Low-income families are highly misunderstood. Some believe they are lazy, others believe they have a stroke of bad luck. Whatever it may be, it is hard for a low-income family to raise their children and provide for them just the little things in life that middle and high-income families tend to take for granted. There are ways to help yourself rise above the struggle and work your way towards a brighter financial future. If nothing at all, you would at least be able to better manage your income to ensure you can put food on the table, pay rent, and cover your basic utility needs. Open a Bank Account and Use Direct Deposit The most important thing for a family with low income to do is start realizing their savings potential. Financial institutions in the past have made it a bit difficult for low-income families to open and maintain a bank account. Reasons have been due to needing a high deposit and balance to waive fees or a certain dollar amount of transactions a month. If you do not have a lot of money, this is hard to agree to. Unfortunately, the repercussions are high fees. In addition, you may have not been able to manage your money wisely and gotten off track. In situations like these, you may have an overdrawn account, which generates more fees. In the end, banks may close the bank account or the family walks away altogether. There are ways around this. In addition, in doing so, you can save money. If you responsibly manage your bank account, you can avoid bank fees, check-cashing fees, and purchasing fees for money orders and certified checks. This money frees up cash for your family and your savings account. The best way to get started is to work with a financial institution that offers minimum bank fees. You want to open a checking and savings account. It should not require a high deposit and should have no minimum balance requirement. That eliminates unnecessary fees the moment you open your account and eliminates the stress to fund your accounts. Credit Unions offer many incentives for those seeking a reliable and affordable financial institution. Next, if your employer offers direct deposit, sign up for that. Direct deposits ensure your paycheck is in your account immediately. There is no more check cashing fees to worry about and you can even start paying your bills online through online banking. You can also set your direct deposit up to automatically transfer a specific dollar amount or percentage of your paycheck into this savings account. Join a Bank or Credit Union That Supports a Matched Savings Program An additional benefit of joining a financial institution, are that some want to help low-income families progress. You will find many credit unions and banks are participating in matched savings programs. These are a great way to help low-income families achieve their savings goals. Besides matching some of their contributions from $1 to $5, the program hosts valuable financial literacy training to sustain a family’s financial well-being. Consider Your Savings as a Monthly Bill You have heard people state to keep an emergency account or a savings account. The problem is that the two should be treated separately. Your savings account is just that. It is saving for a short term or long-term goal. You have a specific goal in mind such as saving for your down payment on a house, to use the funds towards your child’s higher education expenses, for a family vacation, to save towards your retirement, or purchase a new set of tires for your vehicle. When you have set your savings goal, it is time to consider it a fixed expense. Treat it like a monthly bill and faithfully deposit your funds into this account. It does not have to be monthly or a lot. You can set up a transfer from your checking to your savings account weekly, bi-weekly, or monthly. It can be $5 a week or $5 a month. Just get into the habit of saving towards your goal. Understand What an Emergency Is Now that we have touched on what a savings account is, it is time for you to understand what an emergency account is. In essence, it is a savings account; however, in a time of emergency you can use these funds. When times get extremely hard, you can dip into your goal savings account. If you cannot afford to have an emergency account and savings accounts, put the savings account on hold and start your emergency fund. Most families end up grateful they had this in place at one time or another. Let us discuss what constitutes as an emergency. How many people have chosen to fix the speakers in their car, upgrade to a bigger set of tires when the standard set would do, fix or replace their television that’s been on the fritz, grown tired of their worn down couch and purchased a new one, or outdone someone else on a relatives birthday gift? The above examples are not necessities in life, so they do not warrant being an emergency purchase. A true emergency is something that puts your family’s health or safety at risk. Your furnace leaking or no longer working, plumbing issues, rent is behind, or a teen working late nights and their car is on the fritz and needs repair. Sometimes you need to separate your wants from needs to make the decision of what constitutes as an emergency. Consider the alternatives if possible. For instance, if your car does need a new set of tires and you can’t afford it, could public transportation be an option until you can save up for it? Now of course, it is all easier said than done to advise low-income families to save money. Yet, once you have established a checking and savings account how do you fund it? Most low-income families are pinching pennies, so to speak. There are barely enough funds to pay bills, if all on time. So let us discuss ways to place money into this account. Creating a Budget To manage your funds, you have to know where your income is going. Most families think that creating a budget is easy. If they have never done one before, it seems common sense. They know exactly what their bills are. For most though, this is inaccurate. It may take you less than 15 minutes to create via a spreadsheet or on paper your household budget, which consists of your income and monthly household bills. However, you must dig deeper. For instance, after creating your spreadsheet, you may find that after paying your household bills, you have money left over at the end of the month. However, in reality, do you? Of course not. You more than likely have forgotten to write down your gas expense, oil changes, groceries, household supplies, doctor’s co-payments, that twice a week coffee shop run, or ringtone download. Cut or Reduce Expenses Therefore, you may wonder, how does a ringtone download make it on the list of expenses for a low-income household? You would be amazed at the prioritizations a person would have. It has not to say you should not have any sort of personal satisfaction. You are working hard for your money. However, you must use what you have wisely in the process. Therefore, here are a few expensive and inexpensive expenses you can reduce. Your Automobile Expenses How much do you spend on your vehicle? There are many costs involved, such as your monthly car auto loan, auto insurance, oil changes, gas, and other auto