Investing in the Future

A Geographic Investigation of Brick-and-Mortar Financial Services and Households' Financial Health
Policy Paper
Feb. 1, 2017

Households need access to financial services that enhance their long-term financial health by providing opportunities to accumulate assets and build credit. Under this purview, banks and credit unions can be used for future investment, and alternative financial service (AFS) providers have been heavily critiqued for their role in undermining households' long-term financial health. The types of financial services available within the community may be associated with financial health, improving or impeding a household's ability to invest in the future, maintain a manageable level of debt, and achieve long-term goals. 

This study used data on financial services, individual/household and community demographics (including smartphone use), and household financial health to test whether the geographic concentrations or densities of bank and credit union branches and AFS providers within communities were associated with households' financial health. We used two measures of financial services: the numbers of financial services per 1,000 population, or densities, and the composition of financial services densities relative to one another. We explored these associations by income as the availability of financial services within communities varies based on household income levels. 

The findings from this study are not intended to be used for drawing clear prescriptions about building brick-and-mortar bracnhes in communities. Instead, these findings offer preliminary understandings of whether the availability of financial services in communities relates to households' financial health, for which households, and under what conditions.