Cities and towns across the country and across Colorado are witnessing the impacts a lack of financial well-being has on the entire community. Together, they’re taking action. They’re increasing access to safe and affordable banking, helping people avoid high-cost loans, and using free one-on-one financial coaching to help develop the skills and habits essential to building financial empowerment.

Local Success

Here in Colorado, the national nonprofit Cities for Financial Empowerment Fund (CFE Fund) partnered with the city of Denver to tailor these strategies to local needs. Denver is now held up as a national model. CFE Fund has helped residents decrease consumer debt by over $6.2 million, raise their credit scores by an average of 49 points, and increase savings by over $2.5 million. Denver partnered with local banks and credit unions to provide low-rate credit-building consumer and small business loans, resulting in a nearly zero percent default rate. CFE Fund has also helped 212 families buy homes, while every borrower at risk of foreclosure avoided it.  

Rural Experience

These strategies are not just a model for urban communities. The Rural Local Initiatives Support Corporation (LISC) served 230 new clients by opening seven new rural Financial Opportunity Centers (FOCs) across the country since last spring. Clients working on improving their credit scores have already seen an average increase of 50 points. “Economic mobility in rural areas diversifies and strengthens the nation’s economy as a whole and the impact we’re seeing is something to get excited about,” says Julia Malinowski of LISC.  

The Business Case

Financial empowerment makes business sense for banks and credit unions, too. A data pilot for the Bank On model of offering safe and affordable bank accounts showed Bank On accounts had a significant impact on bringing in new business to the participating banks. Seventy-two percent of all Bank On accounts were new clients. Data showed high demand and usage of the accounts by new customers, as well as high retention.  

Financial Coaching

Financial coaching is central to building financial empowerment. That’s because it goes beyond financial education and literacy classes to provide one-on-one goal-based skill development and learning. According to recent analysis by the Urban Institute, “a well-implemented coaching program with engaged clients can produce important improvements in certain financial outcomes, although it may not work equally well across all programs, clients, or outcomes.” Specifically, “financial coaching positively affected non-retirement savings balances, number of savings deposits, total debt balances, curing delinquent accounts (including those in collections), late payments, percent of trade lines on time, payday loans, balance in collections, credit score, having a budget, financial stress, satisfaction with financial situation, and confidence in ability to achieve financial goals.”  

Prosperity Now, a national leader on financial coaching has developed a comprehensive implementation guide to tailor coaching to community needs and available resources, including how to integrate it into existing urban and rural community services. Numerous organizations in Colorado are already providing some form of financial counseling or coaching, creating opportunities in communities around the state to build on existing efforts and knowledge. 

The success of this three-part model of safe and affordable banking products, low-cost credit building loans, and free one-on-one financial coaching has generated strong interest in exploring how Colorado can expand these tools across the state. While improving access to safe and affordable banking and credit and providing free financial coaching will not solve rising income inequality or rising costs of living, it can seriously impact Coloradans’ ability to weather life’s storms, avoid financial devastation, and build financial well-being.