Wednesday, March 7, 2012

Texas Saves


By Don Baylor and Chuck Stokes

This week, Texas is one of many states celebrating America Saves Week, a national week to promote personal savings and encourage individuals to take financial action. American Saves Week couldn't come at a better time, with so many Texan families struggling. To strengthen our communities, Texas needs to adopt a new blueprint for helping families save.

As noted in Why Thrift Matters: 20 Propositions, a report recently released by the Institute for American Values, Americans are rediscovering the  thrift of our forefathers and mothers, who worked hard, saved their money and shared their wealth with those in need. The recipe for building financially strong families and communities remains the same today. Texas Saves Week reminds us that we need only look back to find a wiser way forward. We need to work together, not just for individual change, but to create a culture that values hard work, planning ahead and the importance of community.

Creating a college-going culture is widely acknowledged as the best way to secure a better future by increasing the earning potential of tomorrow's labor force. In Texas, we need to direct similar energy to creating a savings culture. Like a good education, household savings - regardless of family income - is a sound predictor of whether a child who grows up poor will become part of the middle class. The association between savings and future financial security is even more pronounced when savings are targeted toward college. Academic research has found that a child with a dedicated savings account is seven times more likely to attend college than a similar child without such an account, even when controlling for race or income. In essence, savings represent hope and opportunity.

Texans want to become better savers. In the 2010 Survey of Texas Savers, over three-fourths of all Texans said they want to save more in the future; nearly 90 percent of the poorest said they want to save more. But Texas families need more than discipline and desire to be able to save. They need opportunities and incentives. They need a culture that makes savings the default choice, not the exception or choice reserved for wealthier families.  This is why both public and private sectors are
working together to help households build financial security. For example, in some Texas communities, financial institutions, community tax centers and local United Ways now provide incentives and opportunities for working Texans to save a portion of their tax refunds. Throughout February, Texas Saves -a campaign to promote savings to low- and moderate-income Texans lead by the Center for Public Policy Priorities in partnership with our Opportunity Texas partners -- is distributing savings tips and resources to families and raising awareness about the importance of savings.

Another partnership, Bank On Brazos Valley, is having excellent results in getting more Brazos Valley residents connected to the financial mainstream and on the pathway to savings. The Austin Savings Bond Project, run by Foundation Communities and supported by Opportunity Texas and the City of Austin, provides small incentives for tax filers to save a portion of their refund with a U.S. Savings Bond. More partnerships among banks, credit unions, schools and nonprofits are needed to promote savings for all Texans.

Texas policymakers have a role to play in promoting savings. In 2011, the Legislature adopted several policies to promote savings, requiring K-8 math-based financial education and establishing both the Texas Save & Match, which helps families save for college by matching their contributions to pre-paid tuition accounts, and the Texas Financial Education Endowment as public-private initiatives to enable household savings.

Despite these steps, the Corporation for Enterprise Development's 2012 Assets & Opportunity Scorecard ranked Texas in the bottom 10 states in overall measures of household financial security. One in two Texans lacks enough "rainy day" savings to weather a loss of income. We also rank at the bottom in terms of average credit score.

We can do better.  In order to move ahead, the Legislature should remove policies that punish or discourage household savings. For example, one pro-savings legislative step would be to limit the number of times a payday lender can raid Texas bank accounts for the same loan. Legislators also should abolish the social services policy that counts a family's savings when determining whether working families qualify for health insurance coverage for their kids. The message to these families is clear: give up your dream of owning a home or educating your children -- you have to choose between saving or caring for your children.

Texas Saves Week is an excellent time to encourage Texas Legislators, along with key stakeholders in business, education, and philanthropy to support strategies that strengthen household financial security. Helping Texas families save should be seen as an economic development strategy to create a stronger middle class and a brighter future.
Don Baylor is economic opportunity senior policy analyst at the Center for Public Policy Priorities in Austin. Chuck Stokes is a Fellow at the Institute for American Values' John Templeton Center for Thrift and Generosity and Scholar-in-Residence at Samford University.

(c) Texas Lone Star Forum. 2/12