The Decline of Saving

[SoCalDem]

http://www.militarymoney.com/BankingSaving/Banking/tabid/131/itemId/2782/Default.aspx

The Decline of Saving

Courtesy of SavingsAccounts.com

SavingsAccounts.com recently released the results of a poll in which most respondents believe they are as good as or better than their parents at saving money. But savings data and retirement surveys of American workers suggest that these perceptions are overly optimistic. The savings habits of the current generation of American workers trail those of their parents’ generation. The SavingsAccounts.com poll found that 49 percent of respondents believe they are doing a better job of saving money than their parents. Another 22 percent said they were saving as well as their parents, and 30 percent believe they are “worse” or “much worse” at saving money than the previous generation.



Those results are contrasted sharply by the Bureau of Economic Analysis’ personal savings data, which show that Americans’ personal savings rate averaged only 3.48 percent of income over the previous 10 years, despite a bump up to 5.8 percent in 2010. Even the recent 5.8 percent high doesn’t come close to matching the 10-year average personal savings rate of 9.63 percent in 1981. American workers planning to amass wealth for future needs face another challenge. Not only are they socking away a lower percentage of income than their parents, but the growth of their savings is limited by rock-bottom interest rates.



“The 1980s were famous for many things…mullets, parachute pants, fluorescent colors and building your own dynasty, thanks to high interest savings account rates of 14 percent or more,” says Richard Barrington, personal finance expert at MoneyRates.com and author of the poll analysis. “These days, successful saving, amid measly bank rates below 1 percent, means following a new set of rules.” Barrington’s analysis shows just how big a barrier today’s interest rates are to savers. According to Federal Reserve data, 3-month CD rates were above 14 percent in early 1981. Those same CD rates were well below 1 percent in the first quarter of 2011. Savings account interest rates and money market rates have suffered similar declines. Lower interest rates require individuals to save a far larger share of income to accumulate the same amount of wealth.

snip

[shraby]

1. It's stupid to think people will put their spare change in a

savings account that pays virtually nothing..not only that, they have to have a minimum balance and if the account is inactive for X amount of time, they charge a fee until the money is gone.
A savings account tends to be inactive and is only accessed in case of emergencies or a deposit is made. There is no place to put extra change anymore.
When me and my siblings were young, mom saved the pop/beer bottles because there was a deposit on them and put that in our bank accounts and little by little we accumulated a nice sum..not outstanding, but we at least learned to save.

[alcibiades_mystery]

2. This was the plan of the conservatives in the 1970's: transform household savings to investment

capital.

Why do you think there's been explosive growth of the financial industry since the 1980's? They converted household savings into mobile capital.

The defined benefit plans of the old pensions became the defined contribution plans of the 401(k), cycling more money into the financial markets.

It's been, of course, a universal disaster.

[SoCalDem]

4. disaster for US.. a bonanza for "them"..

:grr:

[alcibiades_mystery]

10. Indeed

Labor had gotten too organized from them to rob the surplus through work anymore, so they robbed it on the other end through savings.

Tendency towards the falling rate of profit. People scoff, but it's quite real, and the capitalists have invented ever more diabolical ways to counteract it, all doomed to failure.

[CreekDog]

3. how many workers are making $15/hour or less and you expect them to save?

right after they starve their children to put that money in the bank i guess. :banghead:

real wages have been falling for decades and benefits have been decreasing.

i hate the meme that blames poorly paid people for the fact that they can't put away 10% of their income regularly.

that's just freaking ridiculous.

raise wages, have proper, larger social insurance programs and stop the nonsense of blaming the poor and working class for not having the things they can't afford.

UNREC.

[SoCalDem]

9. wow..

:rofl:

tell us how you feel:)

I did not see "blame"... I saw how in a generation, millions of people were hornswoggled into believing that they could "get rich" by investing, and how banks decided to shift to the more lucrative "credit card" market.

During the 70's & 80's there was horrendous inflation, but we all seemed to manage because it was all relative.. people still bought homes, cars, took trips, bought groceries, and yes.. people still managed to do some saving.

The place we are at now, is no accident. It's been a clever, determined effort over decades.

