Essay Family Decision Making And Financial Literacy

1073 Words Jan 14th, 2016 null Page
This week’s readings on family decision-making and financial literacy offered insight into the struggles low-income households face each month to survive, much less invest or save. In particular, the volatile and unpredictable nature of working hours, predicted income, and unforeseen expenditures affect low-income individuals’ ability to draw on resources and grow assets over the course of a lifetime.

By necessity, low-income and asset poor individuals are unable to accumulate wealth to build assets and focus on long-term sustainability due to their focus on current financial instability. Most lack the access to and knowledge of appropriate financial tools and tend to rely on informal borrowing tools and social networks for assistance.

To illustrate, consider the following scenario: First, volatility and variability in hours worked changes expected wages by week, which makes meaningful budgeting impractical. Then, an unexpected expenditure such as a breakdown of a car requires spending all existing ‘savings’ in addition to perhaps taking an informal loan from a family member or covering the gap with a credit card or payday loan. In the rare case earnings exceed outstanding expenses, working a job that does not qualify for direct deposit or built in retirement or savings programs requires physically travelling to a bank to save a seemingly insignificant amount of money. Even more, the closet bank is outside the low-income neighborhood and requires a minimum balance…

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