Why It’s So Tough to Save Money When You’re Poor

by Emily Guy Birken · 30 comments

We can all agree that living paycheck-to-paycheck is not an ideal situation. And it’s just as obvious that individuals doing this still need to save their money and build a financial cushion so they can finally feel secure.

Unfortunately, the basic rules of saving money are simple but not easy — particularly if you’re already behind the financial ball.

Here are three reasons why it’s so difficult for people in poverty to improve their situation:

1. Lack of opportunity

There’s a reason for the term “banker’s hours.” The majority of banks are only open Monday through Friday from 9 am to 5 pm. For many of us, that’s a minor pain in the neck, but not a big deal.

But someone who’s struggling with their finances and also relying on public transportation will find that banker’s hours pose an enormous problem. How do you get your paycheck cashed if you can’t make it to the bank before it closes?

This is further complicated if you have no bank at all. Eight percent of Americans live “unbanked,” meaning they have no bank account whatsoever. They can’t cash their paycheck without paying for the privilege — let alone set up direct deposit and remove the trip to the bank from the equation.

2. Lack of initial investment

Let’s say you need to move into a new apartment. You find a place where you can afford the monthly rent of $500, but in order to move in, you have to write your landlord a check for first and last month’s rent, along with a security deposit — which you don’t have.

Alternatively, you can move into a cheap motel that charges $35 per night. You’ll end up spending over $1,000 to stay there for a month, but you don’t have to cough up $1,500 all at once. The apartment is clearly the cheaper option, but without the initial investment, you can’t take advantage of it.

This is also why fast food is so often a staple of the working poor’s diet. According to behavioral economist Dan Ariely:

“So imagine that you went to a new house tomorrow with no food and you had to start equipping a kitchen. And you wanted to buy salt and pepper and olive oil and pots and pans. You would have to invest a lot of money in order to be able to eat more cheaply. Or you can go to McDonald’s. So it’s even hard to create the conditions to live efficiently.”

And of course, these issues create a vicious cycle: you spend more money than you can afford because you can’t afford the investment to save money.

3. Lack of time

In 2012, a Coupons.org study found that households with incomes over $100,000 were twice as likely to use coupons as households earning less than $35,000.

This seems counterintuitive, since lower-income households have a greater need for coupon savings. But one of the big differences between high- and low-income households is time — which is absolutely necessary for cutting coupons.

Though Americans across the income spectrum feel strapped for time, those living in poverty may spend their time dealing with issues that could’ve been prevented with more money. For instance, if you have to choose between servicing the car and groceries, you’ll probably choose the groceries — until the car breaks down and you must deal with the problem immediately.

If you’re constantly putting out fires, then it can be difficult to find the extra time to sit down with the Sunday paper and clip coupons.

The Bottom Line

Saving money is possible at any income level. But it’s important for those in the lowest brackets to recognize the ways their situation makes saving more difficult, then figure out solutions. It’s much harder to overcome a challenging situation if you can’t recognize all the ways it’s affecting you.

What else would you add to this list?

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current AT&T DSL and U-VERSE promotion codes and promos and see if you can save more money every month from now on.

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{ 30 comments… read them below or add one }

Retired by 40 March 31, 2014 at 10:41 am

The one about coupons is super interesting. I love coupons, but that aside I think you make a really good point! I think the use of coupons speaks to how conscious a person is with money. Using coupons is just one of the ways that a wealthy individual is smart with his/her money as opposed to a not-as-wealthy person.

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David Ning March 31, 2014 at 5:01 pm

I thought it was an interesting stat when I first heard it as well. But still, coupons aren’t miracles. You are still paying 50% when something is 50% off!

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Ruth Cooke April 4, 2014 at 8:02 am

Not to mention that for the most part, coupons are only on highly processed overpriced items anyhow. I do understand that American couponing is quite different from just about everywhere else, but everything I’ve read seems to indicate that if you’re going to really profit from it, you have to invest an amount of time on the order of having a second part-time job. From what I’ve read, doing it to full effect takes a car to travel to the different stores to get the best bargains.

Not having reliable transportation is a huge problem keeping people poor. In our city, you can’t take anything other than a day job if you rely on public transportation, and it can take an extra two hours out of your day just to ensure you get to work and back on time! That’s two hours you’re not earning money, saving money, banking, or doing much of anything. A car cuts that commuting time from an hour each way to less than ten minutes.

