The importance of saving money and building a nest egg cannot be over exaggerated. Every individual is responsible for supporting themselves and their dependents to build a comfortable future. This is true for everyone – including people on social assistance. However, given the different regulations surrounding welfare schemes, it can force some people into 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 on 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, so they 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 linked to survival, like a home, necessary household items, and even RESPs, and these are not taken into account when determining an applicant's eligibility for income support; however, non-exempt assets are. 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:
|
OW |
ODSP |
|
|
Single applicant |
$ 2,500 |
$5,000 |
|
Single applicant with spouse |
$ 5,000 |
$7,500 |
|
A couple with dependents ($500 increments for each additional dependent) |
$5,500 |
$8,000 |
*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:
|
OW |
ODSP |
|
|
Single applicant |
$10,000 |
$40,000 |
|
Single applicant with spouse |
$ 15,000 |
$50,000 |
|
A couple with dependents ($500 increments for each additional dependent) |
NA |
NA |
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 well-being.
Tips on how to help
There are many things professionals dedicated to helping those on social assistance can do:
- Forward free financial literacy resources to applicants while providing information on saving limits under different welfare schemes.
- Provide a list of settlement agencies that offer free financial literacy services.
- Provide information on various eligible saving options, as well as any relevant details regarding these options.
- Conduct multiple one-on-one meetings with the applicant as follow-ups.
- Liaise with banks on the applicant's behalf to help them open proper savings accounts and fill out the appropriate paper work.
With the right support, asset building is possible for people on welfare, which can definitely help during a financial crisis. It can also provide the means for additional training and skills-building, which can help these marginalized groups rise above poverty, once and for all.
Written By: Jyothi Venkatesh, Financial Literacy Worker from the North York Community House.
