Waugh's great-grandfather was one of the condition of men known as ‘statesmen’, farmers working their own smallholdings in the far northern uplands of England. Long after his great-grandfather's day these economic ‘independents’ retained a reputation for mental independence and cultural distinctiveness: as late as the 1860s, after the period of Waugh's diary, parliamentary education commissioners noted their long-established traditions of literacy and book ownership and their retention of a strong local dialect. The Waughs farmed near Haltwhistle, just inside the Northumberland border. Waugh's grandfather was apprenticed as a shoemaker and leather dealer. He married into the Grindrod family of Rochdale, and set up as a leather dealer. How he came to Rochdale is unknown. But he was clearly a man of some substance, building several houses. He had ten children, seven sons and three daughters. The youngest of the seven sons was Edward, Edwin's father.

Edward was a shoemaker in Rochdale. Little is known of him, but that he was extremely poor and that he received a charity education in the local grammar school. This ‘poor man’ married into the Howarths, a family that came from the area between Bury and Rochdale, in Lancashire. Edwin Waugh's family on his mother's side were both Methodist and musical: one relative was a preacher for Wesley, and his mother told of the visit of Wesley to their home when she was young.