TBO.com - TBO is Tampa Bay Online

Salting Away Can Save Your Bacon

Tampa Tribune file photo

A new analysis of the habits and attitudes about saving in America found that most people know they're not saving as much as they should.

ADVERTISEMENT

The Tampa Tribune

Published: June 1, 2008

WASHINGTON - What will it take to make Americans save more?

Survey after survey continues to point out the obvious: U.S. households are keeping very little of their incomes.

A new analysis of the habits and attitudes about saving in America found that most people know they're not saving as much as they should. But they aren't concerned enough to do a darn thing about it, according to a recent survey by the Pew Research Center's Social & Demographic Trends project.

Even the country's wealthiest acknowledge they aren't saving enough, the survey found. Six in 10 adults (61 percent) with family incomes of $150,000 or more say they aren't putting away enough.

This nationwide "savings shortfall," as Pew dubbed it, is the majority situation in virtually every key demographic group - rich and poor, male and female, black and white.

"While uneasiness about savings is broadly felt, these feelings apparently don't run deeply enough to motivate action," wrote Richard Morin, senior editor for the Pew project.

In another survey released last month by Pew and the Gallup organization, a majority of respondents said they hadn't improved their financial lives in the past five years. Twenty-five percent said they hadn't moved forward, and 31 percent said they had fallen backward. This is "the most downbeat" assessment of Americans' financial progress in nearly half a century of polling by both organizations.

Part of the pessimism comes from the fact that for the past two decades, middle-income Americans have been spending more and borrowing more. Here's why, according to Pew:

• Homes are nearly 60 percent more expensive (in inflation-adjusted dollars) now than in the mid-1980s.

• Goods and services that didn't exist a few decades ago - such as high-definition televisions, high-speed Internet and cable or satellite subscriptions - have become commonplace consumer items.

• The costs of many of the anchors of a middle-class lifestyle - not just housing, but medical care and a college education - have increased more sharply than inflation.

• With their rising expenses, middle-income Americans have taken on more debt, often borrowing against homes that, at least until recently, had been rising rapidly in value.

I have no doubt that the recent rise in gasoline and food prices, higher home prices, slower wage growth and debt payments hinder people's ability to save. But this savings slide has been going on for decades. The truth is when times were good, people who could save didn't.

Slightly more than half of middle-class respondents said they've had to reduce their spending in the past year, and they expect to have to continue these cutbacks in the year ahead. A quarter of the people in this same group said they expected to have trouble paying their bills. And about a quarter of the middle class who are employed worried that they could lose their jobs.

On average, as a country we are saving less than 1 percent of our incomes.

Some experts like to point out that the savings rate figure doesn't tell the whole story and that Americans aren't as big of spendthrifts as the statistics show.

Technically, it is true that the national savings rate does not include capital gains on investments (stocks, bonds, mutual funds) and real estate. Perhaps people were so elated about the paper gains in their investment portfolios and appreciation in the value of their homes that they became overconfident and stopped saving.

But as we all have seen recently, relying on paper gains can get you into a heap of financial trouble.

Michelle Singletary can be reached at The Washington Post, 1150 15th St. N.W., Washington DC 20071.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT