Why don’t Americans save?

Why don’t Americans save?

A new report from the Center for Financial Services Innovation says that only 28% of Americans are financially healthy. And it reinforces something we already knew: The U.S. saving rate sucks. Americans don't save.

The U.S. Financial Health Pulse divides people into three tiers of financial health.

  • Financially healthy people (28% of the U.S., 70 million people) are “spending saving, borrowing, and planning in a way that will allow them to be resilient and pursue opportunities over time.”
  • Financially coping people (55%, 138 million) are “struggling with some, but not necessarily all, aspects of their financial lives.”
  • Financially vulnerable people (17%, 42 million) are “struggling with all, or nearly all, aspects of their financial lives.”

Financial health of Americans

The full report is hugeit's an 80-page PDF! — and filled with data based on survey responses from 5000 people. The document does a great job of presenting the info, separating it into four major sections (spend, save, borrow, plan), then comparing how people in each financial health tier differ in their approaches.

Here, for instance, are the results for the survey question about saving rate:

Saving rate among Americans

In the nearly thirteen years I've been writing Get Rich Slowly, I've seen reports like this over and over and over again. It's a constant refrain: American's don't save. But why don't they save?

The U.S. Saving Rate

There's a tendency in some circles to blame outside forces for our national inability to save. “People can't save because the economy sucks. Incomes are low and expenses are high.”

I'm not going to say that stagnating wages don't play a part in the problem, but I dont think they're a primary factor. In fact, if you look at a chart of the U.S. saving rate over time, you can see a surprising pattern. (This data comes from the Federal Reserve and the U.S. Bureau of Economic Analysis.)

U.S. Saving Rate Over Time

See those grey shaded areas in the chart above? Those are recessions. When the economy is bad, people tend to save more. When the economy is booming — the mid 1980s, the late 1990s, the mid 2000s, now — people save less. This takes the teeth out of the whole “people can't save because of the economy” argument.

I think the problem with the American saving rate is complex. There are many forces working together to depress saving rates in this country.

Why Don't Americans Save?

Many writers and pundits have tried to tackle this topic over the past twenty years. I feel like most of the analysis is facile and/or guided by a political agenda. Deep thought on the subject — such as this fine article from The Atlantic — is rare.

In that Atlantic article from 2016, author Derek Thompson explores five different theories, examining the pros and cons of each. Thompson says these five factors are each a piece of the problem:

  1. Americans stopped saving when their incomes stopped growing. (Like me, he finds this argument incomplete and/or unconvincing.)
  2. The poor and middle class went into debt to buy houses. There is a clear correlation between increased homeownership and decreased saving.
  3. U.S. policies make it easy to not save money. It's too easy to access our retirement accounts, pulling out money we oughtn't pull out.
  4. The U.S. is uniquely susceptible to conspicuous consumption. This is a subject I've been discussing with folks by email lately. Look for future articles about “identity economics”.
  5. The pressure to keep up with richer neighbors has been greatly exacerbated by rising income inequality.

Thompson doesn't believe any single factor is wholly to blame. He thinks it's a combination of these things. (He and I also agree that anyone at any income level is capable of saving. He writes: “The poor can save more money, and it’s not offensive to suggest so.” Preach!)

In addition to Thompson's five factors, I'd propose three other possible reasons Americans don't save.

  • We're not encouraged to save. There's a vast, sophisticated advertising industry designed to separate people from their money. Nobody believes ads work on them, yet they're working on somebody! Otherwise companies wouldn't pump hundreds of billions into advertising each year. (Trust me: Ads affect you.) But there are precious few ads encouraging us to spend less and save more.
  • We're not clear on what we want to use our money for. Here at Get Rich Slowly, I'm adamant that readers need to find their purpose in life. You need some vague idea of where you're headed, at the very least. Without a vision of the future, you can't make smart choices about your money in the present. Spending on one thing is as good as spending on another. With a destination in mind, it's easy to know when your spending undermines your long-term goals.
  • We're taught that money is complicated. It's not. The basic math of money is shockingly simple. It's the psychology and behavior that's difficult to master. There's another vast industry of financial advisors with a vested interest in convincing you that this stuff is difficult and that you must have help. More people need to know that yes, they can manage their own money effectively.

