The COVID pandemic unleashed stimulus checks for millions of Americans who were struggling due to the unprecedented actions of governments across the country. Families and individuals whose jobs were suspended or disappeared due to the pandemic received government payments to mitigate lost wages.
Once the pandemic ended, many communities across the nation wondered whether families would face financial hardship once stimulus payments stopped. Taking a cue from former presidential candidate Andrew Yang, many cities and states have launched universal income-related programs.
However, a Washington mother of three’s decision to spend most of the taxpayer money she received as part of one of these programs on vacation-related expenses has led many critics to question the benefits of free money programs. Let’s take a look at what the struggling mother decided to spend her free money on.
I wanted to screw everything up
A mother of three spent more than half of the $10,800 lump sum she received from the city on a luxury vacation to Miami for herself, her children and their father. The money came from a DC pilot program called Strong Families, Strong Future.
Individuals below the poverty line selected for the program could receive about $900 a month or a lump sum payment of just over $10,000. The program comes with no strings attached, meaning recipients can spend the money as they see fit.
In this case, Canethia Miller spent the money on a seven-day vacation to Miami for her family, which included new clothes, a boat trip to see Miami mansions and a makeover. Mrs. Miller explained that she spent the money on the boat trip so that her children could see that if they worked hard, one day, they could live in a mansion similar to the one they had seen.
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The $180 she spent on a makeover that included hair and nails was done for:
“…she wasn’t supposed to look like a stressed out, working mom.”
She went on to admit that when she received the money, she:
“…I wanted to ruin everything. I wanted to have fun.”
In addition to the vacation and everything that came with it, he used some of the leftover money on a used car and bills.
Help or hurt?
Guaranteed income programs like the one in Washington that Ms. Miller participated in have spread nationwide. The total value of the programs is estimated at more than $125 million, some providing up to $36,000 to families.
Both Los Angeles and New York City have programs that offer up to $1,000 per month for up to three years for some eligible residents. While I agree that these programs can, and indeed often do, offer temporary relief to many people, the long-term damage they cause is not worth it, according to Oren Cass, executive director of the American think tank Compass.
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Oren Cass warns that expanding such programs nationwide would undermine the adult responsibilities placed on citizens:
“A permanent, society-wide system of providing for all would destroy the fundamental elements of the social contract and create the wrong incentives for people to make choices about the course of their lives.”
When asked why programs like Washington’s are helpful and why people like her struggle financially, Ms. Miller said:
“Many communities in my area don’t know the financial benefit of credit or savings for their children; that’s why we’re broke. This is why we have nothing to pass down nor any house to give up.”
The question is: does receiving money with no strings attached help close this financial literacy gap?
Teach a man to fish
The data suggests that Ms. Miller is right in her analysis of what ails communities like hers. America in general is also grappling with the same principles.
According to a study by the Financial Industry Regulatory Authority, the overall financial literacy of all Americans is declining. In 2021, the average American was only able to answer 2.6 out of five questions related to basic financial literacy.
These questions focused on personal finance, budgeting, and investing. The trend is going in the wrong direction for the nation compared to 2008, when the average American could answer three out of five questions correctly.
Additionally, the study found that Hispanic and black Americans scored worse on average than Asian and white Americans.
Traditionally, sources of financial literacy come from the following constructs:
- family
- High school
- University
- employers
- military
If financial literacy is declining generationally, it can be assumed that families are not as capable of passing on quality financial advice as they were in previous generations. Additionally, the percentage of high school-aged Americans working in jobs that can provide hands-on experience with finances fell from 51.7% in 2000 to 36.6% in 2021.
Is it better to provide young Americans and families with guaranteed income or pathways to high school employment and quality financial literacy programs before they find themselves in financial difficulty?
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