University of Houston. Three years later her cancer is in remission, and she has paid off her mortgage.

By creating tools to help low-income families to save money and build wealth, IDAs are very consistent with Asset-Based Community Development. Rather than focusing on what low-income people do not have, IDAs build upon people’s hard-work, discipline, and financial assets in order to help them acquire even more behavioral and financial assets so that they can be self-sufficient. This leads to inter-generational economic stability in families, which in turn strengthens the entire communities in which these families reside.

In the last five years over 200 families earning less than $40,000 have graduated from Covenant Community Capital’s IDA program, 55% of whom earn less than $20,000, and 23% of who earn less than $10,000. 76% of these graduates were female-heads of households. 74% purchased a first home, 20% attended post-secondary education, and 6% capitalized a small business. 59% were African-American, 29% Latino, 7% Caucasian, and 5% Asian/Pacific Islander. Another 600 families are currently enrolled in the program and saving toward their asset goal.

Nearly 40% of white children and 73% of black children in the U.S. grow up in households with zero or negative assets. IDAs have emerged as one of the most promising tools to help low-income American families save money, build wealth, achieve economic independence and household stability, and decrease the risk of inter-generational poverty transmission.

Covenant Community Capital is now working with the Chalmers Center to develop opportunities for churches to offer IDAs to low-income members of their congregations and communities. By using biblically-based financial stewardship curricula and relational mentoring across time, IDA programs can be a powerful means for your church to minister—in both word and deed—to the spiritual and economic needs of low-income families. If you are interested in exploring the prospect of providing asset-building services through your local church, a great first step would be for you to take the Chalmers Center’s distance learning course “Principles and Practices of U.S. Economic Development Ministry.”

Stephan Fairfield is the Executive Director of Covenant Community Capital Corporation, which provides financial products and development services to low-income residents of Houston. He was previously the founding director of the Fifth Ward Community Redevelopment Corp., Houston’s leading community development corporation. During his 12 years at Fifth Ward, the organization built more than 700 housing units and several small retail centers, created nearly 600 jobs, successfully advocated for 500 blocks of street paving, 13 miles of sidewalk, and set one of the city’s poorest neighborhoods on the path to stability. Steve is a Loeb Fellow at Harvard University and a frequent speaker at both regional and national conferences.

For more information about the Chalmers Center, visit us at www.chalmers.org.

4/15/08