A program to instill in children the importance of saving money is in place at Salishan, the housing project on the East Side owned by Tacoma Housing Authority (THA). Michael Mirra, executive director of THA, and Andrea Levere, president of Prosperity Now, recently provided an update on the program to Tacoma City Council.
Based in Washington, D.C., Prosperity Now is a non-profit organization that promotes asset building. It is involved in cities across the nation that have launched pilot programs for children’s savings. Tacoma’s program began in September 2015. Prosperity Now has a goal to have 1.4 children involved in the program by 2020. It currently has 382,000 in 32 states and the District of Columbia.
According to Prosperity Now, 26 percent of Tacoma households are unbanked or underbanked. Half of Salishan residents are unbanked. People without accounts spend an average of $2,400 per year in assorted fees, such as for cashing checks. Levere said some people do not trust banks, especially certain immigrant groups. Some low-income neighborhoods are bank deserts. “There are multiple reasons why this exists,” she observed.
The accounts are available to all children at Salishan, regardless of family income. Kindergartners at Lister Elementary School in Salishan are eligible even if they do not live in Salishan.
There are currently 170 families participating, or 33 percent of eligible families. Children are enrolled in kindergarten. THA will open the account with an initial $50 deposit. The program matches donations from parents. For children up through fifth grade, the
amount is up to $400 a year. For sixth through 12th grade, it is up to $700 a year. A child could have up to $9,700 in the account when he or she graduates from high school.
From sixth through eighth grade, students have a list of academic incentives that will contribute to the account. By ninth grade, incentives are based on factors such as attendance, grade point average, enrolling in the College Bound Scholarship program and taking tests like the SAT and ACT. A change in the program in September will allow children in the first or second grade to enroll.
The students must enroll in a college or vocational training program to tap into the account. It is meant to pay for expenses other than tuition, such as housing. Parents can withdraw money from the accounts in limited circumstances, and only money that they contributed, as opposed to the matching funds.
Levere said the poorest families in such programs tend to save the most money. When parents save for their children, the hope is that the children will learn to follow their example. She described the accounts as a way to “move people out of poverty in a significant way.”
Heritage Bank is the operating sponsor for the program, managing accounts opened at its branch on South 56th Street. The bank secured a challenge grant to THA from a local foundation to fund the effort from 2016 through 2022.
“Tacoma is working with the right partners,” Levere said. “This is not a problem that gets solved by one player.”
Heritage Bank held a ribbon cutting last week for a new branch at Salishan. While online banking is increasing in popularity, Mirra said it likely does not hold the same appeal for children. For children in Salishan, he feels walking by the building that has their money will serve as a concrete reminder of the importance of saving.