Ohio Treasury Cordray Launches SaveNOW to Change Citizens’ Savings Habits
Ohio Treasury Cordray Launches SaveNOW to Change Citizens’ Savings Habits
ONB COLUMBUS: With winter winds blowing a chill across Ohio, and the prospect by many reputable economists that the next recession is waiting in the wings to make its cameo appearance, bringing with it more financial heartache to a state that has yet to recover the last recession of 2001, the timely announcement by Ohio Treasurer Richard Cordray that he’ll plunk down $25 million in state investment dollars to help Ohioans save more and earn higher interests rates on their savings, is a warm breeze in an otherwise frosty environment.
Cordray, a Democrat who was ushered into office in 2006 when Ohioans voted to kick the Republican bums out who had ruled the state for about 16 years in favor of new faces and new ideas, has astutely used the authority and tools of his office as the chief investment officer to his advantage and not fallen into political potholes like others in his incoming class of Democrats, notably Secretary of State Jennifer Brunner and Attorney General Marc Dann, both of whom have stumbled and tripped on their own egos and agenda misadventures.
In a speech Wednesday to a group of Columbus movers and shakers, Cordray unveiled his SaveNow program. Describing the program as a “tool to educate citizens about personal finance while helping them earn above-market interest rates on savings accounts and develop the habit of saving,” the photogenic 49-year-old attorney who ran unsuccessfully for the United States Senate from Ohio in 2000, said the goal of the program “is to promote financial responsibility and spark lifelong savings habits. This is an investment in Ohioans and the future of Ohio.”
“For the first time in history, Americans are spending more than they earn. Ohio families especially are under extreme financial pressure right now with no margin for bad judgment, economic circumstances, or downright bad luck. As a state, and as a society, we are well beyond the point where this is someone else's fault, or someone else's problem. [Richard Cordray]
The message from Cordray about the importance of saving is similar in nature to the message from Suze Orman, the high priestess of personal financial responsibility about the need to save. On a recent Larry King Live show, the bedazzling blonde beamed with happiness that retailers had not done as well over the holiday season as they had wanted. She took their grief in a shortfall as a positive sign that individuals might be wising up by no longer catapulting themselves willy-nilly into credit-card debt to dutifully perform like good American consumeroids, buying for the sake of buying, even if it meant they will not have any personal savings when it comes to time to retire.
Cordray, blond by birth, seems to be echoing for individuals caught up in the forces of retail the long-forgotten admonitions of former President Dwight Eisenhower, who upon leaving office issued this warning about the ills of too much spending by government:
”Another factor in maintaining balance involves the element of time. As we peer into society's future, we-you and I, and our government-must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.” [President Dwight Eisenhower, Farewell Address]
Cordray, a Columbus native whose cultural claim to fame was that he was an undefeated five-time champion on the “Jeopardy” television program in 1987 and a semifinalist in the Tournament of Champions, where he won $45,303, spoke of the siren songs of commercial retailers and the sweet messages that falsely say spending is more important than saving.
“A debt-based economy is a fragile one, which operates under a different set of rules than we were taught—if we were lucky—when growing up. A credit-centered economy is based on consumer spending. There's nothing wrong with that, if the playing field is level. Unfortunately, when the product that is being created, packaged, and sold is debt instead of widgets, the way most of us think about the world is turned upside down.
“If the CEO's on Wall Street are making mistakes, which we have heard a lot about recently, how can we expect young people, pressured families or senior citizens living on fixed incomes to stay ahead of the game? Financial education and personal responsibility are the most important place to start. More responsible corporate practices and consumer financial safety is where I hope our efforts will lead us.” [Richard Cordray]
In his letter to the Ohio General Assembly, who will decide whether they want to move forward with his idea and if so in what manner, Cordray said that “for the first time in 74 years, Americans are spending more than they earn. Too many Ohioans lack a safety net to cope with life’s unexpected events.”
The SaveNOW process is as follows: 1) Interested banks apply to the Ohio Treasury to become a state depository and to be elgible to participate in the program; 2) Bank agrees to provide premium interests rates to the savers; 3) The Ohio Treasury places deposits in approved banks; 4) An Ohioan opens a SaveNOW savings account at a participating bank; 5) the saver completes a financial literacy assessment and receives ongoing educational materials; 6) Savers enjoy an additional 3 percent interest rate incentive at the conclusion of the SaveNOW program period; and 7) Annually, the Ohio Treasury seeks feedback, evaluates the program and reports to the General Assembly.
Cordray said the program is modeled on the Treasury’s successful linked deposit programs that have helped thousands of Ohio farms and small businesses and will not materially impact Ohio’s budget, but will leverage the existing linked deposit program to help balance the budgets of many Ohioans who are struggling to save. He said It incentivizes savings and assures participants that their money is working as hard as they are.
There would be no limits on who can participate, or when a saver could withdraw funds. All it requires is for participants to set aside a small monthly sum of money in an amount that they decide is right for them.
There would be no minimum deposit requirements or fees for use of the account.
Participants are limited to $5,000 in the average daily balance.
SaveNOW accounts would be limited to one per Ohio resident but may be opened by a parent, grandparents, or guardian for a minor or dependent adult. The program would be available initially on a first-come, first-serve basis until $25 million of deposits dedicated to the pilot project are used.
Under current law, Cordray said the Ohio Treasury can use 12 percent of its portfolio—about $600 million—for linked deposits. About $25 million dollars would be dedicated to fund a pilot version of SaveNOW.
John Michael Spinelli is a former Ohio Statehouse government and political reporter and business columnist. He now serves as the OhioNews Bureau Chief for ePluribus Media Journal. Find ONB archives here.
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