J. Michael Collins wants people to get more bang for their buck.
The La Follette School professor studies how people make financial decisions and how they learn about personal financial management.
Collins is faculty director of the campus Center for Financial Security. The multidisciplinary applied research center seeks to inform practitioners, policymakers, and the general public on strategies for building financial capability and security over the life course.
"My research examines the role of specific products, policies and advice in helping individuals navigate the increasingly complex financial marketplace," Collins says. "In addition, the center's research is notable for its focus on vulnerable populations — including low-income families, youth and people with disabilities."
His research has never been more important in the wake the Great Recession. "Data show that people are struggling to keep up," Collins says. "A 2012 Financial Industry Regulatory Authority survey shows that 55 percent of people report 'living paycheck to paycheck,' and 60 percent do not have the funds to cover a financial emergency that costs the equivalent of three months of expenses."
At the same time, many Americans lack the ability to make simple calculations or to understand simple financial products like bonds. "Media reports suggest that Baby Boomers are not prepared for retirement, and young people are saddled with student loans," Collins says. "Policy discussions on these topics invariably mention the need for people to be better consumers of financial products and services, including increase use of financial education and counseling, as well as information disclosures and warnings about risks. The challenge is to find the way to best accomplish those goals."
Collins is figuring out just that. As he outlined in the spring La Follette Policy Report, he and others are exploring how schools, public programs for low-income and unemployed people, financial counseling, and employer-based programs can help improve people's financial capability.
Collins' current study of mortgage foreclosure and family well-being is supported by the John D and Catherine T. MacArthur Foundation. The Annie E. Casey Foundation funded an examination of financial counseling, and the C.S. Mott Foundation is supporting Collins' study of emergency savings policies. Collins founded the PolicyLab Consulting Group, a research consulting firm working with national foundations and government agencies, and co-founded MortgageKeeper Referral Services, an online database for mortgage servicers and counselors. He also worked for NeighborWorks America (Neighborhood Reinvestment Corporation) and the Millennial Housing Commission.
For the La Follette School, Collins is teaching the Workshop in Public Affairs, a major component the school's participation in the Wisconsin Idea. His students' clients are the U.S. Government Accountability Office, the Wisconsin Children's Trust Fund and the Financial Clinic of New York City.
With all these projects, Collins emphasizes the importance of understanding the context in which people make financial decisions. For example, many some experts criticize "payday lenders" and "cash stores" for the high interest rates they charge. "From the perspective of someone who is poor, such a short-term loan makes sense," Collins says. "People use payday lenders because they are out of money: It's the middle of the month, they get paid in two weeks, and bills are due now. Without a payday lender, they have to turn to some really nontraditional funding source, or bounce a check, and the cost of bouncing the check often exceeds the payday lender."