Ex-Offenders Need Financial Literacy Too (Ken Galchus Commentary)

by Ken Galchus  on Monday, Apr. 28, 2014 12:00 am  

Ken Galchus

Each year, U.S. state and federal prisons return more than 600,000 prisoners back into society, at least half of whom are reincarcerated within three years. Many of these ex-offenders return to inner-city neighborhoods where income levels are low, jobs are scarce and crime rates are high.

The goal of the penal system, of course, is to reduce the recidivism rate to as low a level as possible by providing inmates with education, vocational training and substance abuse treatment. Most criminologists will agree that these efforts are designed to increase the employment opportunities for ex-offenders because employment provides a steady income to ease inmates’ transition back into society.

But income, while obviously helpful, only meets the short-term needs of ex-offenders. If, for example, a former inmate is laid off during an economic crisis or suffers a serious health issue, then his or her income is significantly reduced or entirely lost. At those times, it becomes immediately apparent that employment is but one component of the solution to a long-term problem.

Instead, the wider focus should also include ways to assist the individual with the skills needed for asset or wealth accumulation, since it is these skills that help meet his or her long-term needs. Wealth provides a foundation for self-employment and for down payments on personal assets, such as homes or vehicles.

Perhaps more important, asset accumulation has been shown to be connected with a number of positive social outcomes. One recent study found a connection between asset ownership and self-sufficiency, child well-being, civic engagement, health and psychological well-being. If such things are vital to the average citizen, how much more is this true of the ex-offender who is trying to navigate societal norms, often for the first time ever?

One of the greatest challenges facing society is that many former inmates lack a background in financial literacy, a prerequisite for any type of asset accumulation. Financial literacy refers to a person’s basic grasp and understanding of key financial concepts — more loosely, how money works — and it is essential for solid consumer decision-making.

Yet, based on questions asked by residents about to be released from the Department of Community Correction, it is obvious that many do not know how to balance a checkbook, have never had a credit card (and have no idea how to obtain one), have never had a checking or savings account and do not know what a credit score or credit report is.

Financial literacy workshops, such as those offered at the correctional facility in Little Rock through the Kenneth Pat Wilson Center for Economic Education in UALR’s College of Business, offer one solution. Research, such as that being conducted through a project funded by UALR’s Institute of Race and Ethnicity, is providing further insights.

The research project seeks to more precisely measure the level of financial literacy of those in penal institutions near Little Rock. It includes a 43-question financial literacy survey designed for inmates in re-entry programs at these institutions. An analysis of some preliminary data indicates that the level of financial literacy among inmates surveyed in Arkansas’ correctional institutions is even lower than that of the typical American consumer, already dismal, according to a recent survey by FINRA, the Financial Institute Regulatory Authority.

I am fortunate to be a member of this collaborative effort between UALR’s Department of Economics & Finance and UALR’s Department of Criminal Justice, which includes Professors Andy Terry, Mark Funk, Tim Brown and David Montague, with the assistance of graduate student Marc Glidden. The project’s goal is to use the collected information to design a financial literacy program for those about to be released from penal institutions so that ex-offenders are not set up to fail from the start when they re-enter society.

An ex-offender who is financially illiterate will have a tough time building wealth. That’s why financial literacy training is so important for them, as well as for current inmates of penal institutions. Newly acquired financial literacy skills, along with plentiful employment opportunities, will help to reduce the recidivism rate, which ultimately will assist in crime prevention.

Ken Galchus a professor of economics in the Department of Economics & Finance at the University of Arkansas at Little Rock College of Business. Email him at KEGalchus@UALR.edu.



Please read our comments policy before commenting.