We are afraid to "invest" (having been repeatedly ripped off)
We get nothing in interest for money we do manage to save
Our pensions are non existent (for most of us)..and dwindling for the ones who still have them
401-ks are now 001-k's for most people
Wages are (and have been for a long time) stagnant
The one "trump card" that millions thought they had (their house) is now worthless too

there truly is no safe place anymore for people to even try to build that nest egg

[pscot]

12. You can't save what you don't have

[Yavin4]

5. A Savings Account Actually Loses Money

Because the interest is beneath the true level of inflation. The longer your money sits in one, the more it loses it value. The government's calculation of inflation is a political farce. It does not include energy, housing, and health care.

[Pholus]

6. So does my 401(k). Market goes down, I go down. Market goes up, eh not so much.

I remember that wave of 70's INVEST don't SAVE propoganda. Seems to me that *was* the time that things really started heading downhill.

[Yavin4]

7. That's Why I Am Buying Gold

It's the only investment that keeps its value over time.

[Pholus]

11. My brother had to hold his a LONG time.

Purchased in '80 at $500/oz. Held it for 30 years cause he couldn't get his money back out. It took GOP teabagger nutballs to create enough instability for him to sell. If it wasn't for W, he'd still be out his money.

Also, generally, if Beck says it's good I tend to look long and hard because I know what he's about and it isn't my well-being.

[Yavin4]

13. 30 Years Ago, I Would Have Agreed That Gold Is A Bad Investment

However, the economy has dramatically changed in the past 30 years. Back then, when you saved/invested, you were doing so in American companies, in well regulated financial markets, and your investment was not dependent on extraneous global factors.

Today, the world's economies are all inter-connected. Most of our mfg base is in China, a highly, unstable dictatorship. Our markets have been converted into high rolling casinos without the free drinks.

We're in a vastly different world from 30 years ago.

[Pholus]

14. Sadly, you have a point.

But...still...Beck's getting a cut! Eeeeeew!!!! ;)

[Yavin4]

17. Buying Gold Aint Got Nothing to do with Beck

You can buy it directly from the U.S. mint and other reputable vendors.

[Pholus]

15. I have a friend that says that machine tools, not gold, should be the reserve currency.

After all, unlike gold it is a creator of wealth. I see his point as well.

[Yavin4]

16. Machine Tools Are Very Difficult to Store, Transport, and Used in Exchanges

It's not nearly as good as gold.

[Pholus]

18. But their products are not. And have the advantage of utility.

[Yavin4]

34. How Are You Going To Pay Your Doctor?

In machine tools???

[Pholus]

36. If things go *that* bad, how about in machined items?

Gold is pretty to look at. Machine tools build civilization.

[alcibiades_mystery]

8. That's exactly right

The neoliberal program was all about transforming household savings into investment capital. They had to do it, because they could no longer pull the surplus from labor alone.

[musette_sf]

23. +1

[kctim]

19. The savings vs. new TV battle has been won.

Sorry savings, you're 15 minutes are over.

[Pholus]

22. At least you got a new TV. Mine was medical bills for the kids.

[kctim]

24. I am quite sure

all the people at Wal-Mart buying what they don't need, also have medical bills.

[Pholus]

25. Perhaps they are merely missing a role model then. ;)

Edit: Adding a few comments.

Growing up, I remember similar morality-based external examinations of people's finances when the "old hens" would gather down at the local restaurant. Always turned me off then, pretty much the same now.

There is waste and there is need. Lots of people sinking. Perhaps if we are judgemental some deserve to sink but you'll find a LOT of examples of people who don't.

[kctim]

28. We don't have to be judgemental in the least

Wal-Mart, Best Buy and parking lots prove MOST people willingly choose not to save.

