How those who can't save can

How those who can't save can

December 28, 2003
Mercury News
By Susan Tompor
Knight Ridder

NATIONWIDE PROGRAMS HELP LOW-INCOME AMERICANS GET

DETROIT - Saving money seems hopeless for many families who don't have much money. They might live on the edge, work for minimum wage, depend on Soc

ial Security, get public assistance or string along odd jobs to pick up what money they can.

Save what, exactly?

But Donna Hoover teaches a class on saving money that reaches out to people who are financially vulnerable. And you discover that every household, really, can save something and gain some ground.

To get her class going, Hoover loosens things up by asking students to grab a marker and a piece of paper to create a nameplate and, maybe, a more promising financial future.

The idea is to find a name to describe how you want to budget. Her own nameplate: Diligent Donna.

The adult students, many of whom struggle to make ends meet, create various names:

Less Spending Larry. Be Wise Barbara. And there's B. Smart Brian.

But tucked on the inside of his nameplate, he has written another name that speaks to the heart of his story.

Broke Brian.

``It's hard to save when you don't have nothing to save with,'' said Brian Martin, who lives in Pontiac, Mich. He receives a disability check through Social Security. His credit record is poor.

And so what's the point?

Learning how to save

Several programs nationwide focus on teaching lower-income families how to save. They also give working poor people a better understanding of how banks work and how to carefully use credit. Without financial education, lower-income families can fall victim to expensive payday loans, predatory home loans, costly tax preparation services and various credit-repair schemes.

It's better to understand upfront that paying bills late can drive up your cost of borrowing in the future than it is to casually charge away and deal with the consequences later.

And knowing how to build an emergency, rainy-day fund can save you from rushing for a quick, high-priced loan when the car breaks down.

The objective is to set goals, budget, talk about ways to repair credit and understand how to use banks and credit unions wisely.

Hoover starts her class by talking about simple things that end up costing a lot. Take buying two diet colas a day at work. It's $2.20 a day, or more than $500 a year, to buy them where she works.

And then the discussion quickly turns to cable television, cigarettes, fast-food meals for children, videos, lottery tickets and other budget-busters.

And then members of the class talk about their children or other family members who are more down on their luck and want money.

Vanessa Gamble, whose name card read Vice Vanessa, has six children and so much credit-card debt that she's not sure what she owes. She said her children want the latest athletic shoes. And her cable bill was climbing to $100 and higher a month. She cut back to basic services, about $32 a month.

``Sometime, you have to say no and stick with it,'' Hoover said.

Getting down to the basics is what it takes. It's true for any size paycheck.

``The fact is, there are savers and spenders in every income group,'' proclaimed Stephen Brobeck, executive director of the Consumer Federation of America, a network of consumer groups in Washington, D.C. ``Virtually everyone can build wealth,'' he said.

His program tackles the idea of getting families to save $10 a month, if that's all they can.

The America Saves campaign, a collaboration between the Consumer Federation of America Foundation and the Ford Foundation, encourages people to create a fund for emergency expenses and to ultimately save for a down payment on a home. Owning a home can build wealth.

Finding help

America Saves has grassroots initiatives in a dozen communities. The efforts focus on wealth coaching, savers clubs and no-fee accounts at participating banks and credit unions.

To assist black consumers, BET.com offers a free membership in Black America Saves. Visit http://bet.com/articles/0,,c6sc173gb3737-4418,00.html. Or interested savers may go to www.AmericaSaves.org to sign up for the program, which includes access to free advice from a volunteer certified financial planner by phone or Internet. A ``Hispanic America Saves'' program is on the Web site, too.

Saving money out of each paycheck is essential. And to start, it helps to open a bank or credit union account.

Some people have never had bank accounts, they never saw their parents have bank accounts, and they don't trust banks.

About 12.7 percent of all families in the United States do not have checking accounts, according to a January 2003 report by the Federal Reserve. More than half of those families are lower income, headed by people younger than 45 and non-white or Hispanic.

With a bank account, savers could have their tax refunds deposited directly into the account. It's important for low-income people who receive the earned income credit. They're more likely to use costly tax preparation and rapid refund services to get their money quickly.

And there's the cost of cashing paychecks and other checks, too.