Why are we so bad at saving?

[eliza61]

My sons H.S. is offering a budget type class for the first time next year. I made that boy sign up for it immediatley. even as we are trying to teach him at home, I figure it can't hurt.
Anyway I saw this article today at Yahoo news.

http://news.yahoo.com/s/nm/20080414/ts_nm/usa_economy_retirement_dc

Basically it says that Generation Xers (young adults between the ages of 27 & 42) don't expect to be able to retire.

Do you think we can change that?

 

[Todd&Copper]

Well, I am 34 and I max out my matching funds to my employer's retirement savings plan, plus I will get a government pension, plus I have an IRA, so I kind of think that I will be able to retire, with or without social security.

This also means I don't buy designer clothes (in fact, pretty much all of my clothes and shoes were bought at some kind of discount), I drive an older car, I am not obsessed about getting the latest cell phone or the biggest cable package, I don't have weekly mani-pedi's, I don't get a venti latte at Starbucks every day. I am perfectly happy with all of this - the status symbol crap just isn't my thing - so don't think I feel deprived or anything.

Maybe the recession will be good for Gen X if it forces us to be more frugal or responsible with our money. Unfortunately, I think so many people give up before they start, or are master procrastinators always claiming they'll start "tomorrow."

 

[KelNottAt]

Yes, we have a financial literacy class, too. We couldn't work it into DS's schedule until 12th grade. But, at least he WILL get it before heading off to college. I'm hoping that it covers savings, but REALLY hammers home the dangers of debt.

Why don't we save more? That's the million dollar question, isn't it? I could make a blanket statement about the culture of instant gratification. But, that would only be about half right. Some people can't save because they're paying medical bills. Some can't save because they had more kids than they expected and the bills just mount. I could go on and on. Sometimes it's just not possible to save.

But, what gets me is the healthy family with a good job(s) that CAN save, but just chooses not to. Now that burns me up!

 

[punkin]

Well, on some salaries it is nearly impossible to save. I have a friend who is living on $40K for 4 people. They are barely making it, and they only have one older car, no electronics, budget for food, etc. However, they live in the DC area, in Montgomery county. That means that they are paying $1700 for a small 2 bedroom apartment. That's $20,400 per year in just rent (over half the GROSS pay). Tell me, what can they save?

 

[Tissa]

They probably can't save anything, they need to move. We are a family of four living on about that much and I manage to save a few hundred a month. Of course we are paying $850 in rent on a 3 bedroom house.

 

[Irin997]

It is all also dependent upon whether they have to pay child care. Childcare costs for me as a single mom paying $1100 for a dinky 2 bdrm and half that a month for child care. I make $39,000 a year and just got that promotion up from $33,000. Before my promotion I was cutting it close every month but now I finally have room to breathe and am able to save about $200 a month. For those on that income (in MD no less) my assumption is that it is a one income family because that's the only way to make it as a 4 person family paying $1700 a month for rent (how on earth did they qualify for that?).

Funny to see already 3-4 MD'ers posted on this thread.

 

[crisi]

Its a shame because most of us HAVE to retire at some point. My father is 63, he'll work another two years, but his memory is slipping, his muscles are sore and he is ready to take it a lot easier. Yeah, he could be a WalMart greeter, but in your late 60s a few hours a day on your feet can be a physical and mental challenge for a lot of people.

It will change, but it will take a gap generation (or perhaps two) of it being bad for people to realize it needs to change. It will take people in their twenties watching their grandparent unable to retire and having nearly nothing for them to wake up and say "I don't want to live like my grandparents did." Its going to take a shift in thinking - one that says that a public college education is good enough unless you have $200,000 to pay for a private school because $200,000 in debt at 22 for college is too much - and one that says you don't need granite countertops, Coach purches, new cars (or dare I say, annual vacations) on a $80,000 income.

 

[Irin997]

Its a shame because most of us HAVE to retire at some point. My father is 63, he'll work another two years, but his memory is slipping, his muscles are sore and he is ready to take it a lot easier. Yeah, he could be a WalMart greeter, but in your late 60s a few hours a day on your feet can be a physical and mental challenge for a lot of people.

It will change, but it will take a gap generation (or perhaps two) of it being bad for people to realize it needs to change. It will take people in their twenties watching their grandparent unable to retire and having nearly nothing for them to wake up and say "I don't want to live like my grandparents did." Its going to take a shift in thinking - one that says that a public college education is good enough unless you have $200,000 to pay for a private school because $200,000 in debt at 22 for college is too much - and one that says you don't need granite countertops, Coach purches, new cars (or dare I say, annual vacations) on a $80,000 income.

I'm 26 and what did it for me is growing up realizing that I cannot count on social security for my retirement and knowing that I need about $2 million to retire comfortably anyway.

Luckily, my company matches 6% of my contributions which I'm taking advantage of the full match right now.

