How financial literacy can assist offender rehabilitation
By the time offenders reach our case load, they are already carrying a significant debt load from fines, courts costs, traffic tickets and victim restitution
A few weeks ago I received a prepaid debit card in the mail. This was different from the usual credit card offers I receive almost daily. This was not a credit card, but a card the company wanted me to direct deposit my paycheck to.
As I know it is common for offenders to use such cards instead of getting an actual paycheck or having money directly deposited to a checking account, I decided to read the fine print. What I found shocked me. The amount these companies charge for fees is astonishing – fees for checking your balance, fees for monthly use, fees for swipes and fees for pin transactions.
Most of us have probably witnessed offenders get sucked into the buy-here, pay-here places whether it’s for TVs, furniture, or cars. They get the sales pitch telling them their payment is only $50.00 a week, but they never learn the true cost or the interest rate they are paying.
Moving forward from paycheck to paycheck
Most offenders live paycheck to paycheck, and never stop to think about saving money or making any financial plans past the next month, the next week, or even the next day. To add to this, by the time they reach our case load, they are already carrying a significant debt load from fines, courts costs, traffic tickets and victim restitution.
When offenders look at their financial situation, it can seem very bleak, leaving a lot of them asking, “What’s the point?” This could cause them to revert back to their previous lifestyle and engage in criminal behavior again to make some fast cash. However, I have also seen offenders come out of prison and get a well-paid job in a matter of days with a full range of benefits, including a 401k.
The offender is usually very excited about this, because at some point in their life they were told, “You need a job with a 401k.” But when you ask them what a 401k is, they don’t know how it functions, or how they even sign up for it.
You can’t fault the offenders for not knowing this. There are numerous highly educated professionals who don’t take advantage of a 401k or deferred compensation plan, because they simply don’t understand the process.
The need for financial education in corrections
Personal finance is not usually covered in schools, and most of us stroll out into the world with little understanding of how to navigate our finances. Some people get lucky and have a family member or friend who teaches them the importance of long-term investing and saving, but for most of the population, this is not the case. When we start to look at the offender population, the amount of financial education being taught is probably even lower. As a probation/parole officer or prison counselor, we constantly see how some offenders lack knowledge of basic life skills most of us learned at a young age.
In corrections, regardless if it is community-based or the institution, we provide access to intervention programs to help offenders build skills for long-term success. One program we should put more emphasis on is financial education. Teaching offenders proper money management, saving habits, budgeting skills and even investing could make a significant difference when it comes to the offender making changes toward a pro-social lifestyle.
Surveys reveal that financial issues are a leading cause of stress in American households. If Americans with college degrees and high-paying jobs are experiencing stress due to personal finance issues, how can we expect offenders coming out of prison to cope? When offenders are in prison their basic needs are met – they have a place to sleep, clothing, medical care and food. Upon release, they sometimes have nothing more than a couple hundred dollars in the pocket of the clothes on their back. Almost anyone would find that situation stressful.
How do offenders feel about their finances?
A recent article on Gobankingrates.com stated that 42 percent of Americans had less than $10,000 saved toward retirement. So what is the overall financial picture of offenders and how do they feel about that financial future?
Based upon these questions, my colleague probation/parole officer Crystal Cook assisted me with a small research project to find out if more emphasis on personal finances is needed, and whether or not offenders would find this of value.
For this article, 71 offenders from all walks of life were interviewed, confirming what we already suspected – offenders neither plan for long-term financial success, nor do they have the knowledge to do this.
One offender who was contributing to a pension system thought it was a tax and didn’t realize how important those contributions were, and that the money was being placed in an interest-bearing account. Another offender specifically pointed to not understanding how to manage their finances as one of the direct reasons they committed some of their crimes.
When some of my colleagues and I interviewed the offenders, 93 percent said they were at least somewhat confident about their financial future and 83 percent said they were at least somewhat confident in their budgeting skills. Of the offenders interviewed, 75 percent also advised that they were at least somewhat confident in their knowledge regarding personal finances. Yet as we conducted these interviews we found that most offenders were overconfident about their knowledge. Sometimes it’s amazing what you don’t know, when you just don’t know.
When these offenders were asked if they had ever thought about retirement, 62 percent said they had, but of that 62 percent, only 16 percent felt confident that they would have enough money saved and only a handful had any type of financial plan in place to address this.
Offenders were also asked to categorize a loan as an asset, liability, or equity. Only 34 percent could properly categorize it and 51 percent reported not knowing.
Out of the offenders interviewed, 58 percent reported that their financial situation causes them stress. What was encouraging was that 86 percent of the offenders indicated they felt a personal finance class would be beneficial, as most reported not having any type of education beyond a basic budgeting class.
The value of financial literacy education
By providing financial literacy education to offenders, we can help them learn a way to secure a better future for themselves and their families. Offenders need education on:
- How to properly budget money;
- The true value of money;
- How to avoid loans with double digit interest rates;
- How to pay taxes;
- How to use tax-efficient investment tools;
- How to get off social welfare programs;
- How to find better housing;
- How to pay more money back toward victim restitution.
Financial literacy programs can also help address other needs offenders have, which may include problem-solving abilities, impulse control, employment, peer associations and cost versus benefits.
Just like every intervention program currently in use, some offenders are going to learn and use the skills they obtained from the education and others are going to adamantly reject it. Even if we can just reach 10 percent of offenders currently incarcerated or under the supervision of community-based corrections, this could have a drastic effect on our communities.