Poverty and Banking
I’ve always wanted to teach a class with a spreadsheet analysis of several income groups. One would be a family of four at the poverty level, a little more than $20,000 a year and then two more at middle and upper class wage scales. I’d have the students calculate a budget. Then I would throw a few curve balls at them to see how they adapt – nothing spectacular, a flat tire, a child who wants $179 to go to band camp, etc. My students would see very quickly how awful it is to live on the line of financial disaster every day, to risk losing home and automobile constantly. They might see how difficult it is to live even while both parents are working. Of course, a good number of them are in that situation now. But for some, it would still be an important lesson.
It’s a small dream of mine.
James Pilant
8 surprising ways poverty is absurdly expensive – Salon.com
If you are poor you either don’t have a bank account (8 percent of American households) or have one that costs so much your money drains away. 28.3% of Americans conduct at least some of their financial transactions “outside of the mainstream banking system,” meaning they have to rely on expensive alternatives like non-bank money orders, check-cashing services, prepaid debit cards and payday loans.
For the poor, even being lucky enough to have a bank account means high fees. You don’t have enough to meet the minimum balance requirements so you pay a monthly fee that eats away at any money you have. You will pay a fee averaging $6 to cash your paycheck. You will be hit by terrible fees if the money runs out before the month does. Overdraft fees are incredible. A Pew graphic illustrates how the median overdraft for a $36 transaction racks up a median $35 in fees. “If an overdraft was treated like a short-term loan with a repayment period of seven days, then the annual percentage rate for a typical incidence would be over 5,000 percent.”
If you are not able to get a bank account (or don’t want to risk paying 5000% for writing a check), things are even worse. You turn to payday lenders. Payday loans cost an average of more than 138 percent in interest and fees. According to Think Progress,
“Most take out nine repeat loans per year with an interest rate as high as 400 percent. Forty-four percent of borrowers ultimately default, even after paying back their loans several times over, and thus are pushed ever closer to poverty. Critics have called the practice ‘legalized loan sharking’ and describe the industry as ‘bottom feeders.’ In recent years, major banks have also joined in the practice.”
via 8 surprising ways poverty is absurdly expensive – Salon.com.
From around the web.
From the web site, Jane Finch Action Against Poverty
http://jfaap.wordpress.com/2014/01/28/we-need-a-minimum-wage-of-14-now/
Residents from the Jane and Finch community and their allies have been calling for a $14 minimum wage for over a year.
Thousands of residents in our community support the $14 minimum wage demand because workers, particularly low income workers in our community and across the province, need meaningful raise now in order to meet their most basic needs!
The rumour that the provincial government might increase the minimum wage to only $11/hour does not help. It just continues to legislate a poverty wage.
Pilant's Business Ethics Blog 
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