 

[dvcgirl]

Why don't we save more? That's the million dollar question, isn't it? I could make a blanket statement about the culture of instant gratification. But, that would only be about half right. Some people can't save because they're paying medical bills. Some can't save because they had more kids than they expected and the bills just mount. I could go on and on. Sometimes it's just not possible to save.

But, what gets me is the healthy family with a good job(s) that CAN save, but just chooses not to. Now that burns me up!

I think that you hit the nail on the head. It's a combination of things. Surely we have become an "instant gratification" society. Easy credit for all in massive amounts has made that possible. That's changing as we speak though, and so a lot of people are now experiencing an involuntary downsizing in lifestyle.

Let's face it, it's so much more fun to spend that 5K on a trip to Disney than on that new Roth account you've been meaning to open. Most people have good intentions to start that retirement account, or add a little more to the one that they have. But then they think... "that can wait til next year"....."we've had a hell of a year and we really *need* this vacation", or "the kids are only little for a short time" or they resign themselves to the "I'll probably never retire anyway" group. If credit cards disappeared and everyone was putting 10% into their retirement accounts you could roll a bowling ball down Main Street USA on July 4th and not hit a single tourist .

But the other side of the coin is that the gap between the ultra-wealthy and the rest of us is growing at an alarming rate. And by the "ultra-wealthy", I'm talking about the top 1% or so. Real wages for the overwhelming majority of Americans haven't kept pace with the big ticket items in our budget for years (meaning housing, healthcare and education). We've had the luxury of cheap fuel and food for years, but now we're feeling the pinch there. Some of us who have room in their budgets aren't feeling it too badly (yet), but for a family of four making the median income carrying some CC debt....things are getting tougher.

As I type this....inflation numbers are in *way* up....again. Like any of us need the government to tell us this. Oh, and oil is at $113 a barrel....

 

[Todd&Copper]

Well, on some salaries it is nearly impossible to save. I have a friend who is living on $40K for 4 people. They are barely making it, and they only have one older car, no electronics, budget for food, etc. However, they live in the DC area, in Montgomery county. That means that they are paying $1700 for a small 2 bedroom apartment. That's $20,400 per year in just rent (over half the GROSS pay). Tell me, what can they save?

Honestly, if the breadwinner has skills that are marketable in other cities/towns, they need to move. Montgomery Co. is too expensive for that kind of income. Are they able to keep their heads above water, or do they have to rely on goverment assistance? I am guessing the other adult does not have job prospects that would justify him or her working as well?

 

[punkin]

and one that says you don't need granite countertops, Coach purches, new cars (or dare I say, annual vacations) on a $80,000 income.

You cannot have all of that, but surely you can have an annual vacation. I have formica countertops; I do not own a single coach purse (DD does because she got it as a birthday present from a friend in 7th grade ); our newest car is 4 years old w/ over 50K on it, while our oldest is 8 yo w/ over 125K, but guess what, we take more than one vacation per year. That's called prioritizing. Oh, and we save for retirement too.

 

[punkin]

Honestly, if the breadwinner has skills that are marketable in other cities/towns, they need to move. Montgomery Co. is too expensive for that kind of income. Are they able to keep their heads above water, or do they have to rely on goverment assistance? I am guessing the other adult does not have job prospects that would justify him or her working as well?

They have two young children (youngest is 2) so daycare around here would eat up anything a second income would bring in. She actually does have job prospects and will go back to work as soon as the little one goes to pre-k, which is full day where they live.

 

[dvcgirl]

Its a shame because most of us HAVE to retire at some point. My father is 63, he'll work another two years, but his memory is slipping, his muscles are sore and he is ready to take it a lot easier. Yeah, he could be a WalMart greeter, but in your late 60s a few hours a day on your feet can be a physical and mental challenge for a lot of people.

This is what so many people our age (and younger) don't think about. It's so easy for a 20-30-40 year old to think that "I'll never retire so why save anyway", but go talk to a 60-70 year old. My in-laws are 75 and 78 and I can't imagine them working....and they're in good shape. They've got another 15-20 years ahead of them I'd say. They have no debt and a nice home in a retirement community. They're very frugal people but I can't imagine that they could stay in their paid-for home in that community on SS alone. No way.

 

[Todd&Copper]

They have two young children (youngest is 2) so daycare around here would eat up anything a second income would bring in. She actually does have job prospects and will go back to work as soon as the little one goes to pre-k, which is full day where they live.

Yeah, that's a story you hear far too often in these parts. Daycare eating up any potential income.

Were they able to save up some money before they had the children? DH and I also have a smaller (around $6K) ING account that we add to every now and them as a sort of "baby fund" in the very off chance that we have a baby and I decide to take some time off from work (but since I am the higher income earner, t hat is probably not gonna happen).

And I absolutely agree with what you said in your other post about prioritizing. We have two cars, a '99 with 58K miles on it and a '00 with 101K miles on it. I don't have Coach or Prada stuff. If they weren't already in the house when we bought it I wouldn't have gone for Corian counter tops and hardwood floors. We are working on a lot of home improvement/rennovations ourselves to save money. But we are currently trying to decide where to go on our next vacation and have the money available for when we decide to go.

