Low-income families face financial obstacles every day. Maybe you worry about being able to put food on the table or clothes on your growing kids’ backs. Or you lack access to a bank account and credit card and don’t know how you would possibly pay for an emergency. Perhaps you’re letting your health decline because you can’t afford to pay to see a doctor. Whatever your particular concerns are, there is help out there.
First, it starts with you and learning how to manage your finances so you can prevent some of these dire situations. We’ll give tips on how to do just that. Second, know that you don’t have to go it alone. There are federal and state government assistance programs that exist to help families just like yours. There is no shame, ever, in asking for and receiving help – that’s what it’s there for. Here we include information on some of the programs that provide assistance for low-income families.
Tap into banking resources
Being unbanked or underbanked sets you back in so many ways. Instead of turning to payday lenders or other unsavory sources, here are some tips on how low-income families can access banking resources without getting ripped off:
1. Get a secured credit card
If you don’t qualify for a regular credit card but want to start building up your credit score, a secured credit card is a great first step to do that. With a secured credit card, you put down a deposit of usually a few hundred dollars. Once you do that, you can borrow against that amount. Often, after using the card responsibly for a period of time, you might be able to upgrade to a standard credit card. This can also help you raise your credit score enough to apply for a new card.
2. Open a checking account
A checking account is one of the basic tools you should have in your personal finance arsenal. Unfortunately, some low-income families are denied access to traditional checking accounts. This could be because of past issues such as unpaid fees or bounced checks.
If you do not have access to a traditional checking account, consider a second-hand checking account. While these accounts usually have more requirements than standard checking accounts, including monthly fees, they are often better than the alternatives like cash-checking services. Banks offering these accounts include Chime, GoBank, and Varo.
3. Consider alternatives like lending circles
Low-income families can also turn to non-traditional sources to access money. One such place is a lending circle. These are groups of people who lend each other money at no or low cost. The group helps each other raise money for things like down-payments, car loans, or debt payoff.
A lending circle works by having each member contribute a set amount each month (e.g., $50). Then there is a rotation for which member receives the pooled funds that month. If your lending circle has ten members who each put in $50 a month, every month one member receives $500, and the circle rotates until everyone has had a turn. If you are interested in a lending circle, see here for more information and learn how to join one.
4. Get help with immigration application filing fees
Lastly, if you are an immigrant family with low income, you likely face additional financial challenges and hurdles. One hurdle, in particular, is the cost to apply for immigration statuses such as citizenship, a green card, and DACA, among others. Mission Asset Fund provides 0% interest rate loans to immigrants to help pay their USCIS application fees. These payments are also reported to the credit bureaus. And so participants have the chance to build up their credit scores at the same time.
Take care of your health
We don’t have anything if we don’t have our health, so the saying goes. But our health is often one of the first things we let slide when our bank account is low. Even if you have health insurance, the cost of co-pays, medicine, and emergencies can really start to add up. While many medical expenses are unavoidable, the more you take care of your health, the less you end up paying in healthcare costs over time.
A family with low income can try a couple of these tips to invest in their health. This, in turn, can result in long-term health and financial benefits:
- Eat pasta, beans, or soup in place of meat 2-3 times a week, which would result in an annual savings of $780.
- Quit smoking a pack of cigarettes a day, which would result in an annual savings of $1,820.
- Schedule regular check-ups and take care of any health issues as soon as they arise, instead of waiting until they become bigger (and more expensive) issues.
- If you are overweight, try losing weight. According to the CDC, a 10% weight loss could reduce a person’s lifetime medical costs by $2,200 to $5,300.
When it comes to taking care of your health, health insurance is a must-have. While there are certainly ways to stay healthy on a budget, there is only so much preventative action a person can take. Accidents and some diseases are inevitable, not to mention growing older and the associated healthcare costs that come along with age.
That’s why the government provides assistance for low-income families to help offset healthcare costs. The three main programs are:
Medicaid is a combined federal and state program that provides basic health care coverage to low-income families and individuals. Eligibility for Medicaid is based on the federal poverty level, which, for a family of four in 2021, is $26,500. Individual states determine who exactly is covered (some states actually expand coverage beyond the federal guidelines), so you should refer to your own state’s Medicaid program. Be sure to check your eligibility.
2. The Children’s Health Insurance Program (CHIP)
CHIP is another federal and state joint-partnership that provides health insurance coverage to children and pregnant women. CHIP generally covers children whose families cannot afford private health insurance but who do not qualify for Medicaid because their income is too high. While eligibility is based on income, every state has its own eligibility and coverage guidelines, so you should refer to your state’s program for more information.
Medicare is a federal government program that provides health insurance for people with disabilities and those age 65 and older. Eligibility is not based on income level, but many low-income families are eligible for Medicare (as well as Medicaid). If you are eligible for both programs, you can apply for Medicaid to cover the services that Medicare does not cover.
Earn more money
One of the best ways to go from low-income to middle or even high income? Make more money. Of course, that’s easier said than done, but there are ways that low-income families can increase their income. These include:
1. Go back to school or taking online education courses (at low or no cost)
Going back to school is a huge commitment and might take away from your current earnings, but it also greatly expands your future opportunities. If you are not ready to go back to traditional school, there are plenty of online educational resources that are free or low-cost. These include Harvard University’s courses and Coursera, which can give you the skills you need to advance in your career or start a new one.
