How Can We Cure What Ails American Family Finances?

There's nothing simple about being a consumer of financial services these days. We're bombarded daily by tempting credit offers while living in a reality where a single unpaid bill can torpedo one's credit score. Bank closings and mergers have left many lower-income neighborhoods without a mainstream financial institution, and high-cost predatory lenders have stepped in to fill the gap. In the U.S. today there are 20,000 storefront lenders. That's about 6,000 more than the number of McDonald's restaurants.

All of this is happening during a time when skyrocketing student loan debt and the demise of employer-based retirement plans have made people even more dependent on this complex financial system. No wonder 57% of Americans are considered "financially unhealthy" and one in five people making more than $75,000 say they could not come up with $2,000 in an emergency.

Navigating this financial minefield is hard enough for those of us with a good paycheck and savings in the bank. But for those further down the economic ladder, it is nearly impossible.

The perilous state of American family finances cannot be solved by a few new policies alone. Instead, the situation demands action from all the players in the system, including the business community, education leaders, non-profits and government agencies.

With that in mind, the country's leading experts on financial well-being from a range of sectors have come together to create a roadmap for change. The result is What It's Worth: Strengthening the Financial Future of Families, Communities and the Nation, a book produced by my organization (CFED) and the San Francisco Federal Reserve. The 40-plus essays in the book, including a forward by Janet Yellen, showcase a host of remarkable innovations that are transforming financial lives in communities across the country. And they also raise a challenge: for these programs to have significant impact on our financial lives, they need to be replicated on a national scale.

Many of the most successful approaches help improve "financial capability" by integrating services such as financial coaching into existing programs that already target vulnerable populations. For instance, Skyline College's on-campus SparkPoint Center provides services such as free tax preparation and financial coaching to the California community college's low-income students. The services help keep students in school and on a path toward graduation. In 2013-14, 87% of students who used one of the center's services remained enrolled during that academic year compared with just under 55% college- wide.

Innovative approaches at companies like Staples Inc. demonstrate how businesses can help workers better manage their financial lives. The company uses video games to educate employees about the need to save and to sign up for the company's 401(k). And it offers the Treasury Department's myRA account for part-time workers and those too young to be eligible for the 401(k).

Louisville, Kentucky, is often hailed as a model for municipalities looking to embed financial capability programs into their social services. It offers programs ranging from Bank On Louisville, which helps unbanked residents access affordable financial products, to the "Credit as an Asset" financial education curriculum, which is designed to help people understand how to monitor and improve their credit scores.

Providing one-on-one financial coaching, as opposed to a quick class or workshop that is easily forgotten, is a particularly effective tool that can be integrated into everything from job training to re-entry programs. When Destiny Riviera saw a coach at The Financial Clinic in New York City, she wanted to pay down her $16,500 in debt including credit cards and student loans and eventually buy a car to make her work commute easier. Destiny's coach helped her set a realistic budget, identify opportunities to save and establish a realistic repayment plan for her student loan. By the end of her first year of coaching, Destiny already had paid off a quarter of her debt, increased her credit score by 30 points and saved $3,000, all while sticking to her budget.

When financial coaching is combined with safe, affordable and high-quality financial products and services, the results can be powerful. For instance, opt-out retirement plans, in which an employee must actively say no to an automatic paycheck deduction, are a simple but critical way to ensure all employees start saving for the future. And products such as the FDIC's Model Safe Accounts help bring underserved consumers into the financial mainstream with safeguards such as the elimination of overdrafts.

There is no shortage of innovative and effective approaches to help people achieve financial well-being. As a nation, we must make investing in the delivery of these products and services as much a priority in the 21st century as we did more than a century ago when we created our public education system. Only then can we have a country educated in all the subjects necessary to achieve economic security and opportunity.