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A chance to improve financial security in Texas

ERIC JOHNSON | 11/13/2017, 6:39 p.m.
Currently, one-third of all Texas households lack a savings account, and nearly half are liquid asset poor, meaning they are ...
State Rep. Eric Johnson represents District 100, which includes parts of Dallas and Mesquite, in the Texas House of Representatives Texas House of Representatives

Texas House of Representatives

Currently, one-third of all Texas households lack a savings account, and nearly half are liquid asset poor, meaning they are in a constant state of financial insecurity because they lack savings. These Texans are on the brink of financial hardship because they have no emergency funds in place in the event of a job loss, medical crisis or other costly emergency. These startling statistics illustrate how prevalent the issue of financial insecurity is in Texas.

While the solution to this issue is going to need to be a comprehensive one with multiple actions taken by the Legislature to increase financial security in communities statewide, Texans have the ability to sign off on an innovative solution to the problem: Proposition 7.

If voters approve Proposition 7, otherwise known as the Texas Savings Promotion Act, banks and credit unions will be able to award prizes, including cash, to individuals who make deposits into their own savings accounts. Individuals would face no penalties, fees or higher interest rates for participating in the program. They simply save and have the opportunity to win big.

Across the U.S., 20 states currently allow financial institutions to operate prize-linked savings account programs. They have proven to be very successful in attracting financially vulnerable individuals to open savings accounts. Data collected by Commonwealth on the programs that are already in operation found that more than 80 percent of those who chose to open prize-linked savings accounts were financially vulnerable with almost 60 percent having no emergency savings before starting the program. The average account savings after the program was fully up and running was more than $2,400.

According to the Corporation for Enterprise Development’s 2016 annual report, Texas ranks 41st in households without access to mainstream financial services. Without a bank account or any savings, many Texans are forced to turn to payday lenders to cover their needs. In 2012, Texans took out more than 2.2 million payday loans with annual interest rates in the triple digits.

Although this issue is a serious concern that needs to be addressed from a public policy standpoint, the Texas Legislature is not willing to do anything when it comes to regulating payday lenders. Because of this, we have to approach the issue by attacking the demand for the types of loans payday lenders offer.

By incentivizing the most financially insecure individuals to open savings accounts, the Texas Savings Promotion Act will increase financial security and decrease reliance on predatory lenders in times of need.

Prize-linked savings account programs are an exciting way to help boost savings for both new and existing savers. A vote for Proposition 7 is a vote to improve the financial health of the State of Texas.

State Rep. Eric Johnson represents District 100, which includes parts of Dallas and Mesquite, in the Texas House of Representatives.