Getting a 20 per cent return on investment seems like it would be too good to be true.
But for low-income Calgarians looking to set aside $500 savings for an emergency fund, getting $100 in bonus money for doing it gives precisely that return.
For saving as little as $20 bi-weekly, the Momentum Savings Challenge gives participants bonuses to their savings account in increments. Starting with $5 for signing up, then a series of savings boosts up to $50, three-in-a-row deposit bonuses for a total of $30, and then a $15 completion bonus.
“Small amounts can really add up,” said Liz Wong, financial empowerment facilitator for Momentum.
“Even a few dollars in an emergency fund is better than having nothing, and it can prevent you from getting into that cycle of debt later, which would be far worse than not stashing aside savings at all.”
The challenge is run in conjunction with Momentum and the Calgary Housing Company. Savings are collected through financial savings app QUBER, which are then held in digital savings accounts by Alterna Savings and Credit Union.
Completed challenges on QUBER, and not just Momentum’s, also receive an additional 2 per cent bonus payment.
Momentum is holding a free online event on May 3 about their savings challenge, and on how low-income Calgarians can manage the rising cost of living.
The real deal
Challenge participant Adam Windsor was initially skeptical when it was sent to him via a Calgary Housing Company newsletter. He said that the vetting process that the City of Calgary goes through before providing resources to non-profit organizations alleviated some of his concerns.
The additional financial literacy resources offered by Momentum, along with the credible information provided about QUBER helped him to overcome his remaining skepticism.
“After [Wong] contacted me it wasn’t like some no-face organization,” said Windsor.
As a single-dad who is also currently on long-term disability, he met the criteria to receive the bonuses from Momentum.
Currently the program is limited to individuals who live in Calgary or surrounding communities, are 17 years or older, and are currently living on low-income. For a single individual, this would be someone who is making less than $37,268 per year.
Windsor, who used to work at a big-five bank before going on long-term disability, said that getting that 20 per cent return on investment was a no brainier.
Emergency fund changes dynamics of prosperity
It is, according to Wong, hard to underestimate the benefits of putting aside small dollar amounts in the long run.
“What we have found through our savings programs is little amounts add up over time, and yeah, it saves you from having to take out high interest loans later,” she said.
One of the cyclical causes of poverty in Calgary is the continued use of high interest payday loans. In an analysis done by LiveWire Calgary in December of last year, it was found that the payday lenders congregate in areas of Calgary that have the lowest rates of income.
One of the arguments made by the high-interest, short-term lending industry is that they provide an essential service for people with immediate financial emergencies.
Yet, said Wong, low-income families with small amounts of savings do better during emergencies than higher-income ones without.
“Studies have shown that families who are living on low incomes who even have $500 in an emergency fund are better off during a financial emergency, then families with middle income levels that have zero saved,” she said.
“It saves you from inconvenience and stress and worry, there are so many benefits to building these emergency funds.”
The best time to save is always now
As an emergency savings fund, any amounts put into QUBER are not locked in. Challenge participants can take out their funds at any time without penalty.
Windsor compared the challenge savings account to a financial vehicle like a GIC. He said that it wouldn’t be possible to get even close to the same rate of return, and the GIC would lock in a person’s money for 18 months to get 2 per cent interest.
Wong said that it can sometimes seem like it is difficult to find money to put into a savings account. And it can often be easy to find reasons not to save.
“You know, if it wasn’t rising prices, then it would be the crash of oil and gas. If wasn’t the crash of oil and gas, then it would be the pandemic. And if it wasn’t a pandemic? It would be, you know what I mean? There’s always an excuse to not save,” she said.
“But what we really want to instill in people is, it’s always a great time to be saving and thinking about your future and thinking about reaching your goals.”
For more information on the Momentum Savings Challenge, program eligibility, and how to get started see Momentum’s website at momentum.org.