Looking back at that chart of how the U.S. saving rate has changed over time, I also wonder if some of the patterns can be attributed to the forever fallacy. When times are bad, we believe they'll always be bad, so we save more. When times are good, we tend to believe they'll always be good, so we spend more.

Solving the Problem

It's one thing to point out that there's a problem — a problem we're all aware of — but it's something else entirely to provide solutions.

In his Atlantic article, Thompson advocates government-level changes: banning lotteries, expanding Social Security, limiting withdrawals from retirement accounts. Perhaps these measures would be effective, but I'm not a fan of looking for societal solutions to personal problems. (Remember: I believe that becoming proactive is the number-one secret to wealth, freedom, and happiness.)

Other folks I admire are proponents of greater financial education. They want personal finance classes in high schools and/or increased financial literacy education for adults. The Plutus Foundation, for instance, is working hard to increase financial literacy by funding a variety of community-based programs.

From my experience, the trouble is that financial literacy fails more often than not. Most programs are targeted at teaching math and mechanics; they ignore behavior. It's not the math and mechanics that are the issue! Until we turn our attention from traditional financial literacy to something else — behavioral literacy? — these programs will remain ineffective.

So, what's the solution? I wish I had one.

Personally, my answer is to continue providing solid money advice for those actively hunting for help. My goal is to make Get Rich Slowly a treasure trove of information for those who stumble upon it. (Testimonials from readers like you seem to indicate I'm meeting my aim!)

Lately, the GRS team and I have been talking a lot about who this site is for. Conventional wisdom is that in order to be successful, a site has to be laser-focused on a specific audience. Get Rich Slowly is not laser-focused…and I don't want it to be. I want this to be a place for everyone to get help with money.

Yesterday, as I was massaging some old Money Boss material into the archives here at GRS, it occurred to me that perhaps I do have an answer to these two problems: Why don't Americans save? What audience is GRS for?

At Money Boss, my goal was to get people to manage their household finances as if they were managing a small business. Everybody understands that a business needs to earn a profit in order to survive and thrive, but few realize the same applies their personal lives. “Profit” for a business is the same as “savings” for an individual.

Be Your Own CFO

What if I took this metaphor, a metaphor that I thought I was going to retire, and used it to provide editorial direction at Get Rich Slowly? What if I tried to promote this as widely as possible, to in some small way encourage Americans to save more?

That's exactly what I intend to do. My mission in life is to help as many people as possible learn to manage their money so they can earn a “personal profit”. I want them to use this profit to fund whatever their personal mission happens to be.

I can't change the habits of an entire country. But, one person at a time, I can help a handful of people learn to save.

More about...Economics

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Dave @ Accidental FIRE
Dave @ Accidental FIRE
1 year ago

I’m not going to say that stagnating wages don’t play a part in the problem, but I don’t think they’re a primary factor I did a post not too long ago about the stagnant wage issue. Bottom line, it’s complicated. Median incomes have actually outpaced inflation in data that I analyzed from 1984 in all but one state. People didn’t like hearing that. My reaction is they an have their own opinions but they’re not entitled to their own numbers, and the numbers are what the numbers are 🙂 Of course the other side is that even though median incomes… Read more »

S.G.
S.G.
1 year ago

I think the college cost issue is an interesting one. So much of the student loan market is driven by expensive private schools and the crisis is people who take out huge loans without job prospects to pay them back. College IS significantly more expensive, but individuals making college choices without cost considerations is a huge driver. People just didn’t do that as much in the past.

tim boehm
tim boehm
7 months ago
Reply to  S.G.

Kids are sold on the idea that you need to get a college education to be successful, and that’s just a crock. We’ve been pushing this college thing for years and it’s a farce! To be successful in life you have to be driven, education is only a tool in the tool box. You need certain tools for certain jobs. I know lots of kids my son included that have good degrees that can’t get a job and end up doing work a hi-school drop out could do. The educational industrial complex keep pushing the line of crap, when you… Read more »

John C Richmond
John C Richmond
1 year ago

If you will take a look at the taxes paid by most people plus living costs their is a deficit left for saving. A recent report stated average American pays more in Taxes than food and medical cost combined. As I spent a lot of time in DC on behalf of my employer and industry, I saw first hand the employee bloat in DC alone. Example: drop in on most open style government offices around 10 A M and half or more of desk are empty. At least half remaining are openly read a newspaper and rest working on computer,… Read more »

Greenbacks Magnet
Greenbacks Magnet
1 year ago

In my experience, numbers don’t lie. You have to sit down and look at those bank statements to see where the money is going. Only when you know of a problem and see it can you try to
fix it.

