COLUMNS:
Here’s
What You Had to Say About:
Why the U.S. is more of a spending rather than saving culture and
why the U.S. savings rate is at its lowest since the Great Depression.
Cheri, Teacher
Los Angeles, CA
We seem to be living in a time where things are readily available,
in spite of the cost. Material things appear to be "disposable",
even those that shouldn't be. When my parents grew up and had very
little, they really made every little bit count, thus saving became
an important issue. These habits have carried on throughout that generation,
so impulse spending is very rare. In fact they still rarely spend
on any luxuries for themselves even today. Today with more money,
it is easier to acquire "stuff" and forget the value. How
many times have we heard that "kids don't know the value of a
dollar"?
You have this analogy in "It's A Habit, Sammy Rabbit". When
Sammy finds all of the carrots, he feels it's okay to waste them.
Linda
San Francisco, CA
I think one good point to make is that our US society has become a
credit culture—spend, spend, spend on plastic—then make
the monthly payments (partial or full) and not have anything left
over for savings. The shift from a savings culture to a credit
culture has hurt our nation, leaving people unprepared for any type
of unforeseen financial situation.
Youth are our change agents—teach them to save and help shift
the culture from one of credit to saving.
Dr. Richard Gilbert
Professor of Psychology and
Member of the Financial Development Research Group
Loyola Marymount University
Westchester, CA
We spend because the rewards are immediate and the punishments (e.g.,
debt, unprepared for crisis, can't retire comfortably) are delayed.
It''s the exact opposite with saving: The cost is immediate while
the gain is delayed, often significantly.
Sarah Shirley
Military Saves
Washington DC and Las Vegas
www.militarysaves.org
Americans don't save because of a couple of generations of IRRESISTIBLE
marketing of "buy now, pay later." Solution: irresistible
marketing of save now, buy later.
Mary Ann Campbell, CFP
Money Magic, Inc.
Little Rock, Arkansas
www.moneymagic.com
I'm interviewing my Millennial college students on their money beliefs
and behaviors for my dissertation study. Their voices are telling
me they mimic their parents. They will take after one or the
other parent. A lot of the parents are weak models. It
seems to be the grandparents, or single mothers who emphasize the
importance of saving. For those whose money was hard fought,
they want to hold on to it. But for the credit card parents,
they seem to not only want it all now for themselves, but make poor
credit decisions to be able to "give" to their children.
Most of the young people see through that on one lever
because of the arguing it causes in homes. At the same time,
they figure they're in college, so why not go ahead…they'll
have a job soon and pay theirs back.
Saving montras and habits need to be not only established when children
are young, but modeled with appropriate rewards by parents.
Too much advertising in too many places coupled with easy credit is
a major culprit.
You're addressing early education correctly. But, how do we "re-educate"
current parents and grandparents?
Rosanna Jacobsen, CRCM
VP Colonial Bank
President, Florida Jumpstart Coalition for Personal Financial Literacy
www.colonialbank.com/personal
www.fljumpstart.org
"Why is the U.S. a spending culture? Because we are an instant
gratification society, a convenience culture, want it now, compete
with Jones… marketing hype has won over Americans, media reins,
people just want to be accepted even if may be the wrong way to do
it… credit cards are invisible and intangible until debt comes
in the mail and must get funds to pay it or ruin credit history in
the process… do not have a budget or plan, pay it later, pay
it in 5 years for furniture one buys today….advertising and
enticements seem irresistible…and detrimental to many
folks of all ages and social economic levels. We really need to bring
back the value of money, encourage saving and planning to reach short
term and long term goals, especially our youth."
Robert Bacarella
Founder, Monetta Funds
Wheaton, Ill
www.monetta.com/investtutorial.htm
In a recent article by Ken Fisher in May issue of Financial Planning
he makes the following points:
* The official savings rate data is misleading.
* Increasing net worth due to stock appreciation is not considered
saving.
* Assets deposited in a retirement accounts is not included in
the savings rate.
* Distributions from retirement plans are applied against the savings
rate.
* Household net worth is also excluded from the savings calculation.
