The Wise Thing To Do

The Cedar Rapids Gazette had an interesting editorial today titled, Save For The Rainy Days. For those of use in Good Sense groups this is an even more timely warning. It's a bit sobering to think that Americans spend more than they save. Until 2005, personal savings rates had not been in the red for an entire year since the Great Depression!

It doesn't take a Good Sense small group to help us understand that this is extremely dangerous. How about using some "common sense!" Like not spending more than I earn. I love how the Good Sense material puts it - A wise financial steward learns to become a diligent earner, generous giver, wise saver, cautious debtor and prudent consumer. God's priorities just make sense!

I applaud the Gazette for writing the editorial. But I'm not optimistic that it will change the tide of consumer debt. The pull of the culture requires a change of heart and a change of values. And heart change my friend, takes more than information. A change of heart required radical transformation. Sharon and I are going to be working on some of our Good Sense homework this afternoon, looking at how we can increase our savings. It's the wise thing to do.

I'm not sure that non-Gazette subscribers can access the editorial, so I'm going to post it here in it's entirety.

Even as Americans are earning more and then spending it, with an increasing percentage being spent on discretionary purchases, they are saving less and less. This financially dangerous trend needs to be reversed. In 2006, Americans continued to spend more money than they earned. At the same time, the personal savings rate, for the second year in a row, was in the red, at negative 1 percent. That’s even lower than in 2005, when the personal savings rate was a negative 0.4 percent. Until 2005, personal savings rates had not been negative for an entire year since 1932 and 1933, in the midst of the Great Depression.

Back then, people had a good reason for not saving money: the had no money to save. During the Depression, a quarter of the labor force was out of work, and people dipped into savings to buy food, clothing and other necessities. Now, people spend everything they earn and borrow more to buy stuff. This does not bode well for the coming decades when 78 million of baby boomers will retire, nor for young people who will have no cushion in the case of personal emergencies or should the economy seriously falter. During the Great Depression, Americans learned the hard way about the importance of having rainy-day funds tucked away. Back then, many people lost everything through no fault of their own when banks and other financial institutions failed.

Now, people get into financial trouble when they max out their credit with no ability to pay those debts. Economic downturns can happen at any time, whether on a personal level or at the national level. Americans leave themselves open to calamity when they don’t have quickly accessible savings and long-term investments to get them through the years when they should be able to spend their retirement doing more of the things they enjoy.

Americans clearly didn’t get the message sent by Congress last year when it passed a package of reforms covering pensions, individual retirement accounts and annuity and life insurance contracts. The message was that they should save more. Instead, they saved even less. Some economic experts predict people will save more in 2007 because the economy, including the housing market, will continue to slow. Those same experts say that financial institutions are hungry for deposits and will offer better rates and incentives, such as elimination of some fees, to encourage saving. But consumers should shop around for the best savings vehicle for their own situation.

Now is the time for people to educate themselves about savings options the government has made available and the incentives that financial institutions are offering, and to find out about the risks that each option carries. With more and more options for both short-term and long-term savings, especially those like Roth IRAs and health savings accounts that are tax exempt, there is simply is no excuse for people, especially young adults, to leave their future financial security in jeopardy.