This was a good post.

Thanks,
Miriam

Ben P
Ben P
1 year ago

I liked Richard Thaler’s take on this in Nudge. Automatically enroll individuals into retirement plans and then automatically increase savings over time. Individuals are allowed to opt out, but the default is to save. They call it libertarian paternalism. People are free to do what they want, but there’s some value signaling going on in the default settings.

Money Beagle
Money Beagle
1 year ago

I think there are three contributing factors that help explain the gap between the past and today. I’m not using them as ‘excuses’ or justifying the idea of not saving, but just pointing them out. They are retirement savings, health care, and costs for higher education. Compare each of those 50 years ago versus today. In the past, many people had pensions. Now, very few do and retirement contributions are the onus of the employee. Long ago, health insurance was not a deduction from your pay, and your insurance covered pretty much everything. In our family, for example, the first… Read more »

S.G.
S.G.
1 year ago
Reply to  Money Beagle

I would disagree that it’s just the increasing costs born by consumers, but the fact that consumers have been shielded from the costs for so long that we don’t have a culture of financial responsibility. I think your argument is beat turned on it’s head: if college we’re easily paid for by students, retirement was just taken care of with the promise of a monthly payment check, and healthcare was just something supplied to you by an employer or the government, why would you bother saving? I think the changing nature of these programs leave people at financial risk, but… Read more »

Dorf
Dorf
1 year ago
Reply to  S.G.

But Germany has free universities, social security, and health care costs about 300/mth (no deductible, no co-pay) and yet Germans have a higher savings rate than Americans do. Doesn’t fit with your theory.
https://www.ft.com/content/c8772236-2b93-11e8-a34a-7e7563b0b0f4

Nicole
Nicole
1 year ago
Reply to  Money Beagle

Finally at the age of 37 I am credit card debt free, and have a good (not great) amount of retirement savings, but I still have a mountain of student loan debt. I had no money left over for life expenses that I would have been able to save for such as a wedding, medical expenses, and unemployment. All that combined would have been no problem if I had an emergency fund, did not use credit cards, and did not have a $600/month student loan bill. My parents have very little saved for retirement. Thus, I have since the age… Read more »

WantNotToWantNot
WantNotToWantNot
1 year ago
Reply to  Nicole

Nicole, WOW, what a story—-Keep Going on the track you and your husband have set out for yourself—being frugal and paying off loans. It is not an easy path, but you have already come impressively far. When I was young, I had some tough times too and it was really hard. It WILL get easier and more joyful once you retire that debt and see your wealth start to snowball, because you have created great life habits of saving and living below your means. When you have achieved your goals, you will be able to say–WE DID IT, we earned… Read more »

Agie
Agie
1 year ago
Reply to  Nicole

I concur. Can you save 5.00 to 7.00 a day for retirement.
What are your 5 to 10yr goals
Are you disciplined in saving and want to leave a legacy?

What type of work do you do?

S.G.
S.G.
1 year ago

I have also wondered about the moral hazard factor. Many people expect social security to pay for their retirement, the government is taking over 12% of paychecks after all, and so they don’t save for the biggest expense there is.

Food stamps and other aid programs aren’t fun, but we hear them described as a “safety net”. And the thing about a safety net is people take more risks when one is there even though they never actually plan to fall.

sequentialkady
sequentialkady
1 year ago
Reply to  S.G.

Hi SG, Though I can agree that people take more risks when there is a safety net, I’m going to argue that enough people through no fault of their own end up needing those safety nets. They are a moral good, and a practical good as the homeless and indigent are actually our most expensive people to care for. Nobody asks for a devistating accident that permanently changes the course of your life for the worse. Nobody asks for incapacitating mental illness. Nobody asks for several back to back catastrophies that deplete your life savings despite having been responsible all… Read more »

S.G.
S.G.
1 year ago
Reply to  sequentialkady

I didn’t say if they are a net good or a net bad. But pretending that there aren’t side effects or unintended consequences is irresponsible.

ivy
ivy
1 year ago
Reply to  S.G.

