Personal Savings seem to have reached an all-time low this year. I’m not surprised. Given the very stormy economic conditions, the average American would have been thinking about surviving in the present day, rather than saving up for the future. Apart from the economic conditions, the level of financial literacy of the youth and the public, in general, is also responsible for this. Americans being spendthrifts by nature and being too optimistic about the future, till the recent recession, did not find the necessity to save up for the future, but the economic famine has woken up people to the harsh reality. Another reason that seems to have made the Americans sleep over the personal savings issue was the highly available consumer credit which has grown at an alarming rate in the last few years. The personal savings infographic from Billshrink will give you the statistics. Here we can take a look at reasons behind declined personal savings in the recent years.
The recent economic famine seems to be the most important factor in preventing people from making personal savings. A lot of people were thrown out of their jobs and they had hardly any money to run their daily expenses leave alone saving for the future. A person has to be employed first for thinking about the 401(k) retirement savings. To an unemployed person, it hardly makes any sense. But the economic downturn wouldn’t have been such a big blow on people had they been in the habit of saving from before. It is because we did not learn to save up for the rainy day that today this economic downturn is taking its toll on us.
Poor Financial Literacy
America being one of the richest nations of the world, its people took its financial resources for granted. They never could think before hand that they might have to face poverty one day. It’s rather surprising that even some of the well-educated people are not sound with their knowledge of financial management. Now the government has come up with a lot of programs to educate people about financial management and money awareness which are so very important for personal saving.
The effect of easy availability of an abundance of consumer credit seems to be one of the biggest factors in the low personal savings. If you analyze the infographics, you’ll see that prior to 1980 when public consumer credit was not all that popular, people had no other way of financing themselves but to depend on their saved earnings for that. But financial Literacy now, so many banks, financial institutions, credit card companies are all too eager to finance people. Some of them are not even verifying the credentials of their clients properly in their race to make company profits. Money on debt is easily available. These days its not difficult for even a 60-year-old person to get a bank loan or a financial aid from an institution. So why will people think of saving after retirement?
Personal savings always work as an armour against the toughest of economic onslaughts. It’s never too late to start. With a bit of frugality and money building awareness, people can start securing their financial future with good personal savings.