Payday Loans for Food? Well, It’s a Strategy

This month our focus is on financial well-being, defined as having enough money to meet one’s needs, control of day-to-day finances and making choices that support a secure financial future.  

Easier said than done.  

A survey of 2,286 U.S. adults conducted by the financial wellness company Payoff that was designed to better understand patterns of financial behavior, found that severe stress due to finances affects 23% of Americans over 17 years of age and that this number increases to 36% for millennials (those born between 1981- 1996).  The group analyzed the data using the Five Factor Model, a validated tool for examining financial and other behaviors, and repeatedly found an unexpected sixth factor at play, which they ended up calling Factor Fear.  This factor was characterized as a broad, vague fear of financial failure and avoidance of finances resulting in denial and isolation.  The survey, which also collected information on health found that the financially-induced Fear Factor was positively correlated with a cluster of symptoms that closely mimicked Post-Traumatic Stress Disorder (PTSD).  

Yes, that’s right, this data suggests a significant number of Americans are experiencing financial stress capable of producing the negative coping mechanisms associated with PTSD.

So, yes, financial stress is a problem that is likely making many in the U.S. sick.  And while it seems that many of the strategies at play for alleviating financial stress - like employer sponsored financial wellness programs - may also be missing those most in need.  

Data does suggest that workers who participate in such programs learn positive financial behaviors. Yet many workplace programs focus on long-term strategies like 401k accounts and savings plans.  For the lower wage worker, or a college student struggling to juggle classes, part-time work and manage student loans, the more pressing challenges include paying down debt and budgeting on a shoestring for everyday living.  And this balancing act may drive these vulnerable groups to make financial missteps, which further compound financial stress.  

Karen Early, MS RDN from UW-Madison Division of Extension Brown County shares one stark example.  

“Predatory lending, also known as payday loans, is a common strategy in [Brown County’s] low-income population for affording food,” says Early.    

According to a survey that Extension FoodWIse in Brown County conducts with the UW-Green Bay Professional Social work department every 5 years, data consistently shows that payday loan services are a strategy used by one quarter of food pantry customers to obtain enough money for food.  

Whether it is using payday loans to supplement food budgets or experiencing symptoms of acute stress when it comes to financial situations, financial well-being is an area of concern for our community.  While education and individual behavior change provide an important piece of the solution, other systemic issues like availability of good paying jobs, affordable childcare, benefits like health care and 401K plans play an equally important role.  As a community well-being network, Wello is committed to exploring the policies, systems and environmental shifts that play a role in improving financial well-being for people in Brown County to truly thrive.