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Recession causing growing financial anguish


For immediate release, Thursday May 6, 2010

Recession’s hangover causing growing financial anguish.

A growing stream of people in dire financial straits has compelled The Salvation Army to expand its budgeting services.

The Salvation Army’s philosophy is to meet people’s immediate needs for food, crisis counselling or emergency housing, and then to help clients solve the underlying problems that brought them to The Salvation Army in the first place. Since the recession, that increasingly involves help with budgeting.

From the start of the recession in the first quarter of 2008 to the first quarter of 2010, the number of budgeting sessions provided by The Salvation Army increased 47 per cent and the number of families receiving budgeting help rose 46 per cent.

In the year to March 2010, The Salvation Army provided 6800 budgeting sessions to 2656 families. The Army’s budgeters have been hard pressed to cope with the increase and expect demand to remain high for at least the next year.

While The Salvation Army received corporate donations specifically for its budgeting services last year, the number of budget advisers is still insufficient to cope with the number of families seeking help.

The highest demand is in Auckland where high housing costs mean low-income families’ budgets are fragile. If a breadwinner is made redundant or has their work hours reduced, this can be enough to push them into unmanageable debt.

The Salvation Army is currently training advisers through the New Zealand Federation of Family Budgeting Services, including 11 in Auckland and Northland. These will augment the Army’s 20, mainly volunteer, advisers in the region.

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Salvation Army Auckland spokesman Captain Gerry Walker says rent or mortgage payments typically account for up to 60 per cent of clients’ incomes, giving them little disposable income for basics or emergencies.

“Most of the people who come to us are not bad at balancing their family budgets. It’s because they are generally on low incomes, and when a problem that costs money arises, they can find themselves in trouble.”

He says one example of how easy it is for low-income families to be caught up in debt is an Auckland mother who could not afford the $100 to send her child to school camp. Rather than face the possibility of the child being ostracised or ridiculed by school mates, she borrowed the $100 from a fringe lender.

When she missed a payment, penalties and the daily interest meant the $100 loan had turned into a $1000 debt.

While the debt may not seem insurmountable to most New Zealanders, its combination with a high rent and low income was a financial catastrophe for the family.

A small minority of Salvation Army clients face mortgagee sales or bankruptcy, but Captain Walker says the main aim for budget advisers is to help clients honour their debt and regain their financial independence.

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