No, I don’t think social security can be the reason for Americans having poor savings rates.
America has one of the worst safety nets of developed countries and a low savings rate.
If the presence of a safety net led one to think they didn’t need to save then why do countries such as Norway and Sweden have such high rates?

Savings rate data https://data.oecd.org/natincome/saving-rate.htm

Wesley
Wesley
1 year ago
Reply to  ivy

This makes me want to take someone from these countries, plop them somewhere else and see if their savings rate changes! Is it genetic in homogeneous countries (are they born savers in Nordic countries) or is it their environment?

I would be a horrible ruler…my experiments, for the sake of data, would ruin people!! 😉

S.G.
S.G.
1 year ago
Reply to  Wesley

Yes, that was my point about comparison of statistics with other countries being very difficult. The US is extremely non-homogeneous.

Mick
Mick
1 year ago

I think discussing the rate of inflation and how that affects savings is key in this discussion. Why would someone save money when the interest rate you can get from a savings account is lower than the rate of inflation. Let say you put your money in a savings account that earns 1.5% per year (which is very generous nowadays), if the inflation rate is 3% then each year you are losing 1.5% of the value of your savings. I would say the governments/federal reserves role in the low savings rate is one of the biggest influences of the low… Read more »

VinTek
VinTek
1 year ago
Reply to  Mick

The doesn’t really make any sense and seems to simply be an excuse for not saving. So what happens if you spend it? What happens if you buy a car or new smartphone instead of saving the money? How much value do those things lose per year vs. what you keep in a savings account?

S.G.
S.G.
1 year ago
Reply to  Mick

Except the savings rate isn’t limited to money in a savings account. Comparing savings account to inflation is a red herring.

Ris
Ris
1 year ago

How does this compare to other western nations? I know it’s harder to compare when other countries don’t have exorbitant healthcare costs and can rely more on their countries for assistance in retirement, but I’d be interested in a study that looks not just at US savings rates but savings rates across peer countries too. I wonder if something like this exists?

TomR
TomR
1 year ago
Reply to  J.D. Roth

Here’s a good source, but with only 35: https://data.oecd.org/natincome/saving-rate.htm If you dig around the OECD web site, you can find data for all countries, I think, but it’s probably a very complicated issue for developing countries and very hard to compare across countries in different situations. How would you come up with a saving rate for Venezuela, for example? You would probably find papers on the question in this library, as well, depending on how deep your interest is. I would hesitate before psychologizing the question of why people save, beyond a certain level. The psychological techniques often referred to… Read more »

S.G.
S.G.
1 year ago
Reply to  TomR

I think the psychology can be helpful in terms of culture. But then you have the American problem of non-homogeneous cultures in the US.

Tyler Karaszewski
Tyler Karaszewski
1 year ago

> My mission in life is to help as many people as possible learn to manage their money so they can earn a “personal profit”. I want them to use this profit to fund whatever their personal mission happens to be. So, encourage people to save. Great. So that they can fund their “personal mission”. Hmm. Let’s make this super abstract. We’re assuming my personal mission costs money (or has some opportunity cost that can be measured in dollars), or we wouldn’t have to save for it. Let’s say that this personal mission is an ongoing thing (“help as many… Read more »

Tyler Karaszewski
Tyler Karaszewski
1 year ago
Reply to  J.D. Roth

Yeah, I didn’t mean to imply a “mission” couldn’t be a discrete event like buying a house, so much as I think it often isn’t and is more about attaining some certain lifestyle, which is an ongoing thing. If the goal is to attain a certain lifestyle, and that’s happening with any non-negative cash flow, then that sounds like “adequate savings”, even if you’re not saving anything, right? And yeah, some missions will not be expensive, and thus should be easily achievable, at least from a financial perspective. But yeah, if I click through to your “How to write a… Read more »

Derrell Huff Huff
Derrell Huff Huff
1 year ago
Reply to  J.D. Roth

Let me try to make this simple for folks. As my Old papa told me years ag0, who worked at a aircraft company for 35+ years, and never made big money, but he told me, it is not what you make, but what you keep, and being retired today, I made good money for years, but now a lot less, but still able to save, and put money away. How difficult is that to understand. As far as people using credit card, if they would just change their name to “Charge Cards” and not “Credit Cards”, where people could use… Read more »

