What is the Cycle of Poverty and How Do You Break It?

Chances are you’ve heard about the poverty cycle before, but you might not know if it applies to your life — or, importantly, how to get out of it. The poverty cycle, or poverty trap, is a set of events or circumstances by which poverty repeats itself throughout generations. Statistics show that one in seven Canadians live in poverty. Here’s what you need to know about how poverty repeats itself and the steps you can take to create a better life now and for your family in the future.

Cycle of poverty definition

So, what is the “cycle of poverty,” anyway? The poverty cycle is the process by which conditions of poverty are passed from one generation to the next. For example, poverty can lead to a substandard educational experience, which could limit a person’s earning potential, thus preventing them from providing a higher standard of living for their children. This is commonly known as generational poverty or the poverty trap. 

What is the poverty line?

In simple terms the poverty line is the official income deemed necessary to meet minimum living standards. It’s a government’s way of saying, “This is the amount you would need to earn in order to meet all your basic needs in our country.” The poverty line can sometimes also be referred to as the poverty level. 

In Canada, the poverty line is measured based on the annual cost of food, clothing, shelter and other necessities like transportation. According to the federal government, a family lives in poverty if they do not have enough money to purchase this specific “basket” of goods or services in their community. This is called the Market Basket Measure. In 2018, the last year for which statistics are available, Stats Canada reported 8.7% of Canadian families were living below Canada’s Official Poverty Line — that’s about 3.2 million Canadians. The value of goods and services in the official Market Basket Measure is under review to ensure this statistic is an accurate representation of low-income Canadians. 

The Official Poverty Line isn’t the only way the government measures the economic health of the country. The government also uses a measurement called the Low-Income Measure. This is a relative measurement of 50% of the median income, adjusted for family size. In Canada, the median after-tax income in 2018 for families was $61,400. If your income falls below $30,700 annually, you are considered to be living in low income, according to the government of Canada’s definition. 

Poverty in Edmonton

Statistics show that in Edmonton, one out of every eight people live in poverty. Poverty in Edmonton disproportionately impacts women and children — 53% of those living in poverty are women and 31% are children. The numbers are even starker when you look at lone-parent families — 9,705 lone-parent families in Edmonton are living in poverty. Out of these, 8,460 are female-led. Low-income families in Edmonton have a median income of $27,790. 

Breaking the cycle of poverty

Knowing that generational poverty exists and understanding how to break the cycle of poverty are two very different things. Not to mention, if it was as simple as knowing theoretically how to get out of poverty, it would be easy. But, much of the time, families experiencing poverty simply lack access to the right community support and financial resources it takes to move into financial security. It takes a village to end the generational cycle. 

There are a lot of theories about how to break the cycle of poverty, but if you’re currently experiencing poverty, here’s what we’ve learned from the women in our community about how to break free.

1. Believe in yourself

Feeling stuck in a cycle of poverty can be overwhelming and feel hopeless. Know that you have the power to make changes in your life right now that can set you on a new trajectory. Don’t let money shame hold you back. No matter what your family money story might have been in the past, you can create a new story now. You can do this. 

2. Find the right support

We’re firm believers in the saying, “It takes a village.” Finding a supportive group of others who have been through similar circumstances, or who are on the same journey as you right now, can help you navigate speed bumps, setbacks and mistakes. They can also help you celebrate wins as you succeed. It isn’t easy to break the generational cycle of poverty, but with the right support it is possible. 

3. Focus on your finances 

It might be scary to open bills from creditors or review your spending, but you need to tackle your finances head on. As you create a plan to get out of debt and earn more, you’ll probably find that it’s far more manageable than you first imagined. Remember, “everything is figureoutable.” Here are some baby steps to get started on this part of the journey:

  • Open your bills, look at your bank account: So many women we talk to let unopened bills pile up, or go months without looking at their bank accounts, simply because it gives them incredible anxiety to even think about money. You are a warrior princess who is going to slay the dragon of generational poverty. In order to do that, you have to face the dragon. Remember, you will have your village to help you.
  • Get a copy of your credit report: Improving your credit is a huge step toward a better life for you and your family. Even if you have bad credit, it’s possible to fix it. First, you need to know what your credit is. So, request a free copy of your credit report to get started.
  • Create a budget: You’re probably already really experienced at making financial decisions — people experiencing poverty need to make hundreds of financial choices every week when it comes to what bills to prioritize and how to stretch money throughout the pay period. The purpose of creating a budget is to make your financial decisions less chaotic and to help you create a different strategy for your money, one that allows you to save and prepare for the future. Lean on your village for help creating a budget that works with your family’s reality. 
  • Create an emergency savings fund: Having emergency savings is a huge step and one that will ultimately get you to a place where you don’t have to rely on credit cards or loans when unexpected costs come up. Even if you can only save a few dollars every month, slowly building your emergency savings is going to help you over time. 

4. Increase your earnings

At some point, there is only so much budgeting and saving you can do before you can’t decrease your family budget any further. At this point, in order to continue to provide for your family’s needs, you’ll need to find a way to increase your earnings. Every family is different, so the way you earn more is going to depend on your own situation — whether you’re looking after small children, currently working a shift schedule, or any other variable. Here are a few ideas to increase your earnings:

  • Gain new skills: Are there new skills you can learn that will help you get promoted at work or attain a higher paying role in your field? For example, attaining a First Aid certificate could help you qualify for better jobs in some fields. 
  • Improve your resume: Take advantage of free career counseling services offered in the community to get help editing your resume. This is especially important if you feel you don’t have great grammar or spelling. Presenting a polished resume could be the difference between getting a job interview or being passed over.
  • Start a side hustle: Some women we’ve worked with have found success and joy in starting their own side business — this could range from selling goods on a site like Etsy or offering a service such as tutoring or house cleaning.
  • Participate in the gig economy: Apps such as Skip the Dishes or Uber provide an opportunity to make some extra cash on your own time. 

You don’t have to increase your monthly earnings by a wide margin to have a big impact. Earning an extra $100 each month can add up to $1,200 per year. Imagine how relieved you would feel next time your car breaks down to have $1,200 in the bank to put toward repairs? That’s the beauty of increasing your income. While it’s not easy, it is possible. 

Getting out of poverty is a huge accomplishment and something that is definitely attainable. Surrounding yourself with the right resources and community members who can help you reach this goal is crucial to learning all the skills you will need to reach your money goals.

2 thoughts on “What is the Cycle of Poverty and How Do You Break It?”

  1. Poverty is earning less than your counterparts…it is a seemingly endless vortex of no way out leading people to make difficult decisions regarding their finances ie bankruptcy. That is where I am headed. (Please share my story only, not my name or email. Thanks.).

  2. Pingback: Need Motivation? Try These 5 Personal Finance Podcasts for Women - Lady Loans

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