What Does It Mean To Be Poor?

What do you think of when you think of being “poor”? In his article “Working Poor,” Alexander Eichler talks about what it means to be poor.  If being poor is defined as living at or below the poverty line, then 15% of Americans- or about 46 million people- are poor. But if being poor is defined as living off a decent income but hardly any savings, then it is  nearly half the country. These are people that do not live below the poverty line, but they don’t have enough money saved to weather an emergency.

Jennifer Brooks, director of state and local policy at the Corporation for Enterprise Development, said, “The resources that people have- they are using up those resources. They’re living off their savings. They’re at the end of their rope.”

The Corporation for Enterprise Development released a report this week regarding liquid asset poverty households. According to the report, 43% of American households are liquid- asset poor. This means that if one of these households experiences a sudden loss of income, it would fall below the poverty line within three months.

The amount of people living asset poor underscores the effects of a struggling economy. Even though the Great Recession officially ended over 2 years ago, unemployment remains high and wages have remained stagnant.  However, you can receive a monthly paycheck and still be liquid asset poor.

David Rothstein of the nonprofit Policy Matters Ohio says that many people don’t realize how close they can be to one interruption to income or one interruption to health benefits. “They’re one paycheck away from being in debt.” Many Americans are not prepared for financial emergencies.

CFED suggests that while more intensive financial literacy is important in addressing this problem, it is also important to look at asset limits in public benefit programs. Some states restrict services like food assistance to households with few or no assets. Critics say that these policies deny help to many people in need. In a state with restrictive asset tests, a middle class family that faced a job loss would have to liquidate all of their assets and savings in order to qualify for benefits.

CFED suggests other measures that could help alleviate liquid asset poverty, such as strengthening consumer protections against payday lenders and making greater assistance available to first time homebuyers.

New Century IDA is proud to be involved in asset building by offering financial education and down payment assistance to first time home buyers in Forsyth County. What ideas do you have for eliminating asset poverty in our area?