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The Texas Financial Report Card
The Savvy Consumer

By Teresa McUsic

New numbers are out on the financial health of Texans, and they aren’t pretty.

More than half of the state’s residents, including one-third of those earning between $55,000 and $86,000 a year don’t have an emergency fund of three months of expenses saved.

Almost 500,000 Texans are making at or below minimum wage, more than any other state in the country.

Thirteen percent of Texans have no bank, and 27 percent are “underbanked,” meaning they have an account but still rely on costly alternative services.

Sixty-five percent of us have subprime credit scores, while 25 percent still are uninsured.

Those statistics add up to D and F grades for the state on the 2013 Assets & Opportunity Scorecard recently released by the Corporation for Enterprise Development, a policy and financial security analyst group based in Washington, D.C.

“Although there are signs of improvement in Texas’ economy, with unemployment edging downward in recent months, this year’s Assets & Opportunity Scorecard paints a picture of a state – and a nation – that is struggling to achieve economic opportunity for all residents,” said Jennifer Brooks, director of state and local policy for CFED.

While Texas did receive a grade B in homeownership, largely because of affordability and a lower foreclosure rate, overall the state ranked 39th in the country in ability to achieve financial security after analyzing 53 measures.

“Too many Texans are just getting by,” said Woody Widrow, executive director of RAISE Texas, a statewide coalition focused on helping Texans build assets. “We haven’t done enough with policy for people to move forward.”

Several measurers are underway to change that, however, Widrow said.

First, starting in the fall of 2014, Texas children enrolled in public education grades kindergarten through 8th grade will begin receiving financial literacy as part of their math component, Widrow said. Today, high school students in the state receive financial literacy, but it is not always with trained teachers and is not tested, he said.

“Now it will be part of the math curriculum,” he said. “And teachers are being trained through a partnership with Raise Texas and the Texas Counsel on Economic Education.”

A pilot program in Amarillo has already started with all public school fourth graders receiving the financial literacy education, as well as the extra incentive of a no-cost bank account at Happy State Bank and a donated $25 per account opened in seed money.

The pilot, called Smarter Texans Save, will test whether children with bank accounts have learned more than their counterparts, Widrow said.

“We want to know if having a real life bank account makes you more financially savvy,” he said.

In Fort Worth, Catholic Charities and United Way have a similar program for unbanked adults by helping them set up a low- or no-cost savings accounts through the Education Employees Credit Union. The credit union is open to all residents and employees in Tarrant County and surrounding counties.

Those who qualify for the program by making $50,000 or less and set up the savings account will receive matching funds up to $50, said Steven Ashbrook, a certified credit and financial counselor with Catholic Charities.

The matching program, which started a year ago through Catholic Charities’ Money School program, has exceeded expectations, with 340 clients opening accounts, Ashbrook said.

The goal is to save at least $500 in the accounts for emergencies, he said.

“Most people don’t have a habit of saving,” he said. “If they save some money on groceries, they go out and buy a Domino’s pizza. We want them to reach a psychological limit so they feel it’s painful to pull the money out because they’ve worked so hard to save it.”

Having an emergency fund keeps consumers from going to payday or car title loans, which can be a costly alternative if they have an unexpected expense like a car repair or other emergency, said Don Baylor Jr., senior policy analyst with the Center for Public Policy Priorities in Austin.

“While Texans haven’t been hurt by mortgage lending, they’ve been ravaged the death of a thousand cuts by payday and auto lending,” he said.

In 2012, more than 2.5 million Texans took out payday and title loans worth billions of dollars, said Widrow. There are 3,280 alternative lenders registered with the state, including 246 in Tarrant County.

The data, which was collected for the first time last year, is “worse than we thought,” Widrow said.

“Just one out of four pay it off in one pay period,” he said. “The product is failing too many people.”

Baylor said that state Sen. John Corona (R-Dallas) will be filing a bill soon that will put more restraints on such lending, but will not try to reign in the high interest rates. Lenders charge on average $22 per $100 loan, the highest rate in the nation, he said. “There’s nothing in the bill that will bring down the original costs of these loans,” Baylor. “They are still going to be the highest in the marketplace.”

The bill will address putting limits on how many times the loans can be rolled over, stop refinancing for installment loans and require documentation from the borrower’s income and their ability to repay the loan, Baylor said.

“The bill includes language that there will be lower limits for lower income people so the threshold is 20 percent of their income,” he said.

Consumers and policy makers also have access to a new budget tool from CPPP to show how much it costs by household budget items to live in 26 metropolitan areas in the state, including Fort Worth/Arlington.

Using data from the U.S. Census Bureau and other public sources, the CPPP created the Better Family Budgets program at www.familybudgets.org.

For example, in Fort Worth/Arlington, a family of two incomes with two children with employer-covered health insurance must earn a combined $48,168 or $24 an hour to cover basic expenses of food, housing, transportation, child care and out-of-pocket health expenses. But almost 30 percent of the local jobs do not pay enough for this family to reach the necessary annual income, according to the budgeting tool.

Paying for health insurance out of pocket without employer help, local residents must earn $61,272 or $30.64 an hour combined salaries, which 42 percent of local jobs don’t pay enough for the family to reach this annual income.

The tool also shows that if that same family of four saved $37 a month for an emergency fund, it would have $2,000 in the fund after 4.5 years, which is the average time a job is kept, Baylor said.

While these programs are a step in increasing the financial health of Texans, it is not enough, Widrow said.

“Unless we do something drastically in the next 10 years, our scorecard will get worse,” he said.

You can reach Teresa McUsic at TMcUsic@SavvyConsumer.net