So many expenses, so few dollars saved. That's the dilemma faced by millions of Americans -- everyone from struggling college students to young families saving for a down payment to baby boomers approaching retirement.
During severe recessions, people tend to curtail spending and increase saving as a hedge against potential -- or real -- hardship. In fact, the average personal savings rate as a percentage of disposable income has risen to about 5 percent, compared to an all-time low of negative 0.5 percent in 2005. Back then, the economy was booming and many people assumed that the stock market and home values would climb indefinitely. How wrong we were.
It's probably too early to tell, but some worry that the strong 2010 holiday shopping season may signal a return to old spending habits. Here's hoping we've learned our lesson about living beyond our means and the importance of saving for a rainy day.
There are many reasons why it's important to develop and maintain sound savings habits during good times and bad:
Although many believe that low- and moderate-income families cannot afford to save and build wealth, research shows that there are "savers" and "spenders" in all income classes. To help encourage people to learn sound saving habits, a broad coalition of non-profit, government, military and corporate organizations formed the America Saves campaign in 2001.
Last year, some 2,000 of these member groups sponsored the fourth annual America Saves Week. Millions of Americans were reached through their campaigns -- everything from educational events at military installations outside the U.S., to financial planning seminars hosted by participating employers, to free tax preparation assistance.
This year's America Saves Week is slated for the week of February 20-27, 2011.
America Saves offers many tools for learning more about the importance of saving, including:
Some of the more effective strategies I've seen for reducing expenses and building savings include:
Chances are that economic prosperity is still a ways off; but when it eventually comes, I hope we all remember the harsh lessons of the past few years and retain the thrifty habits learned out of necessity.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
To participate in a free, online Financial Literacy and Education Summit on April 4, 2011, go to Practical Money Skills.