Ron C.
Ron C.
1 year ago

Why. That’s a tough one to answer. I recently met a 20something who proudly spent $1600 on a watch (“it was 60% off!) while saving nothing for retirement. It killed me. I think here in America it boils down to hedonic adaptation. We live lives of ridiculous decadence. Most people I see begging for money on street corners have cell phones (pocket multimedia systems with the world’s biggest library built in) and fast food containers nearby. Most people I know on food stamps have multiple LCD TVs. These are things that 50+ years ago would be ridiculous sounding – now… Read more »

JanBo
JanBo
1 year ago
Reply to  Ron C.

I am sorry that Ron perpetuates the myth about the homeless. It is a cause very close to my heart. Yes, they have cell phones, which are given to them by the state in many places if they do not have one. I don’t know if he has applied for a min wage job in awhile, but it is all on line with cell phone number required. Yes they buy cr#p at his lousy store because supermarkets in “those” areas of town are scarce. I, personally, do not know one person legitimately on SNAP with a 55” tv. But he… Read more »

Ron C.
Ron C.
1 year ago
Reply to  JanBo

JanBo, it’s too bad you resorted to attacking my “lousy store” while making lots of assumptions. I stated no myths, just facts. I think the problem here is when a cause is “very close to your heart”, you’re likely thinking emotionally. You’ve assumed where they got their phones from. You’ve assumed there’s no supermarkets nearby. You’ve assumed my store was lousy. So take a step back, breathe, and recognize that the point to my post is to illustrate how absolutely GREAT we all have it in many ways. Are there problems? Sure. “The poor’s existence becoming MORE bleak?” No, not… Read more »

JanBo
JanBo
1 year ago
Reply to  Ron C.

No Ron. I work with the poor on a daily basis. I taught in a very poor school. I am glad YOU feel it is a great time to be poor. The rest of your statement speaks volumes on how removed you are from those who are truly in the lowest class in our society.

Big-D
Big-D
1 year ago

There are lots of key contributing factors but I would say wage stagnation vs CPI, Housing Costs, Hedonistic lifestyle (or HGTV effect), Costs of Insurance/Healthcare, Lack of Financial Education, Keeping up with the Jones’s, and Education costs. Everyone one of these items can be an individual contributor or it is the combination of each of these. * Wage Stagnation – There are many stats that say wages have risen versus CPI but that is the problem with taking wages over the entire US population. Look at specific sectors and you see where many people work there is definitely wage stagnation… Read more »

infmom
infmom
1 year ago

My parents never saved up for anything. They depended on my grandfather to bail them out. They lived where they felt entitled to live (instead of where they could afford to live) and always did what everyone else did. When my husband and I first married, we put at least a little amount of money into savings every month. Sometimes we had to take it back out again to cover day to day expenses (even with both of us working full time we still qualified for food stamps) but it was the principle of the thing. Later after we moved… Read more »

Hannah
Hannah
1 year ago

I grew up with really financially irresponsible role models and I didn’t know where to start when I got my first good paying job. I found GRS from a google search and it helped me so much. This was abut 10 years ago now and I’m in a great place and still a reader. Please count me as one American you helped along the way to your mission Thank you.

sequentialkady
sequentialkady
1 year ago

I’d also like to point out that one thing that makes it harder to develop the savings mentality is that it’s hard to open a bank account. The ranks of the unbanked have been growing, and for a reason. Not only does current federal law with ID verification create a barrier, but the banks and CUs themselves create further barriers with their nickle and dime fees, direct deposit and/or minimum balance requirements, all things that place savings out of reach for those on the lower rungs of the ladder, and can even have those in the middle class pulling our… Read more »

IN
IN
1 year ago
Reply to  sequentialkady

I don’t see how an ID would be a barrier to having a savings account. People need an ID to fly, to show verification on a credit card at the store, or to drive a car. If you maintain a minimum balance a put a few dollars in once in a while, then there are no nickel and dime fees. Plus, at the university, aren’t students supposed to present ID in order to get a student ID? ‘Hard to open an account’, there is almost nothing easier. Name one bank that does not want a persons’ money.

