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    No Rainy Day Savings

    Americans' poor savings rate is no surprise to readers here. This article, from MSNBC's Red tape Chronicles, fleshs out the details. For instance, only 40% of Americans have an emergency fund and of those, fewer than 1/3 have $2000 or more saved.
    And did you know this is "America Saves Week"? (sponsored by Consumer Federation of America.)
    http://redtape.msnbc.com/2007/02/stu...ve_.html#posts

    #2
    Re: No Rainy Day Savings

    consider that half of all americans earn under 46k a year... 2k might be enough for half the population.

    2005 median US income was 46k

    Comment


      #3
      Re: No Rainy Day Savings

      Originally posted by jIM_Ohio
      consider that half of all americans earn under 46k a year... 2k might be enough for half the population.
      A 3 month EF would be roughly 20% of income. A 6 month EF about 40%. So $2,000 might be enough for someone earning $10,000/year, but it certainly wouldn't be enough for someone earning $46,000. That person likely needs at least $9,000 or so.

      I think almost everyone agrees that Americans simply aren't saving enough. Hopefully, every time one of these articles appears, the lightbulb goes on for a few more people.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

      Comment


        #4
        Re: No Rainy Day Savings

        $2k is definitely not enough of an EF for someone earning 46K...I speak from experience.

        For those of you out there who don't have one, I started mine with a tax refund one year and added any extra money I could find. Gift money, saving coins, saving money saved with coupons, rebates and bonus money (and there wasn't much of that). I had a few garage sales and sold my kids clothes at a consignment store. All you need to get started is a few dollars and a commitment to get that EF funded. It will be one of the best moves you ever make.
        My other blog is Your Organized Friend.

        Comment


          #5
          Re: No Rainy Day Savings

          making 46k, I was taking home just north of 2.2k per month (after 401k and taxes).

          If a person is cash flow positive (meaning they do not spend every penny they make) 2k is ~1 month of expenses which is a good place to start.

          More is always better, and I agree that 2-4 months of expenses would be better than one month.

          I use 1 month as my barometer, because once a person has that "first month savings", the next couple come EASY.

          If 50% of the country made less than 46k and had 2k in the bank, I think savings rate would turn positive quickly.

          But keep in mind people being in debt is one reason the economy and investments (like banks) are doing so well.

          Comment


            #6
            Re: No Rainy Day Savings

            Well, if this is"America Saves" week, we all ought to do our best to save the most that we can!!

            Comment


              #7
              Re: No Rainy Day Savings

              Originally posted by jIM_Ohio
              I use 1 month as my barometer, because once a person has that "first month savings", the next couple come EASY.

              If 50% of the country made less than 46k and had 2k in the bank, I think savings rate would turn positive quickly.

              But keep in mind people being in debt is one reason the economy and investments (like banks) are doing so well.
              I agree that 2K is a good start even though it isn't an adequate EF. I also agree that once you start saving, it gets easier and easier (and your money compounds over time).

              I always wonder about your last statement, though. If people spent less and saved more, would that really have a negative effect on the economy or would it just shift things from one sector to another? Maybe people would spend less at Neiman Marcus but more at Target, less on Mercedes and more on Saturns, less on expendable purchases but more on financial planning services - you get the idea. Up until recently, we were saving 26% of our income but we were still doing plenty of spending to support the economy. Unless you are keeping your savings under your mattress, you are supporting the banks, brokerages, mutual fund companies, financial planners, insurance companies, etc.
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment


                #8
                Re: No Rainy Day Savings

                Originally posted by disneysteve
                I agree that 2K is a good start even though it isn't an adequate EF. I also agree that once you start saving, it gets easier and easier (and your money compounds over time).

                I always wonder about your last statement, though. If people spent less and saved more, would that really have a negative effect on the economy or would it just shift things from one sector to another? Maybe people would spend less at Neiman Marcus but more at Target, less on Mercedes and more on Saturns, less on expendable purchases but more on financial planning services - you get the idea. Up until recently, we were saving 26% of our income but we were still doing plenty of spending to support the economy. Unless you are keeping your savings under your mattress, you are supporting the banks, brokerages, mutual fund companies, financial planners, insurance companies, etc.
                The CC debt and mortgage debt finances the banks profit margins... the bank loses money on me keeping my money their (they pay me, I don't pay them).

                It is impossible for everyone to make money (money is not created, it is transferred is my point of view).

                Comment


                  #9
                  Re: No Rainy Day Savings

                  Yes, but by keeping your savings in their bank, they may pay you 5% but they are loaning it out to others at 7 or 8%

                  Comment


                    #10
                    Re: No Rainy Day Savings

                    Originally posted by jIM_Ohio
                    The CC debt and mortgage debt finances the banks profit margins... the bank loses money on me keeping my money their (they pay me, I don't pay them).

                    It is impossible for everyone to make money (money is not created, it is transferred is my point of view).
                    The CC company collects merchant fees for every purchase you make. They aren't doing it for free. And the bank isn't losing money either - they lend your money out at higher rates than they pay you.

                    As to "money is not created, it is transferred", that's exactly my point. All the money has to go somewhere. If everyone started saving more, the money would just benefit a different sector of the economy. We may see some luxury stores close but more discount stores open. We might need more bank branches or more financial planners. The economy would shift, just as it shifted from manufacturing to service, but it wouldn't collapse.
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

                    Comment


                      #11
                      Re: No Rainy Day Savings

                      I am in my ninth year of figuring out how to manage my current lifestyle, contribute 10-15% of my money to retirement, and get a six-month emergency fund.

                      Currently my EF is how Liz Pulliam Weston, mentioned in the article, advised: accelerated equity and a hefty retirement fund. I am however, building my liquid funds, now that it looks like putting money in CDs will soon reap more than prepaying the mortgage.

                      Comment


                        #12
                        I'd be doing a happy dance if dh made 46K a year! I don't think 2k is enough savings especially if you own your home & have a family. But sometimes it's that ES that pays your groceries that week or pays for the repair on the vehicle that gets you to your job.

                        Comment


                          #13
                          Sad but true for a while I was one of those people, I have about $1800 saved in and EF and another $1400 in another account for an goal but if a real emergency occurs I could use it. I think every one should have an EF

                          Comment


                            #14
                            Originally posted by disneysteve View Post
                            I agree that 2K is a good start even though it isn't an adequate EF. I also agree that once you start saving, it gets easier and easier (and your money compounds over time).

                            I always wonder about your last statement, though. If people spent less and saved more, would that really have a negative effect on the economy or would it just shift things from one sector to another? Maybe people would spend less at Neiman Marcus but more at Target, less on Mercedes and more on Saturns, less on expendable purchases but more on financial planning services - you get the idea. Up until recently, we were saving 26% of our income but we were still doing plenty of spending to support the economy. Unless you are keeping your savings under your mattress, you are supporting the banks, brokerages, mutual fund companies, financial planners, insurance companies, etc.
                            I think there would definitely be a shift in the economy but I don't necessarily think that would make the economy better than its current state. I think that with all the late fees, finance charges, etc. that the banks and CC companies are making up a lot more money than the many discount stores, etc. could make if there was a shift. Of course, this is all just conjecture at this point since it has not actually happened and no statistics are involved. I also don't ever see there being this shift since the average, non-saving consumer knows very little, if anything, about money management and getting out/staying out of debt. It is certainly a revolving door that has built an incredible amount of momentum. It will take a lot to slow it down, much less make it go the other direction.

                            Comment


                              #15
                              Any savings is good, you just need to grow on it. Don't save a little bit, and say your done and blow the rest of your money off budget, no need for it.

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