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Post by robeiae on Feb 13, 2018 18:11:17 GMT -5
So, I've been pondering the issue of savings for a while now. As I'm sure most of you know, the savings rate of the USA--along with that of many other "first world countries," with exceptions--sucks. Here's some data: www.oecd-ilibrary.org/economics/household-saving-rates-forecasts_2074384x-table7Here's a bar graph of 2015 numbers: data.oecd.org/natincome/saving-rate.htmHere's a graph of just the US, 1959-2017, that shows a steady decline: fred.stlouisfed.org/series/PSAVERTOne of the things that should be noted is that these numbers include monies that are invested. Regardless, the numbers indicate a real problem, imo. In the thread on the stock market, I noted that I'd like the Fed to stop using interest rates to prop up the economy and reset them to levels that might actually allow saving money to make sense. Because right, I don't think it does, especially for younger people who are living paycheck to paycheck. What't the incentive to save? Put 100 bucks in a savings account and in a couple of years, you'll have...100 bucks, if you're lucky (likely, you'll get hit with fees that wipe out any tiny gains). When I was young, I'd save money through the year for things like Christmas. And at the end of the year, I'd actually have more money than I started with. Good for me, good for the bank, good for the economy. But I feel like an idiot when I tell my kids to save money, because I know it's a losing proposition; frankly, I think the oldest one gets this completely, so like many kids her age, when she earns money, she uses it right away. I can't in good conscience tell her she's wrong for doing that, can I? Anyway, this ties in--imo--to the issue of governance and our deficit-spending ways. Because in order to maintain such practices and not have the thing blow up, we have to have economic growth, more often than not. And as I've said, the Fed is using the interest rate to achieve phony growth. Imo, the government should be in the business of invcentivizing smart, helpful behavior. Saving money--when one can actually do so effectively--is smart behavior. It gives people security in case something bad happens. It also takes pressure off of the government (to step in and save people who have no savings). It's also good for banks (provided they're not allowed to behave like they have in the recent past) and ultimately the economy in a real sense, because it's money that can be put back to work more effectively. It seems to me that we've really lost our way on all of this. And part of the reason why--imo--is that as a society, we are steadily eliminating the concept of personal responsibility. Thoughts?
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Post by Deleted on Feb 13, 2018 18:32:29 GMT -5
It's not just the lack of interest. It actually COSTS you money to keep it in the bank unless you hold what for many people is a fairly high balance. You lose money in fees every month.
yeah, I know the bank needs to make money, too, but it does have the effect of making it not worth your while to save if you can't save much. And the balance requirements/fees have definitely gone up.
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Savings
Feb 13, 2018 21:14:56 GMT -5
Post by poetinahat on Feb 13, 2018 21:14:56 GMT -5
Yes - it's hard to argue for saving, especially if college education is out of reach, and home ownership is nearly so. One thing I love about Australia - mandatory superannuation (aka retirement savings). On top of your pay, your employer is required to put 9% into a fund of your choosing, which you can invest, but can't withdraw until you reach retirement age. It's forced saving, and it's fantastic. Proceeds are taxed at a much lower rate than income (say, 15% compared to 40-50%), until you start withdrawing - which encourages more saving, if you can afford it. Also, you can contribute more to the fund, but there's an annual maximum. Unrelated: tipping isn't customary here. Waiters and the like are paid better - the minimum wage is, well... hereThe cost of living may well be much higher here, especially in cities. But in general, it seems to work. (On the other hand, the median house price in Sydney is now over $1 million - so home ownership is out of reach for many, if they want to live in the big smoke. OTOH, Medicare means a standard doctor's visit is free.)
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Savings
Feb 13, 2018 21:29:35 GMT -5
Post by Deleted on Feb 13, 2018 21:29:35 GMT -5
The median price of a home (in NYC, apartment) in some of our big cities is around there, too, but we pay out the wazoo for health care.
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Savings
Feb 13, 2018 23:34:26 GMT -5
Post by poetinahat on Feb 13, 2018 23:34:26 GMT -5
In Australia, the Government funds elective wazooplasty.
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Savings
Feb 14, 2018 19:58:46 GMT -5
Post by Don on Feb 14, 2018 19:58:46 GMT -5
When true inflation outpaces passbook savings account rates, sticking money in such an easily-accessible instrument is the definition of wasteful. When the CPI was relatively stable, your money bought more if you saved for the future, even if your only investment opportunity was putting nickles in your passbook.
Since the Nixon Shock removed fiscal responsibility from the Federal Reserve and FedGov, it's rarely been the case that passbook rates represented an investment. Those rates generally mean losing purchasing value every year. Only those who are wealthy enough to afford other investment opportunities have any incentive to save.
So people stopped being stupid. Where's the surprise?
This is just another fine example of government breaking legs, providing crappy crutches that don't really work, claiming that hobbling is the same as walking upright and that if it weren't for the crutches of the Federal Reserve, the economy wouldn't be able to walk at all.
Uncoupling money from any objective standard allows the economy to lose touch with reality. That's how you end up with passbook rates lower than the inflation rate and steadily-declining investment rates. This is a monetary policy issue at its root. It's not about personal responsibility; to the contrary, people who can only afford passbook accounts are showing wisdom in spending their money before it loses value, rather than putting it in a passbook account where it will lose purchasing value anyway. Even many CDs and other more-expensive instruments are actually losing value over time against any reasonable market basket CPI.
There is no incentive to save in the economy anymore.
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Savings
Feb 14, 2018 20:35:58 GMT -5
Post by Deleted on Feb 14, 2018 20:35:58 GMT -5
To be fair, a great many people live paycheck to paycheck and CAN'T save (or can't save much). And if they only can save a tiny bit every month, the bank fees would eat it.
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Feb 14, 2018 22:44:00 GMT -5
Post by prozyan on Feb 14, 2018 22:44:00 GMT -5
Saving in a savings account is pointless. So are old stand by things like treasury bonds, giving a paltry less than 3% return.
Smart investing is the best way to save for the future, but so many people are convinced there is something magical or mysterious about the market that makes this hard to do.
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Post by Don on Feb 15, 2018 10:17:41 GMT -5
To be fair, a great many people live paycheck to paycheck and CAN'T save (or can't save much). And if they only can save a tiny bit every month, the bank fees would eat it. Traditional passbook savings accounts are fee-free. The idea is the bank is paying you for the use of your money. Five percent passbooks were common just a few decades ago. These days, since the banks can instead get money at a ridiculously low interest rate from the Fed, they no longer have any interest in borrowing your money to loan it to others and profit on the margin. (Which is really how banks are supposed to work.) I'm not even sure most banks offer passbook savings accounts any more. When you understand that passbook savings are about the only sensible path that poor people had to accumulate and grow their cash assets, what the Fed has done to that ability is destructive to the very fabric of a productive society and has contributed substantially to the ghettoizing of the inner cities. If you're poor, living paycheck to paycheck makes sense. If you try to save for the future, the value of your savings will decline over time, because there are no instruments available to you that beat the rate of inflation. Might as well spend it today as buy less with it in the future.
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Post by Amadan on Feb 16, 2018 7:39:32 GMT -5
You're all assuming that "saving" only means putting money in a savings account? There is also saving in investment accounts, like indexed funds or even bonds, to be more conservative. Yeah, even the most conservative investments are not risk-free, but historically they are a pretty safe bet. But I get why a lot of people find the market mysterious and scary. I can't even put in the effort to research it beyond taking the easiest route, choosing some reliable index funds and auto-investors.
Of course it's also different when your employer provides a 401K or the equivalent with some degree of matching contributions. That also makes investing/saving much more attractive, and obviously a lot of people don't have that.
I see savings accounts as only good for an emergency fund - I keep a fair amount of cash there so that I have liquid assets. Probably still keep too much there, since even investment accounts can be tapped with just a few days delay.
But speaking to Rob's point, I think it's not so much lack of personal responsibility, or even Don's eternal lament that da gummint done fucked it all up. It's both the fact that so many people are living paycheck to paycheck, and that we don't really teach economic literacy. I mean, I work in a professional workplace and still see fellow employees mystified by IRAs, and the difference between a Traditional and Roth IRA. I get that they are dry topics, but.... it's not rocket science? If you graduated college (or even high school) the concepts should not be so arcane that your brain shuts off trying to understand the difference between "Get taxed now or get taxed later." Making decisions about which is better for you requires a little more thinking, but.... still not rocket science?
Also, the thing about saving is that even if it's not great as a long-term investment (i.e., inflation is higher than the interest), it still makes sense for saving up for things you cannot afford right now. But I guess that would be an example of Rob's "lack of personal responsibility."
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