JanBo
JanBo
1 year ago
Reply to  IN

You should, simply, ask at your local Bank about balances, bounced check charges and availability to get an account without a functional driver’s license. It is surprising how much things have changed in the last ten years! B of A/ Wells Fargo/Chase is $1500 min. You can have direct deposit of over $500.—but you might ask Ron how many poor people are paid in a way that they do not have anything to direct deposit. Recently SS took a group of banks to court for not allowing SS recipients to use their bank. That is because SS went to only… Read more »

IN
IN
1 year ago
Reply to  JanBo

To not have any money saved to me is not a valid excuse. I worked at a farm for many years starting at $3.35 per hour and $5.00 per hour after high school. I still had money saved for an emergency even though some weeks all I had was $15 to use for food for the week. Yes, I understand that banks require a minimum balance but once the minimum is met, checks are cashed for FREE. Bounced check charges happen when people do not monitor their balances and not because they are poor or something. I have bounced a… Read more »

Connie
Connie
1 year ago
Reply to  sequentialkady

I work at a bank and like many in the area, there is no minimum balance if you sign up for direct deposit. Every employer in the area offers this. Most of the low wage workers choose to have their pay put on a reloadable debit card which charges exorbitant fees. Some will pay $30-40 a month in fees. I teach community financial literacy classes and have explained to these workers the cost savings of having a checking account, but few take me up on it. Most are in and out of jobs and don’t want fees when they are… Read more »

Fay
Fay
1 year ago

I live in the United Kingdom (UK) and we have free healthcare and governmental legislation which every company has to enroll every employee who earns a certain amount into a pension. The reason being once they are in a pension they won’t leave. However an employee can leave by opting out after the first pension contribution from their salary has been taken. However tehre is no education as to what pensions are. I didn’t start saving in a pension until 47. if I want to live on £30K per year I will have to contribute £1800 per month for the… Read more »

Joe
Joe
1 year ago

I think it’s the consumerism culture we have here. Everyone is living it up so you’re weird if you’re saving more. Most people like to conform to the norm. Being different is hard. That’s where GRS and other blogs help. We show people the alternative to the consumerism culture. There is a better alternative to spending mindlessly.
I like the mission statement. It’s good.

IN
IN
1 year ago
Reply to  Joe

Kind of like what Mr. Ramsey says ‘Live like no one else, so you can live like no one else’.

Sharon
Sharon
1 year ago

I think a contributing factor is that we are taxed on our savings. With interest rates on savings so low, there should be a limit on how much savings are taxed. Instead, if I earn $10 in interest, it’s taxed. I’m a saver, but I do it through my 401k instead since I get a company match and it’s a tax-free way to save.

Connie
Connie
1 year ago
Reply to  Sharon

Technically a 401k is not tax free. It’s tax-deferred. You will pay taxes when you withdraw the money. I am seeing more employers offering Roth 401k’s which are funded with your after-tax dollars, but the principal and interest are not taxed when withdrawn. There are restrictions however.

Evangeline
Evangeline
1 year ago

True, there’s a lot of external reasons why people don’t save: job loss, medical expenses, low wages, etc. However, I think it’s an internal problem that’s twofold: we get a false sense of security and we feel entitled. Once we hit upon good times, we act like it’s the new norm and begin spending until it’s hard to stop. We don’t worry because we assume another paycheck is on the way. It also doesn’t help that we feel entitled. Granite counters, expensive car, bigger house, yet another TV? We don’t need it but we must have it because there’s no… Read more »

S.G.
S.G.
1 year ago

After thinking about it I think it comes down to culture andarket cycles. The depression was a defining experience for several generations, and those that lived through it had a different relationship with savings than those of us who came after. Last week while talking about paying off mortgages someone said something about paying off a mortgage being a “depression mentality”. The message I got is that many consider having the security of a paid off house to be overly conservative. I believe that our whole culture has shifted and a lot of people simply live closer to the fire… Read more »

Bethany D
Bethany D
1 year ago

All good reasons, but one I think is missing from your list is Cynicism (aka Lack of Hope). For example, I’ve known at least one person with the belief that “You’re always going to have a car payment” so they see no point in saving money for their next car -which quickly becomes a self-fulfilling prophecy. When someone is convinced that rich people mostly got ahead by cheating and the little guy never stands a chance, then it’s not really surprising to learn that they spend high now because they were never going to be rich anyways. Or there’s always… Read more »

