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How Credit Union savings accounts benefit individuals with low incomes

Kane Moffat from Capital Credit Union explores three compelling reasons why credit union savings accounts are a game-changer if you have limited income.

In a world where financial security is paramount, credit unions have emerged as beacons of hope for individuals with low incomes. These financial cooperatives are designed to empower members by offering a range of services tailored to their needs. Among these services, credit union savings accounts stand out as a powerful tool for building a stronger financial foundation.

1. Automate the Savings Process: Direct Debit and Payroll Saving Schemes

Saving money can sometimes feel like an uphill battle, especially if you’re on a low income. Credit unions recognise this challenge and have introduced innovative ways to make saving a seamless and automated process. Two such methods are direct debit and payroll saving schemes.

Direct debit enables members to set up regular transfers from their main account into their credit union savings account. This “set it and forget it” approach ensures that a predetermined amount is consistently saved, without requiring constant manual effort. With this method, saving becomes a habit, and over time, these small contributions accumulate into a substantial sum.

Payroll saving schemes take automation a step further. Through these schemes, a portion of your salary is directly deposited into your credit union savings account before you even see it in your main account. This method allows you to save effortlessly without the impulse to spend it (no willpower needed!). By prioritising your savings at the source, you’re taking a proactive step toward securing your financial future.

2. Separate Savings Account: Out of Sight, Out of Mind

One of the greatest challenges in managing finances is overcoming the temptation to spend. Traditional savings accounts linked to your main bank account can make it all too easy to dip into your savings for day-to-day expenses. Credit unions offer a solution by providing separate savings accounts that operate independently from your primary bank account.

Having a dedicated credit union savings account creates a psychological barrier that discourages impulsive spending, i.e. “out of sight, out of mind.” When your savings are tucked away in a separate account, you’re less likely to use those funds for non-essential expenses. This separation helps you stay focused on your long-term goals, whether it’s building an emergency fund or saving for a big item.

3. Start Small, Save Big: The Power of Consistency

The misconception that saving requires significant sums of money often discourages individuals from starting at all. However, credit unions are champions of the “start small” philosophy. Even saving a seemingly insignificant amount, like £1 per day, can have a transformative impact over time.

Consider this: saving just £1 per day accumulates to £365 in a year. This simple habit, achievable for most people, showcases the power of consistency. Credit unions understand that everyone’s financial journey begins at a different point, and they embrace the value of gradual progress. By encouraging members to start small and remain consistent, credit unions empower individuals to build a strong financial foundation without feeling overwhelmed.

Credit union savings accounts are not just financial tools; they are instruments of empowerment for individuals with low incomes. Through innovative features like automated savings processes, separate accounts, and a focus on starting small, you can use credit unions to change your relationship with money. As well as recognising that financial wellness is not limited by income and that every small effort contributes to a more secure future for you.