The Inclusive Economy
CFED Celebrates America Saves Week (February 19-26)
By Stephanie Halligan on 02/21/2012 @ 10:00 AM
It’s officially America Saves Week! From February 19 - 26, the America Saves campaign is calling on educators, nonprofits and financial institutions to promote good savings behavior and for consumer to assess their own personal saving status.
So how are American’s financial habits faring during America Saves week? The Bureau of Economic Analysis (BEA) reported last month that the national personal savings rate is up to 4 percent (up from 3.5 percent in November); this means, on average, Americans are saving 4 cents for every dollar of disposable incomes. While that’s more encouraging than the negative rate that Americans were saving at a few years back, it’s far from ideal. Since the BEA began measuring this statistic in 1959, the savings rate has fluctuated from 8.3 percent in the early 60’s to 14.6 percent during the recession in the mid-70s (ironically, a recession usually increases the average savings rate, and a bad economy can scare folks into saving more money.
Even though our current savings rate as a country sits comfortably above a negative percentage, it certainly doesn’t mean that everyone is doing it, and it doesn’t mean that saving money has gotten any easier – after all, if savings were easy, we’d all be doing it! Using this year’s America Saves theme of “Set a Goal, Make a Plan and Save Automatically,” how can we help the average American consumer (that’s all of us!) set aside some of the money we have today for something in the future?
Set a Goal. Saving for the sake of saving is boring. Most people need inspiration or a compelling reason to set aside their hard-earned money for any period of time. First, decide on something that has personal value or meaning that may require some financial foresight and savings – a vacation, a first home, or even a rainy day. Secondly, consider opening a targeted savings account or naming an existing savings account something that will motivate you to save and remind you of your goal. What’s more compelling: setting aside $25 every month in your ABC Bank savings account or putting that money into your “My Dream Vacation with the Family” fund? Better yet, eligible individuals can open up an Individual Development Account (IDA) that helps participants save for their first home, continuing education or small business development. Visit the IDA Program Directory to find an IDA program in your area.
Make a Plan. Online savings tools like SmartyPig can help make your savings goal into a reality by helping you keep track of your savings goals and offering suggestions for how often you should be depositing money. Need more personal help in creating a plan and sticking to it? Eligible individuals can take advantage of financial services and education provided by local nonprofits. Local Initiatives Support Collaboration (LISC) Financial Opportunity Centers, for example, take a multi-faceted approach to providing individuals with one-on-one career and personal finance services and coaching. Other providers in your area may offer programs to help you create a savings plan.
Save Automatically. Let’s face it – we’re all human. If you have to consistently and consciously take money out of your paycheck or bank account every month and then put it away toward your savings goal, you are fighting an uphill battle. Creating an automatic transfer or deposit into your savings account is a critical step to achieving your savings goal. Behavioral economics theory and studies suggest that “setting and forgetting” with automatic transfers or direct deposit can have a hugely positive impact on a person’s savings rate and habits. And don’t forget to take advantage of the Earned Income Tax Credit (EITC) at tax time, where you can automatically deposit a portion of your tax refund into a savings account or U.S. Savings Bond.
Savings takes commitment, practice and the appropriate tools to make it happen. And while everybody has a different amount of disposable income to work with, everybody has the ability to save something – even a penny is a good place to begin. So why not start this week?
To find an America Saves Week organization or to join the campaign, visit http://www.americasavesweek.org/.