What do you count as savings?

[jIM_Ohio]

On a related note, the government also doesn't count increases in home equity when calculating the national savings rate.

The government also does not count 401k deposits or IRA deposits as savings either. For national savings rate anyway...

[bjl584]

The government also does not count 401k deposits or IRA deposits as savings either. For national savings rate anyway...

What do they count?

[disneysteve]

The government also does not count 401k deposits or IRA deposits as savings either. For national savings rate anyway...

I used to think that and have posted the same here in the past, but I've recently done some research and discovered that it is a myth. Retirement savings DOES count toward the national savings rate.

401k And IRA Contributions ARE Included In The National Savings Rate Figures - Amateur Asset Allocator

[Scanner]

Steve,

You posted awhile back the collorary question to this topic. . .I think this is why the 3 fundamental numbers are so much more important that the qualitative assessment (what does count as savings? being qualitative):

A. Net Worth Statement
B. Cash Flow Statement (budget known in some circles)
C. Balance Statement (probably the least important and I am in small business and I never get this one anyway, LOL).

That's why I think it's important to put your house equity into the equation even though that doesn't count as "Savings" and would actually be a loss over time when you factor in mortgage interest and taxes.

But I think if you have the 3 statements above on anyone, including yourself, you have an accurate picture.

[snshijuptr]

I prefer to think of saving in contrast to investing (inspired by Investing for Beginners - Article. I think of savings as money set aside for future use, and investing as money set aside to work to earn more money.

When I calculate my savings rate, I count both savings and investing (of course I usually estimate since it fluctuates month to month).

I count savings with my net worth because money is fungible.

When I own a home, I will count the loan as a debt and will not count the house as an asset. Eventually this will lower my expenses, but it will never generate income. If I invested in a rental and planned to sell it, I would count it as an investment asset.

[Seeker]

Savings to me, is any dollars not currently spent.

I do not count anything physical as savings, because they are not dollars and I cannot count them until they are converted to dollars, because I do not know their true current dollar value. When that physical thing is sold, it is converted to savings at whatever dollars are obtained in exchange. Selling a car, selling a house, etc.

401k (and all the various forms of "retirement") has a value, even though that value changes constantly, that current value is savings.

As far as "saving" for an automobile -- to me, it too is savings, until I use that money. Same for saving for a vacation.

If you assign a goal to those savings, ie for a vacation, and spend those savings then at that point, your "savings" are less.

EF is savings until it's not.

529 funds would also be savings until it's used in whatever way; whether by you or your daughter.

---

IMO the people who think that the principal paid into their mortgage is part of "savings" -- I'd say they are confusing "savings" with "value."

Their logic is: in the future "x will have value" and therefore "x is savings" or that some portion paid into "x" is savings.

To me, when you count "savings", you need to stop time. Because the future is unknowable.

You cannot count on the future value of all things; you can count on the future value of some things -- like a fixed interest rate on a CD or any constant rate account -- but you cannot count on the future value when you try to sell an asset.

"As of this date and time I have x savings" to me is a valid concept.

You can make estimates on savings, and predictions on value, but IMO if you mix time into "savings" then you are not looking at an accurate number for "savings."

[supra92]

Interesting points of view on this thread... interesting primarily because I've always had a relatively concrete idea of what constitutes "savings", and many people here have views that diverge. Clearly, there is no one right definition!

I specifically view savings as anything that one generally desires to last until retirement begins, with the one exception being 529 plans for college savings* I put an asterisk after it because I think too many parents focus too much on saving in 529s to send their kids to college at the expense of their own retirement security. Wanting to pay for your child's education is great, but it's no good if the parent has to go to the child later on in life to ask for financial help re: medical bills, in-home assistance, etc.

So, specifically, I view my true savings as: 401k, Roth IRA, the principal portion of my monthly mortgage payment (NOT the interest portion!!), emergency fund, and any taxable accounts where I save $ that "doesn't fit" in the 401/Roth/EF because the first two are maxed-out and the second one is large enough but doesn't have a high interest rate.

Saving for a car is saving, to a point. I agree it can be called saving, but I wouldn't consider it as such -- I would call it "a car fund." A good thing, to be sure, because it's always better to pay for a (hopefully used!) car in cash instead of financing it. And yes, you technically have to save money to build that car fund. But I would never include it as part of my *savings*, because of the key differentiator I mentioned at the beginning:

Savings, to me, is specifically cash you set aside for long-term purposes/growth/retirement. Why that definition? The key concept here is whether one is actively working and bringing home an income. As long as I work a nice salaried job bringing in money, then I'm able to save. Once I retire, I am no longer bringing in an income, and thus no longer able to save, and thus am now to the point where I have to LIVE on my savings. So, quite literally, I view savings as money set aside for the primary purpose of being spent/used *once one no longer has a job or income* -- which for most people is retirement.

One last item of clarification: I DO view principal on mortgage as savings, because that is long-term savings that can easily be part of one's retirement plans. And not just "extra principal payments" -- definitely include the principal portion of your regular monthly as well. Why? Because it's your money, and it's no different than stashing it in a savings account where it earns (roughly, not exactly) the interest rate of your mortgage. One can definitely be affected by whether one's house goes up or down in value -- no question there. But if you have an $1800/mo mortgage payment on a 15-yr fixed, and $1,000 of that is principal -- that is $1,000 more equity you have in your house every single month. That's $1,000 more you'll get back when you sell your house, REGARDLESS of what it sells for. It's longterm, inaccessible savings that you can't "get at" until you sell, but it is indeed savings nonetheless.

Anything else that's short- or medium-term, such as saving for a car, saving for a boat, saving for things that you either consume or depreciate in value.... does not constitute genuine savings. Those are "XXXX fund"s. Car fund. Boat fund. HDTV fund. etc. And one does have to save (verb) money to build those funds. But those funds are not genuine savings in my eyes. Emergency Funds definitely are savings, because in an ideal world you would never draw upon it for the remainder of your working life (because, in an ideal world, you would never get fired and/or be without a job for a long period of time). And in this ideal scenario, because one never had to touch that EF until the day they retired.... presto, that money is now available for them to spend during retirement when they no longer choose to work. And that right there is the whole definition of "savings", to me, in the first place.

One last point -- tough to underestimate the value of truly maxing-out your 401k and Roth IRA contributions, for longterm financial security. Any time someone asks me "what % of your salary do you save in your 401?", I reply with: "I don't know. Whatever $16,500, divided by my current salary, times 100 is - that's the percentage."

Cheers,
Supra92

[feh]

Personally, I only count money that will be used in retirement.

[glock35ipsc]

We always consider any money that is being saved for any specific use to be savings. It could be retirement contributions. Or adding a line item in the budget to make contributions to the vacation fund, vehicle fund, medical fund, or whatever it may be.

Basically, any money that is left over after paying the regular monthly expenses like utilities, and is budgeted to go to a specific "fund" within our budget, is what we consider savings.

[tripods68]

Here's what I consider SAVINGS both PRE and POST Tax that we contribute on monthly basis.

- Pre Tax - 457, 403(b), and Pension contributions.

- Post Tax - Emergency Fund Savings acct, kids saving acct, Money Market, 529, Roth, and IRA.

Any remaining balance on Checking account aren't consider savings at all, unless of course, we transfer remaining to other accounts.