United Way is committed to helping 1.9 million working families achieve financial stability by 2018. You can be part of this drive by helping low-income families to create a sensible savings plan. Budgeting is important for many people, and when income is low or sporadic, following a budget can be difficult. One way to protect families' cash flow is to help them create a plan that is tailored to their situation.
To start, list any unusual or large expenses that you know are going to be incurred in the coming year. Include celebrations such as Thanksgiving and Christmas, as well as household maintenance and car repairs. Make sure the savings plans are geared toward specific expenses to reduce the temptation to dip into it. Give each purchase or category a title, and include a category for emergencies.
Keep Your Savings Separate
Calculate income and outgoing money. If there is no surplus, the family should evaluate their habits to see if there is a way to either increase income or reduce spending. Presuming there is a surplus, designate some of this amount to be set aside each paycheck, and allocate small, regular amounts to each of the named expenses. The families can keep a separate bank account for each expense, but if this is not feasible, separate labeled envelopes for cash will suffice. Families who prefer not to keep large amounts of cash in the house can maintain just one savings account and track on paper how much is to be allocated to each expenditure.
Save Small, Regular Amounts
It may be tempting to borrow from the savings plan to spend on other things. Encourage the family to resist this urge. Explain that the money in the emergencies fund is available for true emergency expenses. Once people start moving money around from one envelope or bank account to another, it becomes much harder to track. The ideal is to see a nice, steady growth in each category every month. For the same reason, amounts in the savings plan should be small and realistic. Better to put in $10 each week and leave it alone to grow than to put aside $50 and find that money must be taken out again to survive.
By using this simple savings plan, you can help ensure that a family's major expenses are covered and help them avoid turning to credit cards or loans.