For years, study after study has borne out the idea that if you want to fix the problem of crime and recidivism in America, figuring out the puzzle of poverty, desperation and why some people can’t seem to get ahead might be a good place to start. A group of researchers at UALR has recently taken a step toward a better understanding of the issue, revealing the preliminary findings of a survey of basic “financial literacy” among currently incarcerated Arkansas inmates. The results of that survey show a widespread lack of knowledge about banking, finance and predatory lending among inmates, and may eventually lay the groundwork for a new approach to combating recidivism: teaching inmates how to hold on to their money so they don’t get desperate enough to return to crime.

A report on the survey, titled “Racial Differences in Financial Literacy Among Prisoners in Arkansas’s Correctional Institutions,” was presented to the UALR Institute of Race and Ethnicity this month. A joint project of the UALR Department of Economics and Finance and the UALR Department of Criminal Justice, the survey was funded by a grant from the UALR Institute on Race and Ethnicity. The 43-question surveys were filled out by 299 male prisoners at correctional facilities in Pine Bluff, Wrightsville and Malvern. Collected between September 2013 to March 2014, the survey includes questions about the inmates’ educational background, past incarcerations, basic understanding of banking, lending and finance, and their history of borrowing, salary, “predatory lending” participation and income. The results were compared to a control group of financial literacy surveys completed by 200 non-incarcerated Arkansas males, drawn from a nationwide financial literacy survey conducted by the Financial Industry Regulatory Authority, or FINRA, a private, nonprofit investor protection agency.


A sample of the inmate survey results reveal:

• 27 percent of inmates surveyed had never opened a checking account, while only 10.4 percent of non-inmates had never opened one.


• 56.2 percent of inmates surveyed had never had a credit card, compared to 27.5 percent of non-incarcerated Arkansas males.

• 32.8 percent of white inmates had owned a home, compared to only 16.9 percent of non-white inmates who had.


• 16.8 percent of inmates were “non-banked,” meaning they’d never opened an account of any kind at a bank. Only 8 percent of non-inmates had never opened a checking or savings account.

• The percentage of incarcerated men who have utilized a payday lender in the past is almost exactly double that of non-incarcerated Arkansas men: 11.1 percent versus 22.5 percent in inmates. Racially, 29.3 percent of white inmates in the survey had sought a loan from a payday lender, compared to 17.4 percent of non-whites.

• The percentage of inmates who have ever pawned an item is over three times that of the non-incarcerated: 21.9 percent versus 75.4 percent of inmates.

• The percentage of inmates who have ever bought something from a “rent-to-own” store was more than four times that of non-incarcerated people: 11.1 percent versus 45.1 percent of inmates, with 48.4 percent of whites and 42.7 percent of non-whites saying they had bought something “rent to own.”


• Only 33.1 percent of inmates in the survey could correctly answer this question: “If you put $100 in a bank account paying 5 percent interest, how much will you have in your account after one year?” 79.6 percent of non-incarcerated males got the same question right.

• Asked the average yearly income in their last job, the average for white inmates was $24,482, while the average for non-whites was $17,381 per year.

Dr. Kenneth Galchus with the UALR Department of Economics and Finance is the lead author of the study. Director of the university’s Kenneth Pat Wilson Center for Economic Education, one of Galchus’ duties is teaching financial literacy courses for K-12 teachers. He was looking to bring similar information to other groups three years ago, when a chaplain with a minimum-security Department of Community Correction facility approached him about teaching basic finance to inmates. Three times a year — March, June and October — he teaches three one-hour workshops to incarcerated men.

Early on, Galchus said, it became obvious that most of the men in his classes had no clue about even the most rudimentary aspects of handling money. “I’d get questions like: How do I balance a checkbook? ‘How do I open a savings account at a bank, or a checking account?’ ” Galchus said. “One question that floored me — this was about two years ago — this guy asked me, ‘When you get a credit card bill in the mail, can you pay it off at one time, or do you have to pay it off over time?’ … I began thinking, ‘We release these people back into society, and if they have no clue about things dealing with personal finance, we’re setting them up for failure from the beginning.’ “

Last year, Galchus was talking to colleagues about the issue, which led to the collaboration with the Department of Criminal Justice. Galchus said that a search of the academic literature on the subject found that no one had ever looked into the level of fiscal knowledge among inmates.

Dr. Timothy Brown is an assistant professor in the UALR Department of Criminal Justice, and a co-author of the project. He said the connection between recidivism and financial hardship is well established, with desperation often forcing people back into criminality. Brown believes the survey shows why inmates often fall into that desperation trap after they’re released.

“It’s important to get a job when you get out, but it’s also important to utilize money in the best way possible,” he said. “What financial literacy is talking about is looking at the ways people use money incorrectly, or not getting the most use out of it. Instead of having a bank account, they might go cash checks at a supermarket, or use payday loans.”

Brown said the figure he found most surprising in the survey was the number of inmates who said they had never opened a savings or checking account at a bank, something that he said could possibly be attributed to mistrust or a lack of “cultural capital” — financial role models to show them how to do basic financial tasks.

“If they go to a pawn shop,” Brown said, “they understand how a pawn shop makes money. … But if they go to a bank and they put their money in a savings account, they don’t necessarily understand how the bank makes money and so they don’t necessarily trust it. They never had that cultural capital from their parents to teach them how that works.”

Brown and his colleges plan to formally publish results from the survey in academic journals soon. While the results of the survey will not answer the recidivism question, Brown said, they can contribute to an answer, including attempts to teach basic finance to inmates to help them better manage their money on the outside. “We can make sure that they have the tools when they get out,” he said. “Not only the tools to gain a job, but the tools to sustain income and grow assets.”

Galchus said he hopes to apply for grants to devise a financial literacy program to be taught in prisons all over the state. He believes the level of financial illiteracy would likely be similar in prisons all over the country, and that a program in Arkansas could serve as a model that could be replicated elsewhere.

“If we turn these people loose with job skills, but lacking in financial literacy,” Galchus said, “we’re just setting them up for failure. A lot of people might say, ‘They committed crimes. Why should we do anything for them?’ But that’s just going to increase the recidivism rate. We need to give these people support when they get out of prison, or they’ll wind up back in prison.”