 

[aloha_lilo]

I hate to admit it, but I'm 28 and I can't save because:
1. I don't have any money to save because my job barely pays the bills.
2. I'm having to go back to college to try to get an advanced degree to see if I can get a job so that I can save.
3. Even though I'm still living at home (unmarried-no kids), my credit card debt and this economy is forcing me to dip into what savings I do have.

*sigh*...now I'm depressed.

 

[eliza61]

.

It will change, but it will take a gap generation (or perhaps two) of it being bad for people to realize it needs to change. It will take people in their twenties watching their grandparent unable to retire and having nearly nothing for them to wake up and say "I don't want to live like my grandparents did." Its going to take a shift in thinking - one that says that a public college education is good enough unless you have $200,000 to pay for a private school because $200,000 in debt at 22 for college is too much - and one that says you don't need granite countertops, Coach purches, new cars (or dare I say, annual vacations) on a $80,000 income.

I've always felt that way Crisi, thanks for saying it. I thought that with this mortgage meltdown. for the last 30 years we've basically been a country of instant gratification. Every where we look, the message is now,now, now and bigger, bigger, bigger and some how we are surprised that every thing now is in the pisser.
The average young lady of 18 today has: (of course not here on the dis )
1) designer bag (coach, fendi, louis vatton)
2) cell phone. probably paid for by parents
3) Ipod-once again paid for by parents
4) victoria secrets bras at $50/bra
Do we really expect her to turn around and become a wonderful saver for the future? Most of us probably grew up not going to the mall every weekend

 

[UMTerp]

I've always felt that way Crisi, thanks for saying it. I thought that with this mortgage meltdown. for the last 30 years we've basically been a country of instant gratification. Every where we look, the message is now,now, now and bigger, bigger, bigger and some how we are surprised that every thing now is in the pisser.
The average young lady of 18 today has: (of course not here on the dis )
1) designer bag (coach, fendi, louis vatton)
2) cell phone. probably paid for by parents
3) Ipod-once again paid for by parents
4) victoria secrets bras at $50/bra
Do we really expect her to turn around and become a wonderful saver for the future? Most of us probably grew up not going to the mall every weekend

I don't really see a problem with # 2 and 3. If she is 18 and is driving by herself sometimes she probably needs a cellphone. My kids have Ipods that they got for birthday/Christmas. When did they become an ultra-luxury product?

 

[MsStinkerBelle]

Basically it says that Generation Xers (young adults between the ages of 27 & 42) don't expect to be able to retire.

Do you think we can change that?

It depends on how serious some people are about saving. I know I'm sure as heck planning on retiring!

I'm a single mom but I started saving for retirement as soon as I got my first real job at 28 and I'm 37 now (but still look 28 . I really credit my grandfather for showing me from a young age the importance of saving for the future. Started putting in the highest amount possible in my 401K so I could at least get the employer match. Did this while paying back student loans and other bills. Had my DD when I was a month shy of 29 but still kept saving in my 401K plus 529 plans for her college. We do Disney at least twice a year--at Easter and for Christmas (Disney *is* the Christmas present). I know I am a complusive spender so I make sure all of my money for savings is taken directly out of my paycheck so I don't 'see' it.

Granted I've got an extremely good job and housing only accounts for about 1/4 of my income. I'm moving this summer and could have moved into an ultra-plush apartment but got something more modest so I could save the difference for a down payment on a new house in a few years. If housing and food is eating up 60 - 70% of your income it is really hard to save. I have friends who are single moms who don't nearly make enough as I do and it is really hard for them to save--but they try.

Now, I have two sisters who are 5 and 7 years younger than me. Neither one of them can save money at all. They've never used a savings account and both of them have cashed out their 401Ks. One of them has two boys and she's always spending money on non-essential things and doesn't save a dime. They look at me wierd because I'm always budgeting and saving. Yet they whine and complain they can't come to Disney at Christmas--the trip I've saved and sacrificed for.

I expect to try and retire at 60 mainly because I'm such a workoholic I can't see myself retiring at 50. But I've always saved beliving Social Security won't be around when I retire.

 

[DiznEeyore]

Basically it says that Generation Xers (young adults between the ages of 27 & 42) don't expect to be able to retire.

Do you think we can change that?

Maybe if the government stopped taking hundreds of dollars out of every one of our paychecks for Social Security? We'll never see that money, and I know if we were able to keep it and invest it as we choose, we'd be able to have a more secure future/retirement.

 

[eliza61]

Maybe if the government stopped taking hundreds of dollars out of every one of our paychecks for Social Security? We'll never see that money, and I know if we were able to keep it and invest it as we choose, we'd be able to have a more secure future/retirement.

Aaah,
but thats the million dollar question (2nd one). Would most people save that money? From what we see today, that would be a big resounding NO! Are most people financially savvy to make good choices, once again from what is going on today that would be a MEGA no. I think Suzy Orman did a survey, most americans who had credit cards, did not know what the default rate was if they were late.