Claiming that cell phones and internet are some sort of “splurge” in today’s reality isn’t much different than being indignant that people living in poverty have refrigerators.
These days, around here anyway, many employers expect that you’ll have a cell phone, and they are often used even in menial, low-pay jobs (such as housekeeping in hotels).
I kind of thought he was pushing it on the cell phone thing too, but he has a point in general. If everyone was hell-bent on putting at least $100 into some form of savings/investment account each week, there are a lot of people who currently put nothing into savings that could manage to find the money, somehow.
Which doesn’t change the fact that there would be a lot of people who couldn’t. But suppose we exclude them - what would happen to the economy if all the people who could feasably do so stowed $100 a month in some form of savings, what would happen?
[QUOTE=krondys]
Claiming that cell phones and internet are some sort of “splurge” in today’s reality isn’t much different than being indignant that people living in poverty have refrigerators.
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Did I use the word ‘splurge’? Hell, did I imply that?? 
If so, my actual point was about choice. You COULD live without a cell phone (or with a less expensive cell phone without a data plan, say…that’s probably $50 bucks a month there, perhaps more). I think you are reading in way more than I intended by my post.
Which employers ‘expect’ you to have a personal cell phone?? I’d have to say that, if they do then they either need to be paying for it or folks should be looking elsewhere for a job if it’s a requirement.
At any rate, for most people, there are choices that can be made (I DID say that there was a large minority of folks who couldn’t afford $400 a month towards savings, regardless) that could get them there if they chose to do it. Sadly, most people don’t even choose to save $100 a month…hell, in my experience, a large percentage don’t choose to opt into their companies 401K plan, and in most cases, the delta in cost is about the price of a dinner out once a month.
If this happened magically right now with the current GDP there would have to be some kind of negative economic impact. If right now everybody 65 or older already had that much saved, and everyone younger was taking $5,200 a year out of the economy to stash away, then there’s no way it can be supported by the current economy.
Now if nothing had changed today and everyone started doing that tomorrow then the money taken out of the economy to save would cause recession circumstances initially, hopefully followed by a lot of growth. The problem is making sure a full on recession and slow recovery doesn’t erode the value of all that money.
:smack: Given that my figure was for a family of four, this is a good point. The OP (not you, begbert) stipulates the savings starts at age 22, so we’ll figure a 2-income family with two kids.
Or, of course, we might be talking about a single-parent home with three kids, which makes the whole endeavor of saving $100 a month even funnier.
Here’s an article written by a couple of assholes who can’t stop taking swipes at millennials, but it contains an interesting tidbit: the average salary for a millennial in North Carolina is a bit less than $19,000. That means half* of Tarheel millennials earn less than $365 a week. I’m not thinking they’re in a great place to stash $100 a week.
And here’s an article saying almost 2/3 of millennials have more than 10K in student loan debt. Again, not something conducive to setting aside significant savings.
*okay, it’s mean, not median, so I’m technically wrong–but I’m likely wrong against my argument, since the stats will be shifted by a few ultra-high-earners.
It wouldn’t kill all spending. But it would seriously wound spending.
Ask an economist what the effect on the economy would be if you reduced national spending by thirty billion dollars a week. That’s a fifteen percent reduction in national spending.
Go around to business owners and ask them what would happen if the amount of money they received was reduced by fifteen percent. Probably half the businesses in the country would be closed within ten weeks.
I’ll actually wholeheartedly agree that it’s basically insane to start out saving $100 a week on a 22-year old’s salary. A much, much more realistic approach would be to start out saving, say, $10 a week, and scaling that up to $200 or more as your income grows to be able to support it. You won’t get quite as much bang for your interest-earning buck, but it has the upside of being vastly more doable.
But hey, I didn’t define the hypothetical. Gotta roll with what you’re given.
At what income level, in what state, do you think $200 a week is doable, and what percentage of households can afford that?
I’m not sure this accounts for the fact the money doesn’t just vanish. It’s been invested, which means banks will be desperately trying to loan it out to people for interest, or it will have been spent on bonds or stocks and thus will have moved into the hands of the government or businesses. The entities that end up with the money will of course be spending most of it (else why borrow it?), and thus the wheels of the economy will still turn. The spending will, for the most part, continue; you’ll just see different agents doing the spending.
I *really *don’t have that data, but I can say with absolute confidence that it can be done with relative comfort (ie: no sacrifices at all) on $50000 a year in Boise Idaho.
So, based on a quick crude google, I’d say no more than half of households in Idaho could pull this off, even if they wanted to. But again, $200 would be the very high end for people making commensurately high salaries. Speaking outside of the hypothetical, people shouldn’t be trying to save to some arbitrary point; they should be saving what they can afford to - and the goal isn’t to retire as a millionaire; it’s to be able to afford your next car repair.
