After the economy took a nosedive in late 2008, Americans realized that it might not be a good idea to always rely on credit during emergencies and many people started stashing money away for a rainy day. This is a pretty natural reaction to a recession, and one might even argue that the bad news for the economy is a good opportunity for individuals to learn better personal finance skills.
Unfortunately, many Americans seem to have short memories. In late October, the government reported that consumer spending was up and saving was down. It was down to 3.6%, the lowest savings percentage since 2007, which was a whopping 2.6%
For those of us who are personal finance geeks, it may seem like someone else’s problem if the majority of Americans have hardly any savings. But the lack of a savings cushion—and worse, the lack of a culture of frugality and savings—affects all of us. Here’s how:
1. Eventually, we’ll have to pay for those who haven’t saved. Those workers who are not putting money away for retirement are not going to suddenly discover a pile of cash when they turn 65. They will either have to keep working into their golden years or rely on public assistance to get by. Either one of those options could cost us. In the first case, it will make it difficult for young workers to break into the workforce if many older employees can’t retire. And in the second, our society will have to bear the cost of helping out our indigent retirees.
2. The spending culture can affect savers. We see this happen all the time—where thrifty or frugal individuals find themselves tempted to spend because our culture is always telling us to buy. We surrounded by messages of consumption, and savers have to buck that trend. But it doesn’t have to be that way.
For a short time, it seemed like saving, clipping coupons, and recycling and reusing items were getting to be chic in the broader culture. Unfortunately, it doesn’t seem as if those trends are necessarily here to stay.
3. A credit-based society is more vulnerable to recessions. Just look at what has happened in the past few years. If the majority of Americans had a healthy emergency fund stashed away, there would have been far fewer foreclosures and a healthier economy. But credit allows hundreds of thousands of individuals to live beyond their means, meaning the house of cards can fall at any moment.
The question is what we can do in order to help turn the tide of savings in America. The first step is to be a good saver yourself. Just by providing a good example, you let the people around you see that there is a different way to live.
Finally, don’t be afraid to talk to others about saving money. Talking about money is often considered taboo, and you obviously don’t want to be rude by asking people how much they have saved. But if you see friends or family members who are struggling, offer to help. Pass along interesting blog posts and articles that you read. Make your little corner of American culture one that rewards saving instead of one that rewards spending. Wouldn’t you rather pitch in by doing that than by paying to rescue those who made bad decisions?