[seabeyond]

20. 4, 5 yrs ago my savings was growing. my expense lower than my income

price increases, stagnant wage, low interest on cd, i am now having to dip in saving until i can pay off a couple things and wage being lower than expenses and i can save again. if i can.

our economy is truly fucked up

[SoCalDem]

21. The rates we get on our CDs is shameful. We would almost be better off having it under the bed

in a shoe box:)

When my mother died she left me a 1/4 share of her life insurance policy at American Express (who knew they even had policies)..anyway, my 3 siblings sent their claims in before the ink was dry on the death certificate, and I kept getting letters from Larry Somebody asking me to file my claim so they could close the case.. I kept putting it off because I did not want to fill out all the damned papers they kept sending me.. I finally called Larry & told him why I had not filed & asked how long I had to actually file it.. ( I think he said 3 years)..anyway I just forgot about it and one day, a registered letter showed up with a ONE PAGE form requiring ONE signature..I filed the claim ( It was a few months shy of the deadline)

Then I figured out why they were in such a hurry.. It was an interest bearing policy, @ 4.85% an my share had an additional $1100.00 in interest that had accumulated :rofl:

[seabeyond]

26. yup. it is another attack on the middle class that many ignore. nt

[MadHound]

27. This is what happens when you have forty years of declines in real world wages

This is what happens when credit cards become the norm. This is what happens when savings accounts don't pay jack shit, thus you are forced into that gambling casino known as Wall St. in order to make your money actually work. This is what happens when consumerism is promoted as a religion.

[Silent3]

29. When I was younger, I saved nothing

In my early 20s I saved nothing, and put a bit too much (not wildly out of control, mind you) on credit.

By my late 20s, I was much more disciplined about credit purchases.

By my early 30s I started to set aside money in a 401K -- only about 5% of my income, but it was something.

By my early 40s I was saving 10% of my income for retirement, and saving up additional income in a savings account as a big purchase/rainy-day fund. My last new car was purchased cash.

I'm almost 49 now. We bought our current house about three years ago 50% down. If you count accelerated payment on the mortgage as a form of savings (effectively earning a very safe ~4%, accounting for the mortgage tax deduction we don't get when we reduce the interest we pay), and the 401K matching funds I get, the past three years I've been saving 40-50% of my gross income.

So at least for the later years in my life, I'm saving money a lot better than my parents did.

[SoCalDem]

30. Yes..prepaying the mortgage pays you the most interest you'll get anywhere

We pay cash for cars too..but then we also buy a 2 yr old, well cared for car, not a new one.

Having no housing payment (except for taxes twice a year), is the best way to a more secure retirement:)

[Silent3]

35. If the country doesn't crash and burn into total economic chaos...

...next week (which I don't think will happen, but I'm not sure it won't either!) I should be on track to pay off our mortgage in 6-8 years.

At least I know that even in this crummy housing market we could sell our big house and get by in a cheaper place for a long time on what we'd cash out in equity. I'm very eager to get to the point where housing only costs us property taxes, maintenance, and utilities. Even then, however, in our neck of the woods, with our size house, a paid-off house will still cost as much as a modest apartment.

[badtoworse]

31. Everyone can and should save

I don't buy the BS that "I can't afford to save". If you're making $30K a year, there's someone getting by on $25K, so bite bullet and put the $5K in an investment.

As a minimum, you should have 6 months of expenses in a secure, liquid account. 12 months would be better. If you're not there, you need to commit to it and do it. Living hand to mouth is just plain irresponsible.

[katnapped]

32. Yea, you tell em!

Some kid in some other part of the world makes only 2 cents a year so no excuses! Git off your asses and get another job (or three) if you can't save! Fucking lazy welfare bitchis sucking on the gubermint tit! :sarcasm:

[badtoworse]

37. What an erudite post! Do you have a point?

[RoadRage]

33. A couple of things here...

What exactly do they mean by "savings account". In 1981, most corporate employees had a pension fund. Now days, almost everyone contributes to a 401K. I consider that "saving" but it sure isn't going to show up in my savings account.

Further, the flip side to 14% Interest Returns on CD's.. is that if you owned a house, you were paying similar Interest Rates on that which didn't go to the principal.. it went straight back to the banks. (Unfortunately the cost of housing has gone up so much in the past 30 years compared to cost of living that it's not noticiable). But at least with interest rates going down, and the cost of housing going up - if you own your home you're still building equity with higher home pricing, thus having that (potentially) when you sell your home in the future and being able to use that income.

Anyway.. i just don't know if this article really compares 1981 apples to 2011 oranges...