For a family of four? Not doubting you, just trying to make sure I understand what you’re saying.
Ah–I thought you were saying everyone should be at that point.
My point, to make it explicit, is that folks in comfortable middle-class (or higher) income brackets often have trouble understanding what it’s like for folks living in poverty. Saving $100 a week sounds very reasonable, if you’re not living off $400 a week.
I remember the first time I realized this disconnect: when I did Outward Bound as a teenager (note: not a child of poverty over here). A kid in my group was from Connecticut – “the richest state in the Union!” he must have said a dozen times over the trip–and we got talking about wealth and poverty. At the time the poverty level was something like $12,000 for a family of four. I asked him what he thought it was, since he kept talking about what poor people should be doing instead of asking for handouts. He thought it was $80,000 a year.
In the years since, I’ve seen countless errors along his lines.
Er, my personal experience ends at a family of two - me, and my bucket of lonely tears. (My parents refused to tell us what they made on the theory that if they did we’d ask for bigger allowances. We were upper middle class but I don’t know how upper, and I still have no idea how much money they have stored away.) In any case I vaguely suspect a family four could probably squeeze out an extra $200 a week (collectively, not each), but they’d have to make lots of sacrifices and/or live really leanly to pull it off.
Absolutely. Some people can (in theory) save a lot; some can save only a little, and some people are scraping by. But if you can save, you should, even just a little to hedge your bets.
I would question the $30 billion a week. Only something like 58% of the 325 million Americans are in the 22-65 age range. Maybe nineteen billion dollars.
Also, I would expect that spending in the 65+ group would rise, offsetting some of the reduction.
I didn’t want to fight your premise. You said “every single American” so I based my figures on that.
Sure, eventually all those people who are saving are going to spend the money they’ve saved. But again, I didn’t want to fight the premise. You said everyone as going to put a hundred dollars a week into their savings until they had saved up a million dollars. So that’s going to be a long period of increased savings and reducing spending.
I already addressed that in a previous post. People don’t borrow money just because it’s available, even at interest rates approaching zero. They borrow money when they feel there’s a good investment to be made. And nobody will be looking to start up new businesses or expand existing ones when the economy is drastically declining. Which, as I pointed out, it would be. With people significantly reducing their spending, businesses would be cutting back on production, laying off employees, and closing down.
Fewer houses and cars sold, only essential services like food, garments, fuel, and education will have prospects of growth. Smaller service sector. Fewer movie and other media celebrities, smaller fewer malls, possibly more best-selling authors (assuming books and e-books stay cheap.) Interest rates will likely stay low as banks would have more deposits than loans, forcing them to invest in government and corporate bonds.
Europe, Asia and Africa will develop apace since citizens there would spend and invest more than Americans.
This. When I first started working, ~40 years ago, being a millionaire meant never having to work again - being able to put that money in Treasuries and still having an income well above that of most people.
Nowadays, the income from a $1M principal would be…well, it depends on what you’re used to. I could get by on it, but not nearly as well as I’m used to. So I keep working.
In another 40 years, savings of $1M will be a good start, but nothing you could retire on, even frugally.
Not necessarily. I’d imagine someone fresh out of engineering or nursing school could easily save over $100 a week.
When I graduated from college, the minimum wage was $2.30/hour. In a 40-hour week, that was $92.00. Before withholding.
Tough to save $100/week on that.
My first office job, in 1978, paid $11,000/year (again, before withholding). $100/week would have been more than half my take-home. I couldn’t have saved anywhere near that much.
Short answer: back when a million was big bucks, saving $100/week was difficult to impossible for most people starting out. And nowadays, even if they can save it, a million isn’t going to be all that big by the time they get there.
[QUOTE=RTFirefly]
When I graduated from college, the minimum wage was $2.30/hour. In a 40-hour week, that was $92.00. Before withholding.
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That would put it in the mid-70’s from what I can tell. So, in adjusted dollars, that’s actually over $10 an hour today. That would be $400 before withholding. It’s theoretically possible you could squeak $100 out of that per week, but it would be pretty tough. Basically, if this were 1975 the OP would be saying that you’d need to save $21 a week, and we wouldn’t be shooting for a million dollars, we’d be shooting for a touch over $200k since that would be the equivalent.
Again, same here…your $11k a year is the equivalent today of $43k. You have to look at stuff like this in adjusted dollars to make any sense out of it.
I agree, though, that most minimum wage earners aren’t going to be able to set aside $100 a week (in 2017 adjusted dollars), regardless of when it was, including today. Not unless they are making minimum wage while living in their mom’s basement or something.