ALABAMA A&M and AUBURN UNIVERSITIES

This is the second article in the series. It will discuss why many Americans don't save and offers some low-cost steps that could raise the savings rate for lower-income households.
 

TRUE OR FALSE: "I CAN'T AFFORD LOW-COST, MONEY-SAVING STRATEGIES"

AUBURN, FEB. 14, 2000---Why aren't people with limited resources taking advantage of free or low-cost financial services and programs? Some people don't know about or understand the programs, but the majority of people don't take part because they say they can't afford it.

Some of these "can't-afford-it" individuals and families are below the poverty line, while others are marginal, says Dr. Fred Waddell, a family resource management specialist with the Alabama Cooperative Extension System.

The U.S. Census Bureau is revising the definition of what constitutes poverty. The new definition raises the income threshold for living above poverty from $16,600 to $19,500 for a family of four. This is a 4.3 percent increase. The change means that 46 million Americans (17 percent of the population) are officially living below the poverty line. This figure contradicts the 12.7 percent announced in Sept. 1999, which was the lowest level of the decade.

Sociologists and economists who study what people must earn to escape poverty in the United States, put the line higher than what the Census Bureau is considering. They put the threshold for a family of four at between $21,000 and $28,000, partly because the Census Bureau's figures don't allow for extra cash for emergencies, such as fixing a car. A higher threshold means that government spending for benefits for the poor, such as food stamps and Head Start programs, would have to rise.

The need for a redefinition of what constitutes poverty doesn't entirely support the belief of poor and near poor people who say they can't afford to save money or take advantage of money-saving opportunities. A 1997 study found that most low and moderate-income households who don't save don't do so because of a perceived inability to save.

Here are some of the reasons they give for not saving.

• Saving would make them ineligible for government transfer payments, and family members wouldn't help them through a financial crisis if they had savings.
• Family members or others in their community would insist that they share their savings.
• There's no point in saving because it would inevitably be wiped out in the next family financial crisis.
• They might be able to save $20-$30 a month without creating hardship, but that this was too little money to make the effort worthwhile.

• Increase the resources devoted to household budgeting education and to conduct research measuring the effectiveness of budgeting education initiatives.
• Publicize asset limits for eligibility for government transfer programs. Many low-income persons believe the limits to be much more restrictive than they actually are.
• Encourage banks to offer low-cost savings accounts combined with convenient, low-cost money orders for long-distance payments to reduce the bounced-check fees paid by many households with small-balance accounts.