Despite the fact that around 69% of Americans have less than $1,000 in savings, we, as a country, sit on a collective wealth of extra cash; somewhere in the region of $300 billion is idling in accounts nationwide. These are not emergency funds; rather, it’s what Cat Berman, founder of the new Oakland-based startup CNote, calls “just in case” cash–she estimates that there are around 30 million “oversavers,” who have an average of an extra $10,000 in their accounts.
Berman, a former managing director at Charles Schwab and the founder of several social enterprises, landed on the idea for CNote when she took a look at her bank accounts online and saw several thousand dollars just sitting there. “I thought to myself, ‘What am I doing?’” Berman tells Fast Company. “Why do I have all this money just sitting in my savings account, and not doing good for anybody?” (Experts recommend keeping about six months of funds in cash in the bank in case of emergencies).
CNote is a way to put idle savings account funds toward the public good. The startup allows individuals to invest directly in Community Development Financial Institutions (CDFIs)–Treasury Department-certified organizations whose goal it is to invest in economic development and job creation in low-income communities. There are more than 1,000 CDFIs across America, and they make the kind of “small dollar” loans to local businesses that larger financial institutions generally don’t offer. These institutions do undeniable good–in 2014 alone, CDFIs financed over 4,102 small businesses and 24,466 units of affordable housing. But in his budget proposal for 2018, Trump has proposed cutting the federal program that finances these institutions–the CDFI Fund–from $233.5 million to just $19 million.
CDFIs combine grants from the CDFI Fund with money from private investors and financial institutions in order to make community development loans. But when Berman, looking for a more productive use for the thousands in her own “just in case” fund, thought to invest it in a CDFI, she learned that she, as an individual, could not.
“It’s not that CDFIs don’t need the cash,” Berman says. “There’s a huge unmet need–CDFIs have a deficit of over $600 million in loans they want to be doing, but lack the capital to make happen. And because they’re set up as B2B organizations and accept loans from banks and foundations, they’re just not equipped to handle and vet small individual [investments].”
Continue reading in Fast Company
Originally written by Eillie Anzilotti