Four ways you can help poor people around you with financial planning

By Uma Shashikant

One little accident left the entire household distraught. The man of the household had his toes crushed by a speeding bike. The wife rushed to the hospital, leaving behind her daily wage work. Their biggest worry was how the family would manage with one earning member out of work.

Personal finance for the poor is a completely different story. One illness is enough to derail everything. There is no job security when someone else can easily take on the job of the injured. There is no insurance to cover hospital charges. Nor are the systems honest enough to ensure that the treatment is effective and reasonably priced. In the time it takes to return to full time work, there would be irreversible damage—they would move home to save rent, the children could have quit school over unpaid fees and the wife would pawn the valuables to buy food.

These not so privileged families are not living in a hole in the hinterland. They are all around us, working as maids in our homes, driving our cars, manning our lifts, securing the gates and doing several jobs for those of us who have the money to pay for these services. We mostly do not care about the fragility of their finances to do much about it.

In our minds, charity and generosity are extended to distant and grand causes. We choose the easy and lazy way to be involved, by writing out cheques. We may also stop to check if there is a tax benefit in it. Or we may think that donations have to be made without affecting our lives directly. If we extended concessions to those who work for us, but do not have a stable job like ours, we might be taken advantage of. We bring out our need for control and measure our generosity with caution and suspicion, before helping those around us, those who may need it most.

Not everything is lost. There are employers who pay school fees for the children of their maids and drivers; many pass on household goods, durables and clothes to their staff; and so on. We, however, do not pause always to understand that what we give should not make the other feel small. The rules of the relationship revert to the feudalistic master and servant, rather than employer and the employed. We do not take the time to align rewards, risks and incentives.

This is the age of local empowerment and community level initiatives. We are now actively involved in keeping our garbage segregated; we fight for our roads to be maintained; we work together to keep our housing societies secure and clean. What does it take to embrace the entire community of people who work around us into a more secure personal financial structure? What if we begin these conversations about community level responsibilities for preventing household finances from being derailed by sudden events? Consider a few ideas to begin with.

First, stability of income is a function of knowledge, skill and attitude acquired at school and honed at work. Recognise that poorer people around us may not have the access to education, work experience and training that can enable them to excel at what they do. Investing the time to teach, train, mentor and support those who work with us to hone the skill they have and pick up new skills, will help immensely. Such investment of time and energy is a valuable act of charity.

Second, access to the formal system is unknown to many simple workers, whose use of technology might be limited to their cellular phone. Using our access to help them open a bank account, to get enrolled in inexpensive health and life insurance schemes, to begin subscriptions to government sponsored saving schemes, to understand plans and options specifically available to the underprivileged, might open many doors to them.

Third, supporting them to develop healthy habits with money might be easier done by someone with the power and control in the relationship. Ensuring that a portion of the earnings is saved regularly and not accessed to spend; handing out personal loans and imposing the discipline of regular repayment; creating systems of reward for performance that will translate into savings and investments; or offering to take on lump sum payments for tuition fees and such in exchange for specified tasks and jobs, will all help towards bettering their financial stability.

Fourth, creating a common pool funded by donations from like-minded people will offer meaningful support during emergencies, or fund expenses that cannot fit into the routine income. Unlike many of us who can save to fund a goal, those who do not earn enough to cover even mandatory expenses, may have no surpluses to save. A scholarship fund that ensures that the meritorious children are rewarded and can access higher education or a hospitalisation fund that would take care of unexpected medical emergencies are all contributions that will go a long way.

If we can use our networks to make such initiatives big, the impact will be better. However, starting at home with people who work with us is good enough to begin with. Reasonable work hours, adequate pay, investment of time and money for their well-being, and dignity in the way we treat those less privileged than us are habits the wealthy must acquire. Blinded by the entitlement we feel towards our incomes and the heady powers of consumption, we cannot risk becoming a selfish society that does not look beyond its narrow circle of family.

If we can use our networks to make such initiatives big, the impact will be better. However, starting at home with people who work with us is good enough to begin with. Reasonable work hours, adequate pay, investment of time and money for their well-being, and dignity in the way we treat those less privileged than us are habits the wealthy must acquire. Blinded by the entitlement we feel towards our incomes and the heady powers of consumption, we cannot risk becoming a selfish society that does not look beyond its narrow circle of family.

(The writer is Chairperson, Centre for Investment Education and Learning)