What does this mean? If you factor these deposits and net worth to
the saving data, Americans are the world's best and most consistent
savers. The basic problem is how they measure the savings rate which
does not reflect the "true" picture.
In terms of spending, without getting into all the details, Americans
are swimming in cash. Cash and equivalents currently total $ 6.67
Trillion, up over 30% since 2002. If you divide consumer liabilities
($13 Trillion) by net worth ($55 Trillion) consumers have a debt/equity
ratio of 24%. That not bad indicating most people are not financially
irresponsible.
Sumer
Concord, CA
I think Americans have a spending culture instead of a saving culture
because we are so dependent these days on credit! You can get
it anywhere - whether you're buying clothes, a car, a mattress - they
all advertise "no payments for 90 days" or "no
payments for a year," etc. Plus, with credit cards, it so tempting
and easy to simply swipe the card and get your groceries, clothes,
just about anything... Who doesn't want to get it now and pay
later? Americans have become so familiar with being
able to access things without having to pay for it right away that
they spend more than they make. We've become addicted to and
dependent on credit, credit, credit! And, consumers are getting younger...
Found these statistics on the Internet:
"More than four out of ten young consumers between the ages of
18 and 21 who surf the Web now own a credit card, and 65% of these
young consumers used the Web to apply for a credit card."
(SOURCE: Forrester Research)
"In 1968, consumers' total credit debt was $8 billion (in current
dollars). Now the total exceeds $880 billion."
(SOURCE: Federal Reserve Bank)
"At least one in ten consumers have more than 10 credit cards
in their wallets. However the overall average number of credit cards
per consumer is 4."
(SOURCE: Experian's "National Score Index")
Alonso Silva Jr.
President, Caza Financial, Inc.
Los Angeles, California
www.cazafinancial.com
For many, maybe most, I think there's a psychological or emotional
element that makes one feel like a millionaire when they spend money.
I'm not sure the same feeling can be achieved while "sacrificing"
or "struggling" to save a million dollars.
What's "fun" or "sexy" about saving?
All the more necessary to associate savings with that which feels
good and positive, and reinforces the expectation of a tangible and
worthy outcome at some point in one's future.
Chris Fowler
Active Duty Sailor Yokosuka, Japan
Columnist, Stars and Stripes Newspaper
www.stripes.com
I think Americans don't save for a couple reasons that stem off of
our "fast food" culture. Americans tend to jump toward
immediate gratification and walk, slowly, toward methodical progress.
For that reason, when we want something, we charge it. Having
the object, before paying for it or owning it has become a cultural
norm. Debt and lines of credit have become status symbols.
"What, you mean you don't have a Platinum Card? What are
you poor or something?"
Another off shoot of the fast food culture is that many people don't
think beyond more than a couple weeks into the future. Therefore,
saving for the future is an abstract notion. It's something
other people, people who live somewhere else, do with their money.
For many, the thoughts of what the future might bring are too dangerous
to entertain at the expense of not having what they want right now.
I have heard entirely too many people say, "What the heck,
I could be dead tomorrow."
I think somehow we have a misgauged since of opportunity to extends
into perpetuity. People think that they will always be able
to make enough money to start saving, so they put it off.
Carol Allison
Personal Finance Mgr. at the Navy's Dahlgren, VA
Fleet and Family Support Center
www.militarysaves.org
Marketers spend more money on advertising than educators..they market
spend, spend, spend. They reach the masses and sound positive,
and much more like the average person wants to do, than we as educators
can. Our message is not an instantaneous gratification like
there's is. We teach for the future, they preach for now!!
Michael Fischer
Author, Saving and Investing
Coral Gables, Florida
www.savingandinvesting.com
The amount of money spent on advertising consumption and products
versus saving
We are the first generation to be responsible to this extent for our
savings
Lack of financial education for the masses combined with aggressive
lending policies of credit and credit card companies.
Christine B.