If you do want to go to school to earn a degree, there is financial aid available to low-income families for this, too. Some of the most popular forms of aid include federal, state, and college-specific grants, as well as private scholarships.
2. Ask for more money
Another way to make more money? Ask for it. Negotiating with your current employer for a raise is one of the fastest ways to boost your income. Here are some great tips on how to successfully ask for and get a raise.
3. Start a side hustle
Lastly, starting a side hustle is another way to boost your income. While not every family with low income has the time to devote to a side hustle, you should consider one if you do have some flexibility in your schedule. A side hustle is one of the best ways to go from low-income to middle income and beyond. For tips on how to start a side hustle, check out this guide. Keep in mind that you want to be intentional about saving part of any raise or extra income you earn.
Save on food spending
If you’re like most of us, your grocery budget is a huge part of your monthly spending. If you take a hard look at your grocery spending and leverage cheap (yet healthy) meals, you’ll probably be surprised at how much you can cut back. Sometimes, you can even cut your budget by half! In addition to cutting back on your groceries themselves, creating a monthly meal planner can help you prepare delicious meals and slash your budget at the same time.
While cutting back on groceries and meal planning will save you plenty, sometimes it’s not enough. If your family is food insecure and needs additional assistance, there are resources available to you from both the government and private organizations. Assistance for low-income families includes:
1. The Supplemental Nutrition Assistance Program (SNAP)
SNAP, sometimes still referred to as food stamps, helps millions of Americans in need get access to groceries and healthy food. In 2020, SNAP was so popular that the government increased its spending on the program by 50%, and 44 million people, up 20% from the prior year, accessed the program.
A family with low income can access SNAP benefits if their monthly net income falls at or below the poverty level. An eligible family of four can receive up to $782 a month. If you are one of the millions of Americans looking to access SNAP benefits, you can apply for them in your state. Each state has its own application process, and you can find more information on that here.
2. USDA Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
If you are pregnant, a new mother, have an infant, or a child up to the age of five, you may be eligible to access WIC benefits. WIC is administered by the states and provides nutrition and breastfeeding services, supplemental healthy foods, education, health care referrals, and other resources to help support your family. Low-income families can check their eligibility and apply for WIC benefits on their state’s page.
3. School meals
Public schools provide millions of children with free meals every day. But what happens when schools are closed, like for instance during the pandemic? These free meals used to have to be eaten at school, but the government now allows them to be picked up and taken home to eat. You can use this tool to find a nearby site to pick up meals for your family.
4. Food banks
The government is not the only place to turn to for help when you are struggling to feed your family. There are local food pantries and meal programs across the country that provide low-income families with the support they need, no questions asked. Check out this page to find a food bank in your area.
5. Other community organizations
Low-income families struggling to feed their families can find help in their own neighborhoods, too. One such local organization, Lasagna Love, connects volunteers who prepare home-cooked lasagna meals with low-income families.
Families can sign up for a meal and it will be delivered to their home by a volunteer “Lasagna Mama” or “Lasagna Papa.” Organizations like this are both a good resource for those in need and a good reminder that there are people out there willing to help you get back on your feet or bridge the gap when finances are tight.
Opportunities for credits and further assistance for low-income families
Between worrying about how you’re going to pay the next month’s rent and whether you are saving enough for your kid’s college, you might let some of these tax credits and government assistance slip through the cracks. Don’t let that happen – here are some to be aware of:
1. Earned Income Tax Credit (EITC)
The EITC is a tax credit that reduces or eliminates tax paid by families with low income. Your family might be eligible for up to a $6,600 tax refund (depending on how many children you have). But the key is you must claim this credit on your tax return in order to get it, so many people miss out on the money. Check to see if you qualify and, if you do, don’t forget to claim the credit on your taxes this year to receive the benefit.
2. Child and Dependent Care Credit
If you work and need to pay for childcare, this credit helps you offset childcare costs (or the costs to care for a dependent with disabilities). You can claim a credit of up to $3,000 for one dependent or $6,000 for two or more dependents. If you think you might qualify, check out these resources for more guidance on the details of the credit. Always be sure to speak with a tax professional to make sure you are accurately taking advantage of all the credits available to you.
3. Low Income Energy Assistance Program (LIHEAP)
Lastly, if you are a family with low income and need assistance with home energy costs, you might be eligible for LIHEAP. This program helps low-income families pay for things like their heating and cooling home energy costs and related repairs. If you are eligible for a government benefit program such as SNAP, you may be automatically eligible for LIHEAP. For more information and to see if you are eligible for this program, check out your state’s resource page.
Educate yourself, make a plan, and tap into available resources
Managing your finances as a family with low income is not easy, but by taking the right steps, it can be done. One thing we did not touch upon yet that is probably the most impactful tip is this: educate yourself. You can start by diving into one of the 30+, 100% free, personal finance courses that Clever Girl Finance offers.
By empowering yourself with financial knowledge, you’ll avoid the pitfalls so many make. If you do that, follow the tips here that are applicable to you and your family, and access assistance whenever needed, you’ll put yourself in the best financial position possible, no matter your income.