Securing their futures
Anti-predatory-lending program teaches financial street smarts to East Palo Alto residents
When Maria De la Luz Hernandez's 11-year-old son begs for items he sees on the Internet, she — like most parents — wants to please him. And she also wants her only child to have a good college education. But until she took the Secure Future$ free financial-education course, she had little hope of having enough money for either, she said.
Now Hernandez saves $50 every 15 days, and although her husband is on disability and is not working, she can still stretch the family's money and have some left over, she said.
Hernandez is one of 53 residents from East Palo Alto and Menlo Park's Belle Haven neighborhood who have taken the free financial education and asset-building program. The Silicon Valley Community Foundation of Mountain View is funding the classes as part of a five-year asset-building initiative to help alleviate poverty.
The program was launched in East Palo Alto in February by the nonprofit organizations Community Legal Services in East Palo Alto, Renaissance Mid-Peninsula and Nuestra Casa as a response to "payday" lending, which is prevalent in the city. Payday lending and other fringe financial services charge exorbitant fees for small loans, a practice that often keeps residents in debt, said Keith Ogden, staff attorney for Community Legal Services' anti-predatory lending and home-mortgage foreclosure program.
A four-week course in finance management, quarterly workshops and financial counseling help residents learn to accumulate assets by opening bank accounts, developing sound money management plans, increasing savings and repairing or building credit.
Only a few students have dropped out of the program, in part because participants have an added incentive to follow through, Ogden, said. As they complete a set of goals, such as opening a checking account or creating daily and monthly budgets, participants receive colored tickets to enter a series of raffles. The prizes range from $25 to $500 and are directly deposited into their new savings accounts.
Hernandez won $25, she said. But her greatest satisfaction is being in control of her family's money and watching it grow.
"I didn't have that habit before," she said.
Hernandez said that without a credit card she could not pay bills by phone. Now she pays her bills on time through direct deposit and withdrawal, and she saves on fees. One time, when she owed $1, she had to purchase a money order for $1.75 to make the payment, she recalled.
Such small sums add up, class instructor Georgina Peraza said.
"You need to write down everything you spend every day. If you buy a popcorn, if you buy an ice cream, if you buy a coffee, you need to write it down.
"How many (purchases) were 'needed'? How many were 'I want tos'? How many could be reduced or eliminated? Get up earlier to make coffee instead of buying it, and pack lunches for the kids to take to school instead of paying for them to buy lunch at McDonalds," she said.
Hernandez said one reason she took the class was because she didn't have a credit or debit card for online purchases. But now she is learning to save for her son's education, and she is more mindful to not buy him everything he wants, she said.
The saving habit is also rubbing off on her husband, who is also taking the classes.
"Before, whatever the boy wanted, he would buy. I would say, 'Don't buy too many toys!' Now he is conscious of what he is spending, and we know we need to start saving," she said.
Peraza said such generosity is common among low-income immigrants, who want to give their children everything they did not have. Single parents also often use gifts to keep a child feeling loved.
"When we are single, we have dollar symbols in our faces. You want to keep them happy, so the child doesn't want to go live with the other parent," she said.
"It's so wrong. The children need to love you and accept what has happened. In their lives, they will hear many 'nos.' They need to be used to hearing that," she said.
Peraza tells her students to clean and organize everything in their homes. Organized closets and cupboards help eliminate double purchases, which are made when one can't find something or has forgotten it even exists, she said. Refrigerator leftovers in clear containers can be seen and eaten — not stuck in the back turning into science experiments, she said. All of these measures save time and money, she said.
The students make collages with pictures of their goals: a trip to Reno or a picture of a car or a home. They post their collages on the refrigerator as a reminder of saving for the things they really need or want, she said.
Hernandez said one lasting lesson is the importance of saving for a death or hospital emergency.
"When we talk about the need of saving for college or for a funeral, those are eye openers," Peraza said.
"Do you want to be buried in this country or in your home country? Do you want your relatives to cry because you are gone or because of the debt you have given them?
"The financial crisis we are having now is really teaching us a great lesson. We cannot rely on this country as a great power that will support us. It has its ups and downs, and we are dragged with it," she said.
Ogden said four groups have gone through the program since its inception, and there is hope to graduate a total of 100 people. So far, most have been Latino. But organizers recently placed greater emphasis on reaching English speakers through the Mouton Center and churches and food banks.
Most participants have had some experience with banking, but organizers want to reach the unbanked — people who have never had a banking experience, he said.
Oscar Dominguez, who until recently directed the program, said that Renaissance also runs a business program for emerging entrepreneurs, but there are very high attrition rates of business classes — of 30 to 50 percent. But Dominguez said he believes entrepreneurship, especially among people who have given up looking for jobs, is key to helping people rise above poverty. If there were an incentive, such as the raffle, more people might stick with the program, he said.
Peraza's eyes grew wide as she talked about the response to a recent April raffle, when the students came for the savings-account prizes. Just nine prizes were awarded. She swept her arm in a wide arc across the room.
"You should have seen it. This place was packed," she said.
Staff Writer Sue Dremann can be emailed at firstname.lastname@example.org.