The need for a savings culture in America (for rainy days)

America has long been a nation of spenders rather than savers (and I say that being as guilty as anyone in this regard, having been saddled by credit-card debt for eight years.) This Covid-19 epidemic is likely to bring about the ruin of many individuals and businesses who didn’t save anything for a rainy day.

Granted, there are big factors that cause many Americans to not be able to accumulate a stash of savings - ripoff healthcare costs, high student loan debt, a minimum wage that hasn’t kept pace, etc. But - even among many Americans who ***do ***have it well in terms of income and other life factors, there still is this culture of “spend, don’t save.” Someone described it as, “Have a thousand dollars in savings? Better take a thousand-dollar vacation.”

How to encourage a savings culture once this Covid-19 is past? Merely getting more money into the hands of private individuals won’t suffice; many simply spend it as soon as it comes.

Good question. I tend to save rather then spend, but I don’t know why this comes easy for me while others have a hard time with it. Perhaps schools should include financial literacy education as mandatory.

It’s the same old inability to delay gratification that we keep hearing about. Some people spend it when they have it, because if they save it, it’ll only be mooched by needy friends and relatives anyway. Some just can’t manage to NOT spend it for whatever reason. And some of us actually can save money without too much issue.

Probably the easiest way to save money is to get yourself in the mindset that your savings account is inviolate except in times of crisis/need, and then set up an automatic direct deposit straight to it. Or maybe an automatic account transfer from your checking account to it. The idea being that if you get in the mindset that your savings account money isn’t free to be spent, and you automatically deposit some amount sight-unseen, it’ll steadily grow without any actual effort on your own part.

The hardest part for most people I suspect, is seeing that they have $750 in the account, and NOT deciding that they need that new TV/game console/leather coat/shoes that they’ve been eyeing, but instead letting it ride. That’s not to say that if your hot water heater needs urgent work that you don’t dip into it- that’s exactly what it is for. In other words, it’s not a temporary accumulator for buying bigger stuff, but rather a contingency fund not to be spent except on stuff you couldn’t handle normally.

I try to save, and to put about $50 into my savings every month. The account was started by my parents and mostly built on money I received from my great grandmother when she passed. My parents have always been big savers, and it’s been drilled into me pretty well since I was a kid. Unfortunately, I don’t have as much now as I once did, having withdrawn a lot for rent and bills when I was living in an apartment I couldn’t afford (my room mate had moved out and I looked for a replacement but didn’t find one). I’m living in a much cheaper place now and it’s starting to build up again, but it’s a very slow process.

If you want people to save, people need to be paid enough to save.

The current research indicates millenials (the roughly ~20-40 year olds) already do a better job than their parents of saving, and this includes having at least some kind of an emergency fund.

But they started way behind due to reasons (they’re not paid as well as their parents in general and got hit by recession early in their careers and cost of living higher than the last few generations).

It’s easy to blame the latest gadget or whatever, but seriously, the research indicates the younger set actually does better, on average, but still lags for reasons outside their control. Maybe start with the actual data instead of stereotypes?

What do you want to go around fucking up the economy for? The whole house of cards is supported by people buying shit they don’t need with money they don’t have. If people start buying things only when they need them everything’s going to collapse.

The notion that people need financial literacy is so commonplace, and yet it doesn’t really make a lot of sense.

“Financial literacy” has never really been a thing people have been taught, and yet here we are. The problem is not that the common person doesn’t know about the difference between savings and debt. Everyone knows that, and most people don’t deliberately get into debt trouble.

The problem is that Western economies - the USA is the worst, perhaps, but all of them have some of this - are STRUCTURALLY built on an unprecedented amount of debt.

I’ve known some people don’t understand how banks, bank accounts, and interest work. Or even if they understand the very basics, they don’t trust them. That’s a serious problem that perhaps could be addressed by education.

In my understanding, lots of Americans don’t have bank accounts and have to rely on predatory check-cashing businesses. Policies could address this – make every post office a bank, and outlaw those predatory lending businesses (check-cashing, “need cash now” car loans, etc.).

Oh no, it is absolutely needed. As well as classes called “CREDIT CARDS ARE THE DEVIL” to get through to the religious folks. Other classes called “Revolving lines of credit and compounding interest 101”
Immediate gratification is rampant. I remember seeing toaster ovens for sale late night tv. and their sales pitch was "Only 3 easy payments of $14.99.

My immediate thought was that if you needed to break up a payment schedule to handle a $45.00 purchase, you don’t fucking need it.

It would be better if we had an economy that encouraged savings in an actual bank, but in order to do that, you first need enough people with reliable incomes and incomes that allow people to save. Real wages for most people have stagnated since the 1970s: a good two generations of no real income growth. People have to take on decades worth of debt in order to enter or remain part of the middle class. It works until the spigot of cash flow is turned off. People can “invest” in the market, but the last few decades the market has become a pump-and-dump ‘boom-to-bust’ scam.

