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Federal Policy Changes Urged to Help KY Families Save

The Annie E. Casey Foundation is urging Congress to change federal policies to make it easier for low-income families to save. (Greg Stotelmyer)
The Annie E. Casey Foundation is urging Congress to change federal policies to make it easier for low-income families to save. (Greg Stotelmyer)
January 20, 2016

FRANKFORT, Ky. - Senate Majority Leader Mitch McConnell and other members of Congress are being urged to change federal policies to make it easier for low-income families to save.

A new brief from the Annie E. Casey Foundation shows the racial wealth gap in America is growing. The Foundation's senior associate Beadsie Woo says that puts children of color at a "huge disadvantage," and Congress needs to address the problem.

"There are commonsense federal policies that can create more opportunities for families to save, and those change the life course for their children," says Woo. "Children whose families can save will do better in school and have stronger outcomes through access to opportunities."

For example, the Casey Foundation says modest federal investment in universal children's savings accounts started at birth could reduce the wealth gap among young white, black and Latino households by at least 20 percent and as much as 80 percent.

Woo says making it easier for a low-income family to save has benefits beyond dealing with a sudden financial crisis.

"Saving, both for short-term emergencies such as a car repair, but it's also saving for long-term aspirations like post-secondary education, or chances that will change their kids' lives," says Woo.

Between 2010 and 2013, the net worth of white families increased by two-percent according to the brief, while black and Latino families saw their assets plummet by 34 and 15 percent, respectively.

The brief urges states to cap interest rates on lines of credit and payday loans. Despite repeated attempts by a coalition of faith-based and poverty-fighting organizations, Kentucky's General Assembly has refused to cap payday loan interest at 36 percent. Woo says that hurts families struggling to make ends meet.

"Payday loans are extremely expensive and they end up depleting a lot of family resources," she says. "So, they are the flip side to what we have outlined in the Casey Foundation brief, which are opportunities to help people save."

Woo says the typical amount borrowed from a payday lender is about $500. She says that's a very thin margin between keeping a family from going into debt or being stable.

Greg Stotelmyer , Public News Service - KY