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Consumer Reports

Classes teach even tiny incomes can yield savings | (KRT) DETROIT To get her class going, Donna Hoover loosens things up by asking students to grab a marker and a piece of paper to create a nameplate and, maybe, a more promising financial future.

The idea is to use an adjective before your name to describe how you want to budget. Her own nameplate moniker: Diligent Donna.

The adult students, many of whom struggle to make ends meet, create various names:

Educate Melinda. Less Spending Larry. Be Wise Barbara. And there's B. Smart Brian.

The name shows up on the front of the folded card. But tucked on the inside, he's written another name that speaks to the heart of his story.

Broke Brian.

"It's hard to save when you don't have nothing to save with," said Brian Martin, who lives in Pontiac, Mich. He receives a disability check through Social Security. His credit record is poor.

And so what's the point?

Talking about ways to save money seems hopeless for many families who don't have much money. They might live on the edge, work for minimum wage, depend on Social Security, get public assistance or string along odd jobs to pick up what money they can.

Save what, exactly?

Sit through Hoover's class in a conference room at the Oakland Livingston Human Service Agency offices in Pontiac. Talk to others who are trying creative approaches to reach out to people who are financially vulnerable. And you discover that every household, really, can save something and gain some ground.

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Several programs nationwide focus on teaching lower-income families how to save. They also give working poor people a better understanding of how banks work and how to carefully use credit. Without financial education, lower-income families can fall victim to expensive payday loans, predatory home loans, costly tax preparation services and various credit-repair schemes.

It's better to understand upfront that paying bills late can drive up your cost of borrowing in the future than it is to casually charge away and deal with the consequences later.

And knowing how to build an emergency, rainy-day fund can save you from rushing for a quick, high-priced loan when the car breaks down.

Hoover, assistant teller manager for T&C Federal Credit Union in Pontiac, held the two-session class this fall as part of a "Saving Smart, Spending Smart" project. The free class is offered through Share Our Strength, an anti-hunger and anti-poverty organization.

The objective is to set goals, budget, talk about ways to repair credit and understand how to use banks and credit unions wisely.

Hoover starts her class by talking about simple things that end up costing a lot. Take buying two diet colas a day at work. It's $2.20 a day, or more than $500 a year, to buy pop where she works.

And then the discussion quickly turns to cable television, cigarettes, fast-food meals for children, videos, lottery tickets and other budget-busters.

And then members of class talk about their children or other family members who are more down on their luck and want money.

Vanessa Gamble of Pontiac, whose name card read Vice Vanessa, has six children and so much credit-card debt that she's not sure what she owes. She said her children want the latest athletic shoes. And her cable bill was climbing to $100 and higher a month. She cut back to basic services, about $32 a month.

"Sometime, you have to say no and stick with it," Hoover said.

Getting down to the basics is what it takes. It's true for any size paycheck.

"The fact is, there are savers and spenders in every income group," proclaimed Stephen Brobeck, executive director of the Consumer Federation of America, a network of consumer groups in Washington, D.C. "Virtually everyone can build wealth," he said.

His program tackles the idea of getting families to save $10 a month, if that's all they can.

The America Saves campaign, a collaboration between the Consumer Federation of America Foundation and the Ford Foundation, encourages people to create a fund for emergency expenses and to ultimately save for a down payment on a home. Owning a home can build wealth.

America Saves has grassroots initiatives in a dozen communities. The efforts focus on wealth coaching, savers clubs and no-fee accounts at participating banks and credit unions.

To assist black consumers, offers a free membership in Black America Saves. Visit,,c6sc173gb3737-4418,00.html. Or interested savers may go to to sign up for the program, which includes access to free advice from a volunteer certified financial planner by phone or Internet. A "Hispanic America Saves" program is on the Web site, too.

Saving money out of each paycheck is essential. And to start, it helps to open a bank or credit union account.

Some people have never had bank accounts, they never saw their parents have bank accounts, and they don't trust banks.

About 12.7 percent of all families in the United States do not have checking accounts, according to a January 2003 report by the Federal Reserve. More than half of those families are lower income, headed by people younger than 45 and nonwhite or Hispanic.

With a bank account, savers could have their tax refunds deposited directly into the account. It's important for low-income people who receive the earned income credit. They're more likely to use costly tax preparation and rapid refund services to get their money quickly.

And there's the cost of cashing paychecks and other checks, too.

"Many people are shocked to learn that without a bank account, they can throw away $300 to $500 a year in check-cashing charges and money order purchases," said Lois Gibbons, the director of the First Accounts program in Detroit.

Pamela Mathis of Detroit said it wouldn't be unusual for her to pay $20 to cash a $200 check at a party store.

At 34, she never had a savings account. She got her first credit card at 20. Credit cards got her into trouble, and she did not pay bills on time.

She might never have opened a savings account if it hadn't been for a chance meeting at a Detroit library last summer. There was a library workshop on a program called First Accounts.

Mathis thought it sounded like another scam. She was at the library with a friend to research something else. But she got talked into sitting through the presentation.

The First Accounts teacher was polite and made her feel comfortable. She didn't feel she was being judged for her low income. She was able to ask questions and address her worries about taxes and letters from the Internal Revenue Service.

"I thought I owed a lot of money," said Mathis, who works as a home health aide.

She didn't. She ended up getting back some tax money. She also took classes on money management with Gibbons, the teacher at the library and First Accounts director.

And she found even more hope after taking her 14-year-old stepdaughter, Kera Gillam, to classes with her. Kera isn't as demanding any more for expensive clothes or pricey hairpieces at the beauty supply store. Mother and daughter have a better understanding of what it takes to save.

"It was so uplifting. I felt like I really belonged. I was doing something for a change," Mathis said.

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© 2003, Detroit Free Press Distributed by Knight Ridder/Tribune Information Services