I don’t care if we do eventually “recover” from this recession. Ever since the Great Recession of 2007-9, much of the global economy finds itself trapped in a situation in which central banks are under tremendous political pressure to pull out all the stops in order to keep cash flowing through the economy, and that’s because the capitalist political classes provided relief to the “job creators” but woefully under-supported households. I was never ideologically against supporting the banks and industries as the economy went into free fall - it was vital. But no less vital was giving households debt relief, incomes, and immediate spending power, and we never totally figured that one out. I guess the political will just wasn’t there. Consequently, and what many people don’t seem to realize until perhaps now, is that we never really completely recovered from the last recession. If we had, we’d have better economic parity. But what happened is that some people in the working class sank into the under-class, and some in the under-class just faded out of sight altogether (probably moving from one homeless shelter to the next).

And so here we are, having had more than a decade to correct this problem, convincing ourselves in the US that we’ve had a good decade of economic growth, which is factually true but doesn’t really tell the truth about the state of our economy. We’ve had wage gains that have been nullified by rising rents, rising healthcare costs, and even rising costs of goods thanks to global trade conflicts. We’re now in another economic free fall, and we’re still trapped by central bank policies that have now run out of bullets to put in the chamber. And if that’s not bad enough, we’ve got rising household debts, rising corporate debts, and rising national debt. Americans are increasingly leveraging themselves toward an economic crisis that will make 2007-9 look like just a bad day on Wall Street.

Exactly. Someone ought to be able to handle saving $45 rather than having to work out a payment schedule. I mean, CHILDREN can handle that by the time they’re somewhere between 9-10, if they’ve been taught well by their parents (i.e. given some amount of money and coached in the benefits/drawbacks to both spending it immediately and saving it for later, and allowed to fail/succeed on their own).

There are just a lot of people in the set of people who actually DO earn enough to save, who still don’t do so, because they have inadequate impulse control.

I am surprised nobody brought up the Marshmallow Test.

Its basically a study on the differences in “rich” kids vs “poor kids” and why people may have a hard time delaying instant gratification. I see this in my daily life, and its evident in my town during the corona virus reactions at the super market. On the “hourly” side of town, the supermarkets are bone empty. On the “salary” side of town, they look just about normal, toilet paper and everything. Perhaps the people that work hourly are more afraid of their jobs than not, and are spending the money now on things that they think they won’t have the money for in the future.

People who can use banks for the most part already do. People who use payday loans literally have no other options. Nobody patronizes a predatory lender for fun. When you take those options away, it doesn’t make anything better for the payday loan customers. It makes things worse. They will seek out loan sharks and dangerous black markets instead.

You have to fix the underlying issues, not the superficial results that are easy to see. Perhaps one prong of this approach would be to mandate that banks accept everyone as a customer and only offer them no-fee accounts. Just spitballing here. “Ban payday loans” is a nonstarter (not that governments don’t frequently try).

I think that the "payments of [tiny amount] for [not big amount] is more of a sales gimmick than anything else. If some people were set to spend $45 bucks on a toaster oven, and found out that for the same $45, they could get a stand mixer and salad chopper gizmo for the same total $45 bucks, they might get it, even if they would be billed $45 bucks again the next month. Does that make sense the way I’m explaining it?

The people that I have noticed that do the “flex pay” crap are generally older folks on fixed incomes, not young people. Young people don’t buy shit off of TV.

Exactly. Taking away a moderately bad thing often just drives people to worse things. Like how Charlie Baker (governor of Massachusetts) responded to illnesses caused by illicit vaping devices by restricting/banning ***legit ***vaping devices, thus ensuring that even more vapers would turn to dangerous black-market vapes.

I see this in my own household. I am a natural saver, always have been. My partner is a natural spender, always has been.

Now in our case, this disfunction causes me to double down on saving to make up for the partner’s spending. But that’s not my main point.

My main point is that we are nearly identical in background, education, work ethic, income level, and general value system - except for how we relate to money and saving. I could play arm-chair psychoanalyst and tease out some underlying motivations, but I really think that would be engaging in post hoc reasoning. My conclusion, instead, is that it is just inherent, a genetic trait. Yes, education about debt and saving is useful, to a degree. But ISTM the differences really seems to just come down to a character trait, much like political leaning.

I would suggest that even in cultures where savings is more predominant, there are those who save better, and those who spend more freely.

That’s why I suggest post office banks – basic banking services available to everyone, everywhere there’s a post office. Including cashing checks with no predatory fees/interest.

Maybe because the results are not quite debunked but certainly in question. The test couldn’t be successfully replicated when they took a larger (and more statistically relevant) sample.

But people like it because it provides a “just so” morality story. The results may still be valid, but this test certainly doesn’t show it and indicates that if it is, the effect is smaller than originally thought.


It’s possible to work around those natural inclinations a bit, though.

I’m a natural spender - money in my hands vanishes. For years I lived paycheck to paycheck. I’d get raises, and my spending would expand proportionately.

One day I decided to do something about it - and had my work deposit a fixed sum each month in a separate account, at a separate bank, that I deliberately made somewhat difficult to get money out of and made a point of basically ignoring. The remainder of my money went into my main account. The functional effect, from the standpoint of that account, was to roll back the previous several of my raises. And I continued to spend pretty much everything in that account, living paycheck to paycheck just like before. Give or take that second account quietly growing, out of sight and out of mind.

This approach certainly wouldn’t work for anybody who was literally living paycheck to paycheck, but if it’s a case of spending by habit rather than by need, giving yourself a separate account to spend dry while leaving the rest untouched can be an effective way to protect your money from yourself - or at least, it was for me.