Remember those banners on Austin-Hands Across the Boulevard? It was nice-even noble-rhetoric, but how many Oak Parkers ever really do business east of Austin?
Park National Bank (formerly First Bank of Oak Park) has joined two faith-based organizations and the federal government (HUD) in an experiment at the corner of Lake and Pulaski in Chicago that combines good business sense, street smarts and a vision for community development.
The experiment is called the Community Savings Center.
“There is literally no other place like this in the entire United States,” said Andy Locke of Thrivent Financial for Lutherans, one of the faith-based organizations that helped create the center (Bethel New Life is the other).
At the heart of the Community Savings Center is the individual development account (IDA) or $mart $aver account as the center calls it, a savings account in which the institution matches $2 for every dollar deposited for three years.
Program participants must attend eight financial management classes and agree to use the money to start a business, buy their first home, pay for post-secondary education, make car and home repairs, buy a car or reduce their debt.
“For the approximately 20 percent of Americans with no bank account and few assets, life can be a daily gamble,” a Thrivent statement on the center’s Jan. 9 opening reads in part. “The loss of a job, an appliance breakdown or an unanticipated medical bill can plunge a family deeper into poverty.
“Part of the reason people in poor neighborhoods do not have bank accounts is that they have grown up in a culture which has not taught them how to use the products banks offer,” the statement says.
“Banks want to do business in low-income communities,” said Patrice Robinson, the financial education coordinator at the center, “but they offer products and services that you have to know how to use. No one in this community has knowledge like that, so you have to educate them.”
Hence, the eight-week teaching component built into the $mart $aver program.
“I think the biggest thing people have taken out of the class is the credit card issue,” Locke said. “Eighteen percent interest on your credit card debt when you’re making $25,000 a year can bury you. But then the light comes on in class: ‘If I’m every going to get anywhere, I have to get that debt down.'”
The classes teach the difference between good debt and bad debt.
“Taking out a mortgage is the fastest way out of debt,” Locke contended. “The classes point out that taking out a mortgage is a way to build equity” and therefore wealth.
There is also a strong spiritual component to the $mart $aver program. The first three sessions, according to Robinson, deal with stewardship, “keeping up with the Joneses,” and values.
In addition to the $mart $aver program, the Community Savings Center provides other products and services to meet the specific needs of this particular market, such as “flex loans” at reasonable rates to compete with the payday loan industry. Customers pay lower fees for cashing checks than those charged by currency exchanges. And they can get advice from trained financial counselors.
“You have to understand this kind of community and meet them where they’re at,” explained Robinson. “If you offer them standard products, it’s not going to happen.”
“We are offering center clients accessible and affordable financial products that provide an important alternative to payday lenders and check cashers,” Park National President Thomas Bolger said in a statement. “We see our involvement as an investment in the community, as we are helping to put our clients on the road to successful engagement with mainstream financial products and services.”
Ann Myles, a recent $mart $avers graduate, said the program works.
“I entered the class to save money so I could take my business up higher,” Myles said. “I needed money so I could advertise, get a computer and do other things.” Myles is starting a business to put last wills and testaments on DVD.
Calvin Hoarde, who has completed half the program, has different goals.
He is working on his bachelor’s degree at DeVry Institute and wants to buy a house. All he needs is financing.
Myles has told her friends about the program.
“If they want to continue their education, buy a home or start a business, this is something good to go into,” she said.
Hoarde is doing the same. “What we are learning is to break the cycle. I did not have a financial education in my household growing up. We, as a whole, haven’t practiced very good financial responsibility. We will teach what I’ve learned to my nephew. I advocate $mart $aver to just about everybody I run across.”
Myles added, “But you have to put your money into $mart $avers in order to get something back … and be for real and do what you gotta do. You gotta work it.”
National Park Bank’s branch location at Austin Boulevard and North Avenue.