CPA
La Habra Heights, CA
Anyway, the first thing that came to mind when I thought about these
topics was the large number of college students that have worked for
me helping out with my son with autism as well as doing various jobs
around our home. On nearly a daily basis, I am thoroughly amazed at
the lack of concern these young adults, the very future of our country,
have with regard to working and thus earning beyond what is necessary
to meet their most immediate needs. Despite repeated offers of nearly
limitless and extremely well paying work, which would stave off at
least part of the need for this indebtedness, I am constantly turned
down with the majority of excuses revolving around the need to fulfill
social engagements. I have seen and heard their tales of mounting
debt to the point that I am nearly losing sleep over it for them,
yet they seem to continue on this path with little more than a passing
thought for the realities of how they are selling the security of
their futures today for the immediate gratification they seek, which
a generation ago, was more commonly reserved for those who had paid
their "dues".
I have actually surveyed nearly all of the twenty somethings that
have passed through my doors over the last few years regarding this
very topic. The respondents have ranged from those coming from lower
middle class socioeconomic backgrounds to upper middle class ones.
Overwhelmingly, I have found that there is little if any real difference
which I have been able to identify with regard to the respondents
socioeconomic backgrounds. Basically, I have come to the conclusion
that this represents a shift in thinking of an accepted way of life
for this generation - the digital, instant gratification generation.
No need to think of tomorrow when they represent the outcome of a
society where bigger, better, faster, is rewarded and waiting for
gratification has become a thing of the past.
Much to my chagrin, it appears that I am experiencing the true impact
of a generation gap, where saving and investing for the future have
become as old fashioned as the vinyl LP's collecting dust at the back
of my closet. With the increasing need for the graying of our population
to be supported by these very individuals, I can only hope we find
a "cure" before it becomes fatal.
P.S. As I write this, my son's aide, the worst and best example of
this mode of thinking, is on her way to a Hawaiian vacation - financed
out of privately borrowed, 10%, student loan debt...
Maria
Honolulu, HI
I believe that a lot of people don't save because they don't know
how. They don't think they can. They don't know how to budget.
It's not taught in school and in a lot of homes, there's not enough
time to discuss saving. Some parents are busy taking children
from one activity to another. Also, children often hear something
to the effect of, "if you want that XBOX or go on a trip, you
have to save money. Then when they saved enough -- they buy
the XBOX or go on a trip. Then, they're broke again. The point
is that saving is to achieve a short term goal rather than long term--future.
There's not a whole lot of training or educating to encourage
them to save for the future or the "rainy day." Kids don't
even know the expression, "save for a rainy day."
Cindy
Los Angeles, CA
I like to spend because usually I am trying to keep up with the Jones
(ex. Everyone else has an ipod why can't I?) Then I think to
myself, why not spend? I have a BIG limit on my credit card. Why
deprive myself of something now to wait until later so that I can
afford it? Why go traveling when I retire and am old and cannot
enjoy myself? Why not do it now so that I can save the memories
in my head forever.
I also shop because shopping relaxes me. Time away from the
kids/husband, it is almost like meditation to me.
Elisabeth Donati
Founder of The Money Camp
Santa Barbara, CA
www.themoneycamp.com
#1) Have you read the article "Why Johnny Can't Save for Retirement"?
If not, read it before this interview. It's fascinating:
www.pbs.org/wsw/news/fortunearticle_20050308_01.html
#2) My take on the whole subject is this...humans being learn best
by example. The worst example that's being set for ourselves is our
federal government. People generally don't make change in their lives
unless it's for pain or pleasure. Because the gazillion dollars we're
in debt as a country doesn't really truly cause us pain (in terms
of pain hurting), we subconsciously don't connect debt with pain.
Paul
CFP
New Jersey
We have a spending society because of Madison Avenue. We want all
the things advertised because we have been conditioned to think that
these things will enhance our lives. Some of them do of course, and
do it instantaneously. Saving money is like watching grass grow --
and it's not sexy. So, many people end up with these spending and
savings thoughts and don't accomplish a financially secure future.
Elizabeth
New Jersey
Two points- for the record:
(1) our culture stresses the importance of consumer spending- more
short run- at the expense of savings needed to promote economic growth
in the longer run
(2) general mathematical innumeracy/lack of quantitative reasoning
skills limit the potential saver's ability to understand the opportunity
cost of spending.
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