Each of us, whatever our race and economic background, should be able to control our financial lives. Financial capability - the capacity, based on knowledge, skills and access to resources to manage financial resources effectively- is critical for communities to be able to do this.  All of us need to have financial capability but it's low- to no-wealth communities that face the direst consequences without it. While it’s important to build household financial capability to support people in getting by and ahead, we also need to address the root causes of financial inequities. If we focus on individual behaviors alone rather than the systemic forces that keep generations from getting ahead Many factors outside of our control contribute to whether people can build up their financial capability – including the tax code, employment systems and wage laws, and structural and institutional racism that has stymied wealth building for households of color – all of which influence the financial resources we have to manage. 

We know that the racial wealth divide is centuries in the making – and that has caused structural barriers for people, particularly BIPOC, accessing financial security and prosperity. Because of these barriers, low- to- moderate income households, despite broadly being strong money managers, face frequent economic shocks and struggle to get ahead and too often are unable to pay for small, unexpected emergencies and build savings over time. So, how do we start to strengthen financial capability for all families? By focusing on both the individual AND breaking down the systemic forces that keep communities in poverty. At Prosperity Now, we are advancing several policies and initiatives that would increase personal resources for low-wealth households, including strategies that boost income and ones that build wealth, all of which would create a more supportive context for building financial capability. Here are 4 ways we’re reimagining an economy where all communities are able to thrive and prosper in part because they are more easily able to manage their financial lives.  

1 - Increasing/Refining financial capability services like incentivized savings programs, credit building services, financial coaching, and others because they provide critical support to people working to manage their financial lives and achieve their goals. By boosting personal resources (commonly built through having routinely positive cash flow or through intergenerational wealth transfers) for currently low-wealth households, we can make these services even more effective. For example, traditional asset-building programs, such as matched savings to purchase a home, are much more effective when the participants have the stability provided by steady incomes that outpace expenses and can manage financial emergencies as they arise.  

2 - Advocating for policies that support working families like:   

• Increased income supports for families through the readoption of the Expanded Child Tax Credit. The Child Tax Credit was implemented through the American Rescue Plan in 2021 and provided $250-$300 monthly per child; despite its success, the expansion expired at the end of 2021. The credit stabilized the household finances for millions of families, particularly those of the lowest incomes. These additional personal resources allowed families to meet day-to-day needs, pay off debt they’d accumulated, and set aside savings for the future.  
• Expanding the Earned Income Tax Credit (EITC) to maximize incomes- the largest influx of income many families receive during the year. We are seeking to expand the credit to households who do not have dependent children and are currently left out of the EITC. Due in large part to the exclusion from EITC eligibility, working adults without dependent children represent the only demographic group that the federal tax system taxes into poverty. Doing so would greatly increase financial stability for lower-income households. 

3 - Conducting research to collect evidence that basic income supports overall well-being. In February, we released our report Supporting Families in East Los Angeles with Basic Income, which highlighted the impacts of providing $500 a month for five months to 72 undocumented or mixed-status East Los Angeles households who were left out of pandemic relief efforts. Our work found that this income boost brought stability, allowing recipients to pay down debt and make necessary investments in their small businesses.  This growth in financial resources opened new avenues for the households to meet current needs and plan for future goals.  

4 - Ensuring a brighter future for every kid by advancing strategies to build wealth for children through innovative solutions like Baby Bonds. In January, we released A Brighter Future With Baby Bonds, which calls on policymakers to invest in children in cities and states across the country to address racial economic inequality. Baby Bonds are designed to close the racial wealth divide by providing progressive seed deposits, where the lowest wealth households have the largest endowments; these funds are invested by the government and upon reaching adulthood, the children can use them toward wealth-building and economic security activities, such as purchasing a home, starting a business, or paying for postsecondary education. While these assets are not liquid, like they are in a basic income program, they appreciably improve the personal resources at one’s disposal, thus making achieving financial capability more attainable to low-wealth households, particularly those of color who have been denied intergenerational wealth building opportunities.    

We are continuing to partner and learn with financial capability leaders who are pioneering new strategies to address racial economic inequality, center communities and clients in the design of responsive services, and build solutions to address the pressing needs of low-wealth households. Bold changes that boost households’ financial resources will make these impactful financial capability programs, even more effective when people have a more stable starting point.