Lack of reliable internet access is also a problem in this day and age. There is so much available on line, and it’s all cheaper than in bricks and mortars store, but if you don’t have private access to the internet and a printer (for coupons), you don’t have access to those bargains. Not to mention that all but the most basic jobs have online applications, there are many ways to earn income with internet access, and there are many, many online opportunities for upgrading education and skills. But if you can’t afford the connection in the first place, you lose out.

Item #1 shows how badly the American banking system is broken. In Canada, I bank with President’s Choice. It’s entirely online, and you sign up when you go to the grocery store. I do almost no banking at the “normal” bank where I’ve had an account since I was 19, but when I do, the bank is open Saturday mornings.

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Jonathan March 31, 2014 at 12:08 pm

It’s such a diffiicult thing to do, however it is possible to save even on a low income, the question is about how quickly you save money.

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David Ning March 31, 2014 at 5:02 pm

Absolutely. Everyone just needs to start no matter how little the savings seem, as the first step is always the hardest to make.

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Ruth Cooke April 4, 2014 at 8:05 am

The main difficulty with saving money on a low income is that in order to save money, you need to have excess income. If all of your money goes to rent, food and transportation (or if, like many poor people you even run a deficit on these basic items), saving isn’t difficult, it’s impossible.

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David Ning March 31, 2014 at 5:00 pm

In the old days, those minimums bank require to maintain a fee-free account must be a huge barrier for many. Luckily, there are many alternatives these days that don’t carry fees for that section of the population who wouldn’t otherwise open a checking account.

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Gary Kerr April 2, 2014 at 10:32 am

I agree with your article. Yes it is really tough to save money when we have low income. But have to make possible to save money. Thanks for sharing

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Property Marbella April 3, 2014 at 2:38 am

Skip your TV watching an hour each week and then you get the time to clip coupons and save money.

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David Ning April 3, 2014 at 12:48 pm

Exactly! :) Every few weeks I’m reminded how glad I am to have cut my cable TV!

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denise April 3, 2014 at 7:27 am

I think poor people waste money like crazy. they buy junk food, have pity parties, smoke cigarettes etc. They make bad choices and also feel like they have less options.

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David Ning April 3, 2014 at 12:51 pm

The reality is that many rich AND poor people waste money like crazy. We can always find faults with any group of people that we categorize. The key is to change the mindset, which is why sites like ours exist!

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emtmomvt April 12, 2014 at 7:02 am

Denise – Have you ever had to live on one small income and feed three children? Have you ever tried to stretch that paycheck to buy healthy food? I have. And I can tell you that i spend twice as much at the market to buy fresh health food than to buy the boxed unhealthy choices. So, do you buy the fresh food that will last you five days or buy the boxed unhealthy food to last you 10 days. So, it is not that poor people make “bad choices”, they make SURVIVOR choices. And as for pity parties, when you don’t know how to keep your child fed since you cannot find a job and your husband is already working two – then yes, you can cry and beg for help. So, Denise, until you been there I would re-evaluate your opinion.

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threadbndr April 3, 2014 at 8:27 am

Re the investment cost. This is huge – my women’s professional group supports a program for women and children to transition from homelessness/shelter to stable home and one of the things that we provide is a ‘kitchen in a box’ and household linens. It’s a big investment for the gear, never mind the staple foods.

And a lot of people just don’t know HOW to cook anymore. It’s better to cook at home, but if you don’t know how and food money is tight, you don’t want to risk using the time and ingredients for a meal that might fail. I’d like to find a decent entry level cookbook with frugal receipes for our boxes.

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Nancy April 3, 2014 at 10:48 am

Kitchen in a box is a great idea–could you give some examples of what you put in the boxes, and how you implement the program? Thanks!

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David Ning April 3, 2014 at 12:53 pm

I’d like to know about the kitchen in the box idea as well. I’m actually talking with a group that serves the homeless in our area and I would like to pitch this idea to them.

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Ruth Cooke April 4, 2014 at 8:08 am

Love this idea! I too would like to know what you put in it.

And this is just one more prod for me to work on the cookbook I’ve started, which I’m hoping will have basic recipes which use mainly ingredients one would most likely get from a food bank. I’ll let you know when it’s done!

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Amy K April 4, 2014 at 11:05 am

I love the kitchen in a box idea. A group I used to volunteer for, the Wish Project of Lowell, MA does a similar thing with cleaning supplies,

http://thewishproject.org/home-clean-home/

They also take donated pots/pans/dishes/silverware and match them up to people in need, many transitioning from homeless shelters to that new home.

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Amy K April 4, 2014 at 11:20 am

I’d like to suggest “Recipes and Tips for Healthy, Thrifty Meals” as the entry level frugal cookbook. It’s a publication of the USDA, the full cookbook is available here to view in pdf format,
http://wicworks.nal.usda.gov/food-packages/food-preparation-and-recipes
and … Oh shoot, you used to be able to buy the cookbook.

Well, barring that, I would still recommend a collection of WIC friendly recipes such as printing from the pdf of that cookbook or a similar resource such as the Minnesota collection of WIC recipes.

http://www.health.state.mn.us/wic/newwicfoods/ppt/foodfunfacts/recipes/

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David Ning April 5, 2014 at 9:56 am

Great resources Amy,

Thanks for sharing the recipes and also the Wish Project. It’ll give us all some ideas on how to help out.

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Eugene April 3, 2014 at 10:14 am

Re: Number 2. My family was in this cycle. 8 kids, 1 working parent (my mom). It literally took the kids becoming teenagers and getting jobs to help our family. To the commenter up there ^^ who wrote ” they are just stupid and also feel like they have less options.”, your bias is well-noted. However, my mother is rather intelligent, and being left by your husband doesn’t seem to qualify as making one “stupid.” (She’s also now a great manager for Wal-Mart, one of the few women in her district to move up to her position). Thank you for writing this article, its great to share this info. As for my wife and daughter, we are not in this cycle, because of my experience. We live within our means and have a written budget. Its needed, because we’re paying for grad school right now with cash, no loans.

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David Ning April 3, 2014 at 12:56 pm

Thank you for sharing your story.

Moving up the ladder from the bottom is no easy feat, so congratulations to your mom for all the hard work that she’s put into her career and in raising the family!

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JD April 3, 2014 at 11:23 am

Been there, done that. We’ve had money and we’ve been broke, and I can tell you it’s hard to get back up to speed when the money is tight. The times we could have scored a fabulous deal (relative selling a great car for a very low price, super deal on very usable lumber leftovers, etc.), that would have saved us money in the long run and kept us from having to take a more expensive option (car payments, buying lumber full price a little at a time, etc.) but didn’t have the money to take advantage of the deal, really hurt. Scraping up $1500 when your pay is non-existent or very low is about impossible. We live frugally and always have, but it’s always been painful to see the opportunities we’ve missed due to periods of very low or no income.

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David Ning April 3, 2014 at 12:58 pm

It is hard, which is why an emergency fund is so important to build during good times. You’ll always feel like that chunk of money isn’t earning enough, but the small price you’re paying in missed extra returns is well worth the insurance you are getting in the long run!

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Shepherd Moon April 3, 2014 at 11:51 am

@denise rich people, and middle class people, for that matter, also “waste money like crazy. they buy junk food, have pity parties, smoke cigerettes etc. ” It’s just that they usually have more of a money buffer as a smokescreen for their bad judgment. I think the article was a well-balanced description of why things are hard for poor people without letting poor people off the hook for taking charge of what little money they do have. I don’t think your judgment of poor people as any more “stupid” than other groups of people is very helpful.

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Suzie April 3, 2014 at 1:23 pm

There are a lot of things that can factor into being unable to save. Most would in some way probably fall into the above general categories. When you don’t have the money it is hard to take proper care of yourself by going to the dentist or doctor when you need to. I had to have a root canal in February. Thank goodness for health insurance, but it still cost me hundreds. I lost my job back in September and have been working temp jobs, mostly low wage manufacturing assignments. The one agency does not have direct deposit. All employees are paid with a debit card. Trying finding a convenient ATM that doesn’t charge you a fee to get your own pay. If you can barely afford to live on what you make, it is very difficult to try to get ahead with additional education. The older you get the hard it gets all the way around.

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David Ning April 5, 2014 at 10:02 am

Many people take for granted all the free services they’ve become accustomed to that some other people have to pay for. Your compensation offered in a debit card is a great example because our society is so used to not paying an outright fee for these financial transactions.

It can be tough, and thanks for sharing.

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sarah t April 4, 2014 at 1:07 am

Great article. A cookbook I would recommend for a beginner cook is Mark Bittmans ‘how to cook everything’. It’s great, has a frugal angle&isnt too pricey to buy itself.

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Gayle April 10, 2014 at 7:57 am

There is another reason that poor people don’t use coupons as much: Have you ever seen coupons for potatoes…rice…onions…beans….eggs…store-brand macaroni, etc.? And many times I have found that the coupons seldom bring the cost of an item below what the store brand would cost anyway.

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denise April 16, 2014 at 7:57 am

I am not poor now but I have been and i have been surrounded by poor people and this may be generalizing but I see how wasteful people are and i am teased or criticised for being frugal.

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