Steve
Steve
1 year ago

I’d bet that locking up retirement accounts would make people save less, not more. I’ve talked to many coworkers in my career who were a bit reluctant to contribute to our employer 401(k), even when it had a match. For instance, one wasn’t sure what to invest in; another just wasn’t sure how to do the paperwork. Adding the additional friction of not being able to get the money back out if you need it would just have been one more thing. It’s known that the loss (and not being able to get your money when you want it feels… Read more »

IN
IN
1 year ago
Reply to  Steve

I have worked with many people who see their 401k as a savings account and not a retirement account. The reasons for them tapping their account vary from money for X-mas to remodeling a kitchen. That is not the purpose of a 401k. When I got into industry where they had a 401k plan with match, I initially did not use it because I could not justify earning 10 to 15% when I was paying 24% on credit cards. After the cards were paid off, the company had various sources for showing me their offerings and how to choose and… Read more »

Paul D Richards
Paul D Richards
1 year ago

Its hard to save when most people are living paycheck to paycheck trying to make ends meet because they aren’t paid enough.
First rule of saving, you gotta have something to save.

Debbie
Debbie
1 year ago

As my Father always said to me “Pay yourself first. If you pay everyone else and then you, you will not have any money left.” I put myself first and cut out anything that is not needed out of my budget. It also takes maturity to say “no”. I’ve lived on a very low tight budget but still saved for me first. It can be done.

Ron C.
Ron C.
1 year ago
Reply to  Debbie

Agreed Debbie. No matter who you are, if you look to your left there’s someone making more money than you and if you look to your right there’s someone making less. They’re both making it work. It’s attitude to start. I’ve never seen someone with an ongoing money problem fix it with more money.

IN
IN
1 year ago
Reply to  Debbie

There was a book I read once that talked about the rules of gold. One of those rules was pay yourself first. Over the years I realized how important that is especially when starting out and SEEMINGLY living paycheck to paycheck. There are always places to cut like going from the $100+ monthly phone bill to a $15 a month Tracfone. I did it and it worked for me but everyone’s situation is different so that one thing might not apply. Just food for thought.

Holly
Holly
1 year ago

Great post! I think you’re spot on with the “Not sure what to use money for,” reason. Everyone I know who’s great with money has a clear idea of what they want.

I can’t wait to read about Identity Economics. One of my favorite things to discuss.

Thanks for all your years of hard work!

Debbie
Debbie
1 year ago

I suppose I approach it from a very different standpoint. I grew up in a house I wanted out of for a very long time. I promised myself once I got out that I would never willingly place myself in a situation where financially I could not get myself out of. Hence, I have always saved an amount of income that I have received. Even when I was in single digits getting $5 allowance part of it went to savings. For me it all about the best shot of having control of my life. Secondly, I think it also helped… Read more »

IN
IN
1 year ago
Reply to  Debbie

I had a friend who looked at the cost of things compared to an ounce of silver. That person told me if he saw something he WANTED he would figure out how many ounces that cost would buy. They accumulated a good amount of silver over time using that method. Me, for something I want, I sleep on it. Usually I realize that I really didn’t NEED that much after all.

Derek
Derek
1 year ago

JD-
I just recently found your site about 6 months ago and as someone who has struggled with CC debt over the years, I have found this site extremely helpful and a daily reminder to improve my/our spending habits. The content you provide is great and I genuinely look forward to reading each and every article you publish. Thanks for the great work!!!

-Derek

NWA-anon
NWA-anon
1 year ago

Read the post, mulled about it for days, and composed a 1200-word post myself 🙂
https://networthanonymous.com/2019/01/02/the-reasons-americans-dont-save/
I’ve tried to explore the “climate of saving” in the country.

Jon
Jon
7 months ago

Because everyone wants to buy those really expensive toys from China and Japan, and by toys, I mean iPhones, computers, TVs, stereos, PlayStation /Xbox, latest Blu-ray/4K, shoes, clothes, etc. They are not cheap either. Nobody will ever save with the latest thing to have to buy. It will never happen, unless the government takes it from our check and they deposit it into a savings account.

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