The Catch 22 of U.S. Government Assistance

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I have written about my dad several times now. Since our last episode, I have learned that he will receive less government assistance if he has any money in a savings account.

Savings accounts are not allowed

The amount of government assistance a person can receive is based on lots of financial factors like income, investments and bank accounts. The more money you have in investments and bank accounts, the less government assistance you will receive (if at all).

However, the problem here is, without being able to build up a savings, how can someone stop being dependent on this check. The person is forced to live paycheck to paycheck because if they save any of it, they are punished.

The solution is: there isn’t one

Unfortunately, there is not a good solution for this. It is a shame that money in a savings account is considered tangible instead of seen as an ”emergency fund”. However, if this were allowed, it would most likely be abused sooner or later.

When rules don’t apply

What this means, is a whole lot of people who really need help with their personal finances, are not learning any of it because they just cannot relate.

All personal finance advice mentions having an emergency savings as an integral part of controlling your finances, but that simply is not an option for those living on government assistance. Saving anything is deemed bad. How can you get your finances under control when you are encouraged to spend every penny you receive?

My dad saves what little he can in a figurative shoe box in his home. It is something, but unfortunately it does not earn interest and, more importantly, is not safe.

Readers

I have given this a lot of thought and cannot come up with any viable solutions. I would love to hear what your brilliant minds can come up with!


23 Comments

  1. Never knew that a savings account would work against you. Luckily savings account interest rates suck right now. We have our emergency fund/house down payment fund in a savings account that is earning all of 1.2% right now, and I can’t find anything much better. So at least your dad isn’t missing out on much!

    Can he get a fire-proof safe with a lock? That at least helps a little with the money being safer.

  2. Anne says:

    One thing that you could do is set up a savings account in your name. My niece is in a similar situation because her child receives SSI benefits. I have a savings account set up for her emergency fund. Its not as convenient as it would be if she had direct access, but it is safer than a shoebox.

    • leslie says:

      Anne, I love that idea! I will consider this next time I go out to visit him. Setting up an account in my name that he can deposit into is a great solution. That will also keep him from withdrawing funds when he shouldn’t.

  3. Pavel says:

    Why is a savings account required to build up a savings? Why not just, you know, not spend more than you make and keep it all in savings?

    I realize that you’re not earning interest on that cash, but if you’re on government assistance, I don’t think the 2% a year is going to suddenly graduate you to the Upper-Middle class of society anyway, right?

    It’s just a bullshit matter of terms at this point. Open up a second checking account, and label it “I SAVE MONEY HERE, LOL”.

    • leslie says:

      Good catch. This is not restricted to only savings accounts. The balance of any bank account opened in your name will affect the amount of monetary assistance you receive.

  4. How about something like a Roth IRA? Or is the point that you want the money to be accessible in the short term (like a savings/checking account would be)?

  5. Mercedes says:

    Could he just save the money in cash form? Maybe put it in a fireproof safe if something like that is a concern? If I wanted to save up money, but couldn’t do it “on the books” (with an account) I’d cash my check every month and put away whatever I want to save in an envelope or coffee can or under the mattress for a rainy day.

  6. eemusings says:

    Oh Leslie, this is a topic close to my heart. It’s the same here. You need basically no cash assets in order to qualify for help. So really it’s a horrendous cycle that’s near impossible to escape.

  7. Evan says:

    Besides using your name (which would also be huge because you can monitor…by the way simply put this is fraud)…you can also use all the cash to pay down debts which is essentially saving anyway. Almost like a forced debt snowball

    • leslie says:

      Just to clarify, opening an account and having someone else (not the account owner) deposit money into it is fraud? Or do you mean the intent behind that?

  8. Clare says:

    This is infuriating. I can see how -some- people that don’t need the assistance could potentially abuse the system and save but how is the majority supposed to get back on their feet?

  9. Evan says:

    @leslie,

    Think about it – why would you be putting HIS money into YOUR account? So the gov’t won’t find it = FR__D

    Not saying people don’t do it DAILY just putting it out there

    • leslie says:

      Can that intent be proven though? Let’s say that someone owes me a large amount of money. Depositing payments into an account in my name might not be a bad solution for repayment.

  10. Evan says:

    I am not trying to say to do it or not to do it, just was giving you something else to think about.

    Manipulating loans is one way people plan for Medicaid, so you are on the right track lol

  11. hj says:

    I’m in a unique situation where I tried getting government assistance due to medical reasons but cannot due to savings. I understand the reasoning. The government needs to help those in greatest need and resources are limited. WHile I don’t have a solution, I would suggest that the government increase their maximum savings allowance. For disability, it was something like you cannot have more than $2000 in the bank. If they raised that amount, they could help people before they fall into complete poverty and also not completely discourage savings.

  12. I agree with Evan. If you are trying to sneak a way around the system to avoid the intended result then it is in fact somewhat fraudulent by definition.

  13. […] talks about the catch-22 of welfare – not being allowed to have cash assets or to build any up. It’s exactly the same here. […]

  14. Eileen says:

    In regards to the whole system, it is seriously flawed. It cripples people so they become more dependent on it, encourages dishonesty, and yes, is infested with fraud.

  15. Andrea says:

    While it may be tethering on the brink of fraud, isn’t it the only way to get out of a system that’s broken? I firmly believe in rendering unto Ceasar what is due… but there are things in our society that are broken that need fixing. Difficult situation. Like other commenters, if I was in his shoes I would keep my eyes peeled for a fire proof and water proof lockable safe and start saving that way. In his case interest doesn’t matter. Putting money in a savings account in your name could be considered fraud but I’m not sure I can agree that having some cash saved up in your house can be considered as fraud. I’d love to see that argued if it came down to it.

  16. […] The Catch 22 of US Government Assistance on 27 and Frugal depicts a scary picture of welfare. […]

  17. I think that you should either get a coffee can or have an account in your name. It may be a-legal, but it’s something that could help your dad out in the future. Besides, if the account is in your name and he needs some extra cash, he can just take it out, and it would look like you loaned/gave him the money (which, from previous reading, would be the likely outcome anyway).

  18. kristen says:

    my aunt just went on disability not so long ago and there were a lot of similar issues. My mom has also decided to open an account for her. My mom loaned out 2k to her when her medical expenses got really high, so her thought process is any money she is able to save will be for “repayment” or just for any other medical expenses, etc that could come up in the future. I don’t think its fraud because my mom always helps her because she doesn’t know how to say no, so any money she can get her to put away for herself will slow down with all my mom dishes out which hurts my moms savings a lot!

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