This last week of February is America Saves Week, and thanks to a recent proclamation from Gov. Asa Hutchinson, it's also Arkansas Saves Week and Military Saves Week. The idea is to promote savings and financial security throughout our communities; it's a focus we desperately need right now.
We as Americans aren't saving enough. We aren't saving enough for emergencies. We aren't saving enough to build wealth through higher education or home buying, and we definitely aren't saving enough for retirement. Year after year, we kick the can down the road, hoping that the next big emergency misses us.
For around 800,000 Americans, that approach was tested in the recent government shutdown. With federal employees furloughed or working without pay, savings very quickly became a focus. We've seen the reports of people struggling financially, and the numbers paint a troubling picture.
Last week, CNBC reported that over half of the affected federal workers used up all or most of their savings during the 35-day shutdown, which means they only had around one month of emergency savings. If there was ever a canary in the coal mine moment, this is it.
While Americans deal with financial emergencies every day, ranging from unplanned medical procedures to unexpected car repairs, they usually aren't broadcast 24/7 for the world to see. The situation was truly eye-opening, and it should be our wake-up call that savings and financial security need to quickly move up the list of individual, business, and public policy priorities.
As a Community Development Financial Institution, Southern Bancorp exists to serve economically distressed and financially under-served communities. We actively seek out communities that can benefit from the type of financial development products and tools we provide such as financial education, credit counseling, and strategic savings programs.
It also means that we regularly see the impact that unstable financial foundations can cause to families, and we also see how it can cascade to the economic instability of the community as a whole.
But even with 46 branches, 400 employees, and 65,000 customers, we're barely scratching the surface of what it takes to truly move the needle around financial security and stability. It's going to take a concerted effort and partnership between financial institutions, community advocates, private industry, and policy makers.
It can start by increasing savings opportunities.
This means financial institutions coming together to create products that help people grow and save like the recently formed BankOn Arkansas+ coalition, focused on bringing people back into the financial mainstream.
It can also mean policies that make the process of saving easier, such as creating an additional direct deposit line on tax forms for refunds or encouraging employers to offer direct deposit into savings.
We must also eliminate roadblocks to building financial security.
In Arkansas, working families in need have access to a variety of supports to help them get on their feet. But some include requirements that have the opposite effect.
The Supplemental Nutrition Assistance Program (SNAP) and the Temporary Assistance for Needy Families Program (TANF) both provide monetary assistance to income-eligible families. However, in addition to income limits, they also include asset limits, which create unintentional barriers to financial growth.
Assets include any savings you put aside, which means that if a family must choose between adding to their savings in an effort to build their way out of poverty or feeding their children, they'll choose the latter every day.
These programs are already income-limited, so why add an unnecessary layer that actually discourages recipients to grow financially and move off of assistance?
Finally, if we're going to support savings, we must stand up to those who actively seek to extract wealth from our communities. I'm talking about high-cost alternative financial services and predatory lenders.
This is the industry that has sprung up around traditional financial institutions, preying on low-income families by charging exorbitant fees to move money around, from short-term consumer loans to cashing checks to high-interest title loans on cars.
It's not a handout to create policies that protect these individuals. It's a hand up into the financial mainstream, where they can grow and ensure a better life for themselves and subsequent generations.
These aren't groundbreaking steps; they're common sense. Let's use this week as a platform to dive into conversations, explore solutions, and get to work making this state financially stronger for everyone.
Darrin Williams is CEO of Southern Bancorp Inc.
Editorial on 02/24/2019