How to access emergency funds on a limited income

By Braxton Lawrence, certified financial planner

As told to John Loeppky

Here’s the answer to this week’s reader question.

What’s the fastest way I can access emergency money on a fixed income, like government assistance for a disability?

—Nung

Emergency funds on a fixed income

The answer really depends your individual situation. For someone who is on some type of social assistance government funding, that answer might be a lot different than for someone who was on a fixed retirement income.

It’s all about your unique situation and understanding what the funds are for, what the timeline for the funds are, what the your goals are, and what other sources of income or funds you might have. 

Getting access to credit—if you have no personal savings outside your regular income stream—is a good place to start. And typically, a bank or credit union can be quite accommodating. 

The first conversation might be exploring having an overdraft on your accounts, which gives you wiggle room. Or, depending on your finances and your family situation, you could borrow from family as well. 

Other options include a home equity line of credit (if you own your home), a standard line of credit or a personal loan. 

If at all possible, avoid high-interest options like credit cards (which often charge 19% to 23% interest) or payday loans for emergencies if you’re not able to pay the balance right away. Predatory loans charge extremely high rates and can get you into a never-ending debt trap. Be aware that it’s illegal to charge an effective interest rate above 35%—that’s criminal. 

Crowdfunding is becoming more popular, which in certain situations may make it easier to raise some capital, but that depends on your timeline. Be open and transparent when you’re asking for money from friends, family and strangers. 

Over the longer term, you can also improve your financial resilience in other ways. Make sure you’re receiving the Disability Tax Credit (DTC), and are utilizing medical expense credits to reduce your income tax. 

There are other various grants that may be available to you, too. These include benefits that can help maximize income tax refunds or potentially increase monthly support for individuals on fixed incomes. There are also pension credits and other types of guaranteed income supplements for retirees. 

You can also leverage your community supports—like case workers, financial planners and advisors, especially if you’re retired. They have knowledge that may unlock programs that you weren’t aware of. The biggest thing they can help you with is fast tracking your applications. A lot of government sponsored programs require you to have an advocate, and going through those application processes can be tedious. Don’t think you have to do it alone.

Know though, if you do generate more cash flow, and you start building registered savings, that may impact some of your asset-tested programs, including provincial benefits like Saskatchewan Assured Income for Disability (SAID), Assured Income for the Severely Handicapped (AISH) and Ontario Disability Support Program (ODSP). In that situation, a tax-free savings account (TFSA) holding cash (as opposed to an investment account) is often the best way to create a small emergency buffer.

I hope this helps open up some opportunities for you.

John Loeppky is a British-Canadian journalist currently living and working on Treaty 6 territory in Saskatoon. He is writer and host of History in 60, a television show focused on Canadian disability history that airs on Accessible Media Inc (AMI).