The Case for a Place-Based Approach to Financial Health

Tuesday, June 16, 2020

By Necati Celik
Associate, Financial Health Network

Place is security, space is freedom: we are attached to the one and long for the other. 

Yi Fu Tuan, 2001: 3

There’s no place like home. Due to the pandemic, home has now become both the workplace and the playground for many of us. But what is home? It is a place of security where we live and hopefully thrive. A home is deeply embedded in a community. More secure neighborhoods mean more secure homes, both from a physical and financial standpoint. Therefore, place is at the center of physical, mental, and financial health. 

It shouldn’t have taken a global health crisis to remind us about the strong link between place and health in all forms. The coronavirus is indifferent to our socioeconomic status, yet the data suggests that communities of color face bigger economic and health challenges from the pandemic. Existing financial health disparities across communities not only make the problem bigger, but also make the recovery harder

The Financial Health Network recently published a brief analysis of the link between place and financial health, examining 2019 data from the U.S. Financial Health Pulse, as well as other public data at the county or zip code level. The findings suggest that individuals who are not Financially Healthy are more likely to live in a neighborhood with poor access to crucial resources that heighten well-being: affordable housing, quality healthcare, healthy food, quality education, employment opportunities, clean air and water, safety, childcare, and recreation. We also found that financial health strongly correlates to a person’s ability to move to a new home, whether it is in the same area or a different community.

Why Place Matters

Healthcare, employment, and food are all place-based  – we need them in close proximity to where we live. While people can seek a different neighborhood with better social and economic opportunities if they are not satisfied with their current place or neighborhood, this is often easier said than done. Apart from the emotional and physical burden of moving, an unstable financial situation is often a barrier to entry for desirable neighborhoods. If moving is our only option for accessing resources that are crucial for our physical, mental, and financial health – and if financial challenges inhibit our ability to relocate – then moving must not be our only path to financial health.

This is why efforts to improve financial health at an individual level are only half the solution. The current context has shown us that we need a systematic approach to solve macro problems brought on by the global pandemic. As an example, essential workers are at higher risk for COVID-19 because they can not afford to shelter in place. Most of these workers are employed in low-income occupations, which makes it harder to own a personal vehicle and leaves public transit as the only option. In order to create sustainable financial and physical health outcomes, offering these workers no down payment, zero interest auto loans to help them avoid public transport will not get us very far. Policies that will bridge the physical gap between where they live and work will certainly drive longer-lasting results, but require more proactive thinking. 

Understanding Place to Improve Financial Health

Neighborhood-level solutions to improve financial health must address both the financial and socio-economic challenges in a neighborhood. Improving access to quality healthcare, childcare, education, and food is associated with better financial health. The inverse is also true: Improving a neighborhood’s socioeconomic condition requires improving the financial health of its residents. Take alternative financial services, for instance. Financially underserved consumers spent nearly $200 billion on these services in 2018. Controlling for the socioeconomic factors in the surrounding area, there is evidence that the presence of “fringe banks” offering these alternative services is related to higher crime levels in a block. Can we reduce crime rates by improving access to high-quality financial services?

When we think about the financial health of an individual within the context of their neighborhood, it becomes clear that different communities will each require their own set of unique solutions. For instance, our recent work on financial health in Hawaii revealed that the financial challenges Hawaiians face and their coping mechanisms are unique to their cultural, physical, social, and economic circumstances. Measurement is key to understanding the unique circumstances of different neighborhoods and communities.The good news is that this effort can be as simple as interviewing households, a project the Financial Health Network will undertake in 2020 in the Frayser neighborhood in Memphis, Tennessee, and the North End neighborhood in Springfield, Massachusetts, as part of MassMutual’s Live Mutual Project

The recent COVID-19 outbreak did not create the challenges many neighborhoods face, but it has highlighted them. It is time to better understand and address these challenges. These efforts can make our recovery a whole lot faster and make us more resilient when another global crisis knocks on our doors in the future.

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