Onward will offer low-wage employees help with saving and access to a line of credit for emergencies.
Ronnie Washington, a 2016 MBA graduate of Stanford Graduate School of Business, was just beginning his research into the financial pain points of America’s working poor when he met Amanda. The 22-year-old was working at a retail chain for near minimum wage and living with her grandmother as she tried to save enough money to go to graduate school.
“She was really trying to save, and really trying to do better,” said Washington, who spoke with her for nearly an hour, one of more than 60 interviews he did on street corners or in front of convenience stores and fast food restaurants. “She had all these tricks to help keep her money in savings, like depositing into her sister’s bank account to prevent frivolous spending. The only way she could withdraw money would be to ask her sister.”
Then, Amanda told him, her car broke down, and, despite all her efforts, the savings that came from those months of effort disappeared with one $700 bill.
Washington channeled the insights he gained from that conversation and others into his idea for Onward: A Financial Safety Net for the Working Poor. During his year as a Social Innovation Fellow, Washington will follow the design thinking methodology to further develop and test the product, which currently includes a line of credit and an app that makes it easier for people to save.
About 10.5 million people in the United States are classified as working poor, out of an overall poor population of about 45 million. They work, or look for work, more than 27 hours a week, but their incomes still put them beneath the poverty line of about $12,000 for a single person. The working poor have trouble coping with the routine financial emergencies of about $1,000 that hit about 40% of families every year.
Onward will make it easier for low-income workers to save, and give them the option to use those savings when needed or to tap into a revolving credit line for small emergencies. “Having the ability to choose between savings and/or credit is empowering. It helps break up big expenses such as a car repair without a person’s entire savings being ‘washed away,’ something that takes a toll on the psychology of workers and can create a disincentive for future saving,” said Washington.