For newcomers adjusting to life in a foreign country, financial insecurity often emerges as one of the most pressing and difficult challenges to overcome. To support successful integration of newcomers and empower them to build financial stability, service providers must equip clients with the necessary knowledge and tools to navigate the financial system here in the U.S. This blog post will explore three areas critical to achieving this goal: financial literacy education, opening bank accounts, and building credit. By addressing these key areas, service providers can play a pivotal role in improving newcomers’ financial health and well-being.
Understanding the Challenges
Newcomers often bring with them a robust understanding of their home country’s financial system and the ability to manage substantial assets. However, navigating the complex U.S. financial system can pose significant challenges, even for native-born Americans. Language barriers can make it even more difficult for newcomers to comprehend financial documents or communicate effectively with financial institutions. Additionally, the loss of income and stability—resulting from having to flee their homes with limited resources and the disruption of regular work and education—contributes to an overall portrait of financial insecurity. Service providers can address these challenges by creating financial literacy education and resources tailored to newcomer clients’ needs and taking into account their unique circumstances.
1. Financial Literacy Education
Financial literacy education teaches individuals about personal finance, including money management, budgeting, saving, and investing. A well-designed program can help newcomers understand the financial landscape in their new country and equip them with the knowledge and skills needed to manage their finances effectively.
Here are some tips for service providers on creating a financial literacy program for newcomers:
- Use Relevant Resources: The Consumer Financial Protection Bureau (CFPB) has a wide range of resources available for financial education programs. These resources include financial literacy curricula, fact sheets, worksheets, and interactive tools that can help newcomers understand basic financial concepts, such as managing a budget, saving for emergencies, and building credit. You can access these resources at CFPB’s Educator Tools webpage.
- Contextualize Education: Adults learn best when the information they are being presented is relevant and timely to their lives. Get to know clients’ financial needs, and focus on the topics that most impact their lives at that moment. Bring in real-world examples, and have participants practice the skills they’re learning through activities and approaches they can implement in their own lives. For more, see Switchboard’s self-paced e-learning course Adult Education Principles for Refugee Job Readiness.
- Ensure Accessibility: Think about your client base and offer education opportunities in a medium that fits their abilities. Some considerations include language, literacy level, digital literacy, scheduling, and transportation.
- Provide Levels of Learning: During initial resettlement, new arrivals are learning a lot of new information, which can be overwhelming. You can introduce certain financial topics that are most important for a client during initial resettlement, such as opening a bank account. Then build on that knowledge through additional education opportunities integrated into continued services, such as employment and education programming.
- Partner with Local Organizations: Consider partnering with financial institutions that have experience working with underserved communities, such as credit unions, community development financial institutions (CDFIs), or microfinance organizations.
- Empower Clients to Articulate Personal Financial Goals: Avoid imposing specific financial goals on newcomers. Instead, help clients assess their own financial needs and develop a plan that is realistic, achievable, and aligned with their overall vision for their financial future.
- Value Clients’ Privacy: Consider offering private sessions or workshops where newcomers can discuss their financial concerns in a safe and confidential environment. This can help build trust and create a more comfortable space for clients to discuss personal financial matters.
Additional resources for helping newcomers with their personal financial health:
Switchboard Guide: Promoting Your Clients’ Financial Wellbeing: This information guide suggests asset-building strategies that refugee service providers can implement to encourage clients’ long-term economic stability and mobility.
META Podcast: Financial Capability for Refugees: Promising Practices for Upward Economic Mobility: This conversation focuses on an IRC study on financial capability programs, drawing on data from more than 2,400 refugee and immigrant families nationwide.
Switchboard Webinar: Navigating Personal Finance and Avoiding Scams: An Introduction for Direct Service Providers: This training explains the role of the Consumer Financial Protection Bureau (CFPB) and the ways in which service providers can rely on CFPB’s suite of personal finance resources and its complaint/reporting mechanism to empower and protect immigrants, refugees, and other newcomers.
CFPB Guide: Selecting Financial Products and Services: This multilingual guide provides information about different financial products or services that can help you meet a specific goal or need. This guide is part of the Consumer Financial Protection Bureau series “A Newcomer’s Guide to Managing Money.”
2. Opening Bank Accounts
With a bank account, newcomers can safely secure their money and access a range of financial services, including paycheck deposits and money transfers. Bank accounts can aid newcomers in budgeting and managing their finances more effectively through automatic payments and by letting them track their spending. A bank account also helps people avoid using a check cashing store or relying on a company-provided payday debit card, which can charge high fees.
Here are some suggestions service providers can consider to assist newcomers in opening bank accounts:
- Provide language support: For newcomers who struggle with English or who are more comfortable communicating in their native language, offer translation services or arrange for an interpreter to be present during bank account opening appointments.
- Explain the banking process: Educate newcomers on the process of opening a bank account, including the types of documents they need to provide and the steps involved. This can help reduce the stress and anxiety associated with navigating a new financial system.
- Offer a referral to a trusted bank or credit union: Look for banking partners that have fewer barriers to accessing their services, such as documentation requirements, minimum deposits, and lack of translation services. Some banking partners will even work directly with resettlement partners and host days off-site where they will enroll clients during a cultural orientation or financial literacy class. Credit unions may also be a good resource, as they are often community-based and may have fewer restrictions for access. To find some banking partners with low-cost accounts, go to Bank On, and to find a credit union near you, go to the National Credit Union Administration.
3. Building Credit
Building credit is essential for newcomers in their journey toward financial stability and independence. A good credit score opens doors to better financial opportunities, including lower interest rates on loans and mortgages, and access to credit cards and other financial products. Building credit also demonstrates financial responsibility, which can be a significant factor in securing employment and rental housing.
Here are some suggestions for service providers to help newcomers build credit:
- Research credit-building products: Research products like credit-building loans, credit savings accounts, and secure credit cards to support clients in their credit-building goals. Develop partnerships with financial institutions that offer these products with fewer barriers to entry and establish referral pipelines. Try contacting traditional financial institutions, organizations providing financial services, and Community Development Financial Institutions in your area to research available products.
- Advocate for vetted credit-building opportunities: Educate newcomers about the importance of building credit, and advocate for the credit-building opportunities that you have researched and found safe and reliable. This can include encouraging newcomers to apply for secured credit cards or working with local organizations to offer microloans.
- Explain credit reports: Educate newcomers on how credit reports and scores work, including what factors contribute to their credit score, and how they can access and review their credit reports.
- Educate on common scams: Newcomers are especially vulnerable to fraud, so it is important that service providers stay up to date on the most common tactics of credit card scammers. To report a scam, rely on the Federal Trade Commission’s reporting tool, which can be found here: What To Do if You Were Scammed (ftc.gov).
- Encourage responsible credit use: Advise newcomers on how to use credit responsibly, including making on-time payments and avoiding high levels of debt.
Service providers can empower newcomers with the skills and knowledge needed to succeed financially in the United States by providing financial literacy education, helping them open bank accounts, and encouraging credit building. By addressing these key areas, newcomers can achieve their financial goals and work toward a brighter financial future.