maintenance expenses. You could be looking at over $500 a month in auto expenses. Instead, consider eliminating a car in the household or both. Check out public transportation and see if it will work with your family’s schedule. If you cannot eliminate the car, reduce the expenses. Have necessary maintenance work performed on your vehicle when needed as opposed to lingering around causing additional problems. Check into discounts for your auto insurance such as multi-policy discounts, employer discounts, and safe driving discounts. Health Insurance Expenses Having health insurance not only ensures you can get preventative care, but also cut the costs of other emergency room visit expenses. Medical expenses hold a substantial weight against low-income family’s budget. If you cannot afford insurance, look into CHIPs. It is the federally sponsored Child Health Insurance Program. Regular doctors’ visits can keep your children healthy and out of the emergency room. Expendable Amenities at Home Expenses Now let us look at your home expenses. Just the little things can reduce your bills by $5-$10 a month, which you can place directly into your emergency fund. Consider your television usage. You may be paying for premium cable channels. Consider just the basics and if you must, add on a service such as Netflix or Amazon Prime. Amazon Prime has gone up in price, but a bonus to look at is that you could save so much money a year on shipping costs and product selections. They have a wide range of products at affordable costs, and you save time and money from driving around store to store looking for your items. If you have high-speed internet service, consider lowering your speed. Often times, you are paying for much more than needed. Do you have a package deal for cable, internet, and a landline phone? Eliminating your landline can save you a few dollars a month, especially if you have a cellular service. Do not be a Victim to Outrageous Businesses Just because a company is, a verifiable business does not mean they are not swindling you for your money. Many businesses prey on low income families. They know you may have less than perfect credit, so you are almost locked into using their services. For example, you may not be able to purchase a new or even used furniture set without using some form of credit. Without your own credit card or line of credit, you would need to use the stores. You will find yourself with a high interest rate loan at a rent-to-own store, paying three to four times, over what the items are even worth. The same goes for buy-here and pay-here auto lots and payday loan lenders. Get Family and Friends Involved In Your Childs RESP Your child’s future is bright, and you can still contribute to their higher education costs by getting family and friends involved. The easiest way is through signing up your child for a Registered Deduction Savings Plan (RESP). Anyone can contribute, including your friends and family members. The capital gained is not taxed until it is paid out. If your child is already enrolled in college, make sure to review with your tax preparer options to claim their tuition and college expenses on your tax return. The government also contributes to RESPs in the form of grants. Some provinces contribute additional incentives. If your child has a RESP, they may also qualify for the Canada Learning Bond or the Canada Education Savings Grant. Developing a Cash Control System to Complement Your Budget A great way to control your spending is to develop a cash control system. Having a checking account is almost dangerous for low-income families. It is easy to swipe your debit card that the financial institution gives out to you and soon have a lower balance than expected. Once you have created your budget, you need to complement it with a cash control system. Here are two great methods. Using the Envelope System The envelope system is easy. You simply take a few envelopes and label each in a specific category, i.e. groceries, gas, entertainment, household supplies, clothes, pets, and savings. The purpose is to control your spending in each category. Place the amount you have budgeted for the month or week in there. Keep these envelopes with you and your debit and credit cards at home, so there is no excuse. If you are the type of person that wants to grab an item on sale to store as a gift item, you should have a splurge envelope as well. Using the Pre-Paid Debit Cards System This is a similar technique to the envelope system. Instead of cash, you have a reloadable pre-paid debit card for each category. Place a sticky label on each to know what you can use each for. No matter which system you use, each time you are paid, you want to move that amount of money into that envelope or on that debit card. That is your allowance, and if you run out of funds, you have two options. Either you are just out of money and must wait until your next paycheck or you can move money from another envelope onto that one. You can use the system however you’d like. You may want to move all your money left into a savings envelope or deposit into your savings or emergency account. You may decide to treat the family to pizza. The point is to manage your money wisely. Using one of these methods guards you against the urge to swipe your debit or credit card. When you have to fork over cash, you may think twice about that purchase. The same goes for your pre-paid card. You know once it’s empty, that’s it. You also don’t want to deal with the embarrassment of your card declining because you’ve used all your funds. How to Bring in Supplemental Income On a final note, it’s important to bring in as much income as you can. This does not always mean going out for a second job and never seeing your family. However, if you are on a one-income household and there are two people, the second should consider going out to get a job. Now, if you deem it’s more feasible for one to stay at home versus placing children in daycare, then that may be the smartest move. But the 2nd person can still generate income for the household. So instead of watching television or catching up on sleep, why not turn a skill into income? You can easily do things around your home such as making pottery and selling at a craft sale. You could use your gardening skills and sell seedlings or potted plants. Take up a class and learn a craft. Look around your home and start reading about how to sell your items you no longer need. Once you have that down pat, possibly focus on selling items on eBay or Craigslist for neighbors, family, and friends and taking a percentage of the income. If you are a trade mechanic, electrician, plumber, barber, or a hairdresser, work on doing that on the side. If you are at home all day with your children, maybe you can sit for a few friends’ children who are in a bind as well. You not only will make more money, but your kids will have a playmate or two. Finally, do not forget about governmental assistance programs. For example, you can sign up for the Federal Income Assistance Programto help with your basic food and shelter needs.In Ontario, you could sign up for Ontario Works or Ontario Disability Support Program. These two programs help financially.