Financial wellness for the disability community starts with early instruction

By Jessica Tuman, VP, Voya Cares & ESG Practice COE

For adults with disabilities, especially those with developmental disabilities, one of the biggest barriers to financial inclusion is a lack of education that stresses the importance and the basic components of financial wellness in a way that addresses their unique needs. To be effective, a financial literacy educational program should begin in childhood and is particularly important in young adulthood. The benefits of early instruction in financial literacy — helping children understand the value of money and preparing them to avoid burdensome financial debt in the future — do not change for children and young adults with disabilities. The only difference is the way this instruction may be applied.

An effective tool to help parents teach their children with disabilities about financial wellness is this comprehensive guide, developed by Voya Financial’s Voya Cares® program and the National Down Syndrome Society (NDSS) for people with disabilities and their families. The guide helps to shine a light on the unique, and oftentimes fluctuating, financial needs of the underserved disability and special needs community and includes information and resources to help individuals with disabilities and their families make more informed financial decisions, so they can better prepare for financial independence and a secure financial future.

A key feature of this resource aims to provide people with disabilities and special needs, their families, caregivers and professionals with important financial guidance on personal assets and both employee and government benefits and how they interact with each other.

Financial wellness instruction for children of all ages with disabilities can be approached by emphasizing the following key lessons that will maximize time and learning.

1. Keep spending in check: creating a budget

Creating and following a realistic monthly budget is a good first lesson to tackle on the journey to financial wellness. Much guidance has been provided on how to cut expenses, but for adults with disabilities, focusing on the other side of that equation — setting the budget amount — is equally as important. For young children, the monthly budget amount is determined by the parent. For older children over 18 years old, determining the monthly budget amount may be more difficult, as income streams may include more than salary, but also may include income from savings vehicles such as trusts and ABLE accounts, as well as government benefit payments.

To determine a budget amount, begin by adding together government benefits payments, take-home income, any earnings from savings and brokerage accounts and any supplemental income received.

Then add up what is spent each month on essential fixed expenses, such as mortgage or rent, utilities and other loan repayments and discretionary expenses, such as eating at restaurants. Subtract the total expenses from the total income. The amount of remaining income will be needed to complete the subsequent steps to achieving financial wellness.

2. Prepare for the unexpected: starting an emergency fund

An emergency fund is readily accessible accumulated assets intended to help pay unexpected financial expenses — for example, an unplanned medical bill — to avoid having to dip into retirement savings or going into debt. For people with disabilities and their families, however, the need for emergency savings is particularly acute, not because they may experience different types of emergency situations, but because they are more likely to and the impact may be more far reaching.

For example, when it comes to environmental and man-made disasters, individuals with disabilities are disproportionately affected in disaster, emergency, and violent situations due to inaccessible evacuation, response (including shelters, camps, and food distribution), and recovery efforts.

In addition, people with disabilities are more likely to experience medical emergency situations. More than one in four (26.5%) households with at least one member with a disability had medical debt compared to 14.4% of households with no members with disabilities.

A rule of thumb is to save between three and six months’ expenses while working, and as much as a year’s or more during retirement. People with disabilities and their families, who often struggle to make ends meet, may have a difficult time finding the funds to put into an emergency savings account. If an emergency fund cannot be started using monthly earnings, take another look at expenses with an eye toward cutting the least necessary items. Another funding option is putting an annual tax refund toward emergency savings or adding to it from other windfalls like gifts, bonuses or selling things that are no longer needed around the home.

3. Determine when to borrow: managing debt

It’s easy to end up in debt, including student or car loans, a mortgage and credit cards. Debt can be a convenient and practical means to obtain goods or services that otherwise would have been out of reach, if the purchase were to be made in cash.

On the other hand, debt also represents a financial challenge, as people with disabilities may have difficulty establishing good credit due to low income or unemployment. Many face discrimination that keeps them from accessing credit lines, such as credit cards or bank loans.

As a result, 33% of working-age disabled households had used alternate financial services, such as payday, pawn shop loans or rent-to-own services, compared to 23% of non-disabled households.

It is best to avoid unnecessary debt by having an emergency savings account. But if debt is incurred, here are some tips to help manage the debt:

• Pay down the account with the highest interest rates first.
• Investigate debt consolidation strategies that take multiple balances and combine them into one monthly payment, especially if the new debt will have a lower annual percentage rate that will reduce interest costs and make payments more manageable or over a shorter time period.
• Adjust monthly household budgets so that retirement savings can continue, even when paying down debt.

The guide — Financial Wellness: A guide for individuals with disabilities, their families and caregivers Financial Wellness — is available to download for guidance in planning for financial wellness.

However, when it comes to long-term financial planning for people with disabilities and their families, there is no substitute for talking to an attorney and financial professional who are experienced in helping individuals and families in the special needs community make more informed financial decisions to improve their lives and start them on their journey to full inclusion in society.