An essential step to help set up young people for financial success when they leave foster care is ensuring they have a bank account. This need became apparent through the Texas Pandemic Aid Project in 2021, which was federally funded assistance dispersed by Texas to support young people who had aged out of foster care. One challenge during Pandemic Aid disbursement was that very few young people who aged out of foster care had a checking account to receive pandemic stimulus funds. Partners on the project had to devise alternatives so that youth could receive the pandemic relief funds they so desperately needed. Without something as simple as a bank account, many young adults were evicted, became homeless, or lost access to essential resources.
This challenge continues after the pandemic as well. Many young people in foster care without bank accounts are excluded from job opportunities because employers require a bank account to receive payments through direct deposit. For jobs that do not require direct deposit, if youth do not have bank accounts, they will cash their checks, pay extra fees, and end up having a large amount of cash on them. That cash tends to get lost when moving from placement to placement or may get stolen if not properly secured.
During the 2023 legislative session, the Legislature recognized the state should equip youth transitioning from foster care into adulthood with tools to help them be successful, stable, and secure. Taking an important step to address this challenge, the Legislature passed SB 1379 by Sen. Tan Parker, similar to HB 2645 by Rep. John Lujan.
SB 1379 directed the Department of Family and Protective Services (DFPS) to establish a pilot program to increase the financial independence of youth in foster care or young adults transitioning out of care. To implement the bill, DFPS is partnering with Capitol Credit Union and Raise Texas to set up bank accounts for youth as young as 14.
The pilot ensures youth leave foster care with greater financial independence, literacy, and security as they transition to adulthood. Known as the Youth Savings Pilot, it will consist of a three-tiered program that gradually builds financial skills for youth in care:
Tier 1: Youth will take financial budgeting and savings classes. Once youth complete this component, Capitol Credit Union will open a savings-only account for them, and the credit union will deposit a $25 incentive into their accounts.
Tier 2: 16- to 17-year-olds who graduate into Tier 2 will be eligible to open a checking account after six months of proven financial responsibility. The credit union will train youth on checking account management. No fees will be assessed on these accounts, as no overdraft access will be allowed, and youth may withdraw up to $50 per day from their account.
Tier 3: Youth must have nine months of proven financial responsibility to graduate into this phase. Once youth turn 18, they can manage these accounts independently.
Participating youth will take a knowledge assessment before entering and as they exit the program to determine the growth of competency in financial management. DFPS will include these data in a program evaluation analysis that they will report to the Governor and Legislature in 2027.
DFPS and Capitol Credit Union (CCU) are currently stress testing the pilot in Central Texas and plan to fully roll out the pilot during the second quarter of this year. Throughout the three tiers of this pilot, youth in care will learn how to open a checking and savings account, have hands-on experience with banking, and be paired with a financial mentor who can guide them and strengthen their skills in money management. This learning opportunity should empower young people to make better financial decisions well into the future.
During this early implementation, we hope DFPS pays particular attention to two key issues:
In Tier 2 of the pilot, if a young person makes three mistakes, their account will be temporarily closed. They then need to meet with their financial mentor to fix the errors. This policy aims to teach youth the real-life effects of banking mistakes. However, everyone makes financial errors, especially when first learning about money management. We urge DFPS to monitor and evaluate this policy to ensure it is used as a teaching tool without discouraging young people from banking.
Another challenge could be the amount of work expected of youth participating in the pilot. We encourage DFPS to monitor the workload to ensure young people are not overwhelmed but eager to participate. Incorporating this type of monitoring will aid in the pilot’s success and help youth feel supported and encouraged.
We are thankful that DFPS is working quickly to support older youth in care through this pilot. Youth in care will have more access to job stability and safer options to store their money. We’re excited that the pilot equips youth with financial literacy tools and ignites a culture in which youth are heard, involved, and empowered to take charge of their well-being as they learn concrete skills to help them in the years ahead.