by Jyothi Venkatesh, Financial Literacy Worker at NYCH

re-blogged from Credit Canada 

piggy bank image

The importance of saving money and building a nest egg cannot be over exaggerated. Every individual is responsible for supporting themselves and their dependents in order to build a comfortable future. This simple logic is relevant to everyone – including people on social assistance. However, given the different regulations surrounding welfare schemes, it can force some people to remain in a perpetual cycle of poverty, impeding them from ever building future savings..

In Canada, every province has its own social assistance system. While there are many financial literacy resources available for people of varying income levels – such as budgeting, saving and investing – there isn’t much information for people on welfare programs. This is extremely concerning, especially considering that according to the Canadian Centre for Policy Alternatives’ study on Ontario's Social Assistance Poverty Gap the majority of people living on social assistance also live below the poverty line without any kind of financial assets, so they probably need this information the most if they have any hope of ever rising above poverty. 

Saving schemes and asset limits

Let’s take a look at an example of possible savings opportunities for people on welfare in Ontario.

Ontario has two main social assistance programs: Ontario Works (OW) and the Ontario Disability Support Program (ODSP).

Approximately 7% of Ontario’s total population is on welfare, and according to recent reports, this figure is only going to increase. As such, it's important to encourage people on welfare to build up their savings and financial assets in order to help them rise above poverty and secure their financial future.

A welfare case worker always evaluates a potential beneficiary’s financial assets prior to granting them welfare. The financial evaluation includes examining their current financial assets, and then these assets are categorized as either exempt and non-exempt. Exempt assets are typically those that are linked to survival, such as a home, RESPs, necessary household items, etc., and these are not taken into account when determining an applicant's eligibility for income support. However, non-exempt assets are considered when determining a person's eligibility for social assistance programs, and if an applicant has non-exempt assets beyond the prescribed limits, that individual would not be eligible for income support.

The table below provides an overview of non-exempt asset limits under the two welfare plans:

table 1

table 1

*The above asset limits are too meagre to build up any type of savings that would secure the financial future of welfare recipients. Fortunately, the recent 2017 Budget addressed this by increasing the above limits to the amounts listed below, effective as of January 2018:

table 2

table 2

Thankfully, the increase in asset limits allows welfare recipients to actually save. However, according to the social assistance directive on non-exempt assets, these potential savings should be in the form of cash or liquid assets only. This provides some opportunity for recipients to build up their savings or open a Tax Free Savings Account (TFSA), which can go a long way in creating a financial buffer, as well as improving a person's mental and emotional wellbeing.

Tips on how to help 

As a professional dedicated to helping those on social assistance, there are many things we can do, including:

  1. A case worker should be trained to talk about general financial literacy to the applicant and also provide information regarding savings limits under different welfare schemes.
  2. A case worker can provide the applicant a list of settlement agencies that offer free financial literacy services.
  3. Settlement agencies should provide the applicant with information on various eligible savings options, as well as any relevant details regarding these options.
  4. The agency should also provide multiple one-on-one meetings with the applicant as follow-ups.
  5. If the individual on welfare wants further help, such as guidance when opening savings accounts or filling out the appropriate paper work, the settlement agency should liaise with banks on the individual’s behalf.

With effective interventions, asset building is possible for people on welfare, especially when it comes to building non-exempt or unrestricted assets, which can definitely help during a financial crisis. These savings could also provide the necessary financial means to complete training and skills-building programs or to start-up a micro business, which will ultimately allow these marginalized groups rise above poverty.