A renewed desire to save
Based on a USA Today article, the personal savings rate for the July-September 2008 quarter was 1.3 percent. That means that on average, people saved 1.3 cents of every dollar earned during that 4 month period. Before you say, “that’s impossible”, would you be surprised to know that 1.3 percent is almost two times the personal savings rate of last year? The United States has one of the lowest personal savings rates of all industrial countries. How can this be? We are considered one of the richest countries in the world, yet we do not have any savings to show for it. One of the main culprits of the lack of savings is the false impression of long-term success that a good economy brings with it. When the economy is booming, we fall into the trap of thinking that the good times will always be with us; and then reality kicks in. We find ourselves in the middle of a tough economy, and most people have nothing set aside for the rainy days.
Comerica Bank chief economist Dana Johnson doesn’t think this new commitment to savings is permanent.
“We don’t have a very good track record in this country for saving a lot of our income. I have real doubt it would persist into the next economic expansion”
While I am excited about the increased desire to save, Mr. Johnson warns that the increased savings is detrimental to the short-term health of the economy.
“When people save more, they spend less. People spend less, producers of goods and services employ fewer people.”
While some are more positive with regard to the increased emphasis on savings, I think we should remember what the Bible teaches us about savings.
Another thing that seems to have lulled us into a false state of security is the idea that Social Security was designed as a retirement plan. I often talk and counsel with people that are now worried about whether or not Social Security will be available to them in 20-25 years for retirement. When I tell them that Social Security was never meant to be a retirement plan, they are taken aback. What has caused us to believe that it is the government’s job to take care of us? Where did we go wrong in teaching people about personal responsibility? What will it take to have people wake up and understand the importance of long-term saving and investing? Let’s hope that the current state of the economy is that wake up call. Winning in the area of personal finance is simple – Learn to spend less than you make, pay off your debt, and save for the future.
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