Financial advice at Food Banks
The Trussell Trust is launching a scheme to provide financial advice to people who are referred to their food banks.
This is in response to recent findings by Censuswide that 10% of the 4,000 adults surveyed took out a payday loan last year. Payday loans are small, short term loans with high interest rates. They are enticing to people with lower incomes and fewer assets, who are struggling with debt and can’t secure normal loans. But because the interest on payday loans is so high, this has the effect of draining money from low income communities. Those who take out payday loans as a quick fix for financial problems will only find themselves deeper in dept, meaning that they will become more reliant on food banks. In the last financial year, 900,000 people received 3 days worth of emergency food, which is a 160 percent increase since the previous year.
The chief executive of the Trussell Trust, David McAuley, made it clear that payday loans are short term solutions for those in desperate financial circumstances: “High prices, static incomes, problems with benefits and harsh welfare sanctioning are forcing people into extreme financial difficulty. When you’re facing stark choices between eviction or feeding the family, debt and high-interest loans can seem to offer a short-term solution; the reality is that this often forces finances to spiral out of control.”
The free financial advice that will be given to the Trussell Trust’s clients will help people to become aware of their options- how they can manage tight finances, plan for the long term and avoid payday lenders. This new service was made possible by a generous six figure donation from Martin Lewis, the creator of the website MoneySavingExpert. After Lewis sold the website for £87 million, he pledged to give £10 million to charity. Lewis had been campaigning for compulsory financial education in schools for years, a dream that will become a reality in September this year. But many people who need financial advice the most are already struggling with debt. The pilot scheme of giving financial advice at food banks will begin in September in London, the Midlands, the north-east, the south-west, Scotland and Wales.
This ‘more than food’ approach is a pioneering step towards fully addressing the needs of people who use food banks. While food banks provide an immediate solution to pressing needs for food and clothing, financial advice can help people to get out and stay out of poverty. As the saying goes, if you give someone a fish, you feed them for a day, but if you give them advice on how to fish, and how to store and keep track of the fish they catch, they can feed themselves for life. And if you take out a payday loan, all your fish will be eaten by the loan sharks.