Saving is such an integral part of our financial literacy because as we adult in life we’re taught the importance of saving, which is to keep our money rather than use it.
And with the goals that we set for ourselves to reach, we build wealth and plan for the future. Whether it’s to travel or buy a dream home. But when you’re surviving on a low income this can seem near impossible. As a low-income earner, the little income that comes in is primarily used for immediate consumption of spending on the things that you need, rather than to keep the money.
Therefore with such circumstances what motivates a low-income earner to save? According to EARN, an American non-profit leading provider of micro savings for low-income workers.
Over the length of EARN’s incentive based saving programme known as the Individual Development Accounts (IDA). Through this programme EARN conducted a research by asking alumni of their IDA program to identify the behavioural mechanisms that encourage low-income workers to save and to do so over a sustained period of time and this is what they found out.
Low-income earners were said to save once they realised they could save regardless of their limited income. And this in turn, motivated them to save.
As saving usually requires that at the end of your tight budget there’s still that extra bit of money left over to put away which is hardly the case for low-income earners. Due to the fact that every cent counts therefore with low-income earners when they realise they could save money within their current income stream. It was a motivating factor to them saving.
Financial literacy was also a factor in assisting low-income earners to start saving and build assets for future wealth.
Interaction through financial services and financial management training allowed low income users with the confidence to understand how the act of saving to acquire a significant asset. Set in motion a critical path for low-income mobility into the middle class. This interaction also served to increase